Companies Rules Volume VI

Securities and Exchange
Commission of Pakistan
Companies Rules
Volume VI
Forms and Applications;
Notifications and Circulars
(Updated up to 5 December 2013)
Companies Rules
Volume VI
Forms and Applications;
Notifications and Circulars
(Updated up to 5 December 2013)

Securities and Exchange
Commission of Pakistan
VOLUME I
STATUTES
Insurance Act, 1938 (Repealed)
Securities and Exchange Ordinance, 1969
Companies (Appointment of Trustees) Act, 1972 (Repealed)
Companies (Appointment of Legal Advisors) Act, 1974
Foreign Private Investment (Promotion & Protection) Act, 1976 (Repealed)
Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980
Companies Ordinance, 1984
Central Depositories Act, 1997
Securities and Exchange Commission of Pakistan Act, 1997
Insurance Ordinance, 2000
Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002
Anti-Money Laundering Act 2010
Stock Exchanges (Corporatisation, Demutualisation and Integration) Act, 2012

VOLUME II
RULES
Securities and Exchange Rules, 1971
Investment Companies and Investment Advisors Rules, 1971 (Repealed)
Companies Profits (Workers Participation) Rules, 1971
Economic Reforms (Acquisition and Compensation) Rules, 1973 (Repealed)
Companies (Appointment of Trustees) Rules, 1973
Companies (Appointment of Legal Advisors) Rules, 1975
Modaraba Companies and Modaraba Rules, 1981
Corporate Law Authority Rules, 1984 (Repealed)
Companies (General Provisions and Forms) Rules, 1985
Forms
Companies (Invitation and Acceptance of Deposits) Rules, 1987
Companies (Management by Administrator) Rules, 1993
Credit Rating Companies Rules, 1995
Asset Management Companies Rules, 1995 (Repealed)
Companies (Issue of Share Capital) Rules, 1996
Venture Capital Companies and Fund Managers Rules, 1995 (Repealed)
Employees Provident Fund (Investment in Listed Securities) Rules, 1996
Companies (Issue of Capital) Rules, 1996
Central Depository Companies (Establishment and Regulation) Rules, 1996
Companies (Court) Rules, 1997
Companies (Audit of Cost Accounts) Rules, 1998
Companies (Rehabilitation of Sick Industrial Units) Rules, 1999
Companies (Buy-back of Shares) Rules, 1999
Companies (Asset-Backed Securitization) Rules, 1999

VOLUME III
Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000
Leasing Companies (Establishment and Regulation) Rules, 2000 (Repealed)
Members' Agents and Traders (Eligibility Standards) Rules, 2001
Stock Exchange Members (Inspection of Books and Record) Rules, 2001
Public Companies (Employees Stock Option Scheme) Rules, 2001
Brokers and Agents Registration Rules, 2001
Balloters Transfer Agents and Underwriters Rules, 2001
Insurance Rules, 2002
Non-Banking Financial Companies (Establishment and Regulation) Rules, 2003
SECP (Appellate Bench Procedure) Rules, 2003
Single Member Companies Rules, 2003
Margin Trading Rules, 2004 (Repealed)
Commodity Exchange and Futures Contract Rules, 2005
Voluntary Pension System Rules, 2005
Clearing Houses (Registration and Regulation) Rules, 2005
Takaful Rules, 2005 (Repealed)
Anti Money Laundering Rules, 2008
Securities (Leveraged Markets and Pledging) Rules, 2011
Takaful Rules, 2012
Public Sector Companies (Corporate Governance) Rules, 2013
Microinsurance Rules, 2013

VOLUME IV
REGULATIONS
Securities and Exchange Policy Board (Conduct of Business) Regulations, 2000
Regulations for the Karachi Stock Exchange, 2001
Code of Corporate Governance, 2002
Companies (Registration Offices) Regulations, 2003
Prudential Regulations for Modarabas, 2004
Regulations Governing System Audit of Brokers of Exchanges, 2004
Real Estate Investment Trust Regulations, 2008
Private Equity and Venture Capital Fund Regulations, 2008
Private Equity & Venture Capital Fund Regulations, 2008 - Forms and Schedules
Group Companies Registration Regulations, 2008
Anti-Money Laundering Regulations, 2008
NBFCs and Notified Entities Regulations, 2008
Prudential Regulations for NBFCs undertaking the Business of Leasing only
Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008
Code of Corporate Governance, 2012
Debt Securities Trustee Regulations, 2012
Insurance Accounting Regulations, 2012
Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012
Third Party Administrators for Health Insurance Regulations, 2013
Centralised Information Sharing Solution for Life Insurance Industry Regulations, 2013

VOLUME V
GUIDELINES
Guidelines for Issue of Certificates of Musharika for Modarabas, 1994
Listed Companies (Prohibition of Insider Trading) Guidelines, 2001
Guidelines for Preparation of Prospectus, 2002
Equity Issues (Checklist of Documents for Approval of Prospectus or Offer for Sale Document), 2002
Guidelines for Appointment on the Board of Directors of the Stock Exchanges, 2002
Term Finance Certificates (TFCs) Issues (Checklist of Documents for Approval of Prospectus, 2002
Guidelines for the Issue of TFCs to General Public, 2002
Guidelines on Issue of Shares at Discount, 2004
Internet Trading Guidelines, 2005
Guidelines for Issue of Commercial Paper, 2006
Guidelines for Bancassurance, 2010
Corporate Social Responsibility Voluntary Guidelines, 2013
Guidelines on Quarterly Accounts

ORDERS
Vegetable Ghee and Cooking Oil Companies (Cost Accounting Records) Order, 1990
Cement Industry (Cost Accounting Records) Order, 1994
Sugar Industry (Cost Accounting Records) Order, 2001
Companies Cost Accounting Records (General Order), 2008
Companies (Corporate Social Responsibility) General Order, 2009
Fertilizer Industry (Cost Accounting Records) Order, 2011
Chemical Fertilizer Industry (Cost Accounting Records) Order, 2012
Synthetic and Rayon Companies (Cost Accounting Records) Order, 2012
Electric Power Generation Industry (Cost Accounting Records) Order, 2012
Pharmaceutical Industry (Cost Accounting Records) Order, 2013

DIRECTIVES
Feb 17, 2005 - Directive under the Credit Rating Companies Rules, 1995
Feb 7, 2003 - Directive to Brokers on Conduct of Business 2003
Jul 18, 2002 - Directive to Brokers or Brokerage Firms or Incorporated Brokerage House Regd.
under the Broker & Agents Registration Rules 2001

GUIDE SERIES
A Guide on Accounts and Accounting Reference Dates
Change in Company Objects
Change of Company Name
Availability of Name Guide
Conversion of Status of Companies
Directors and Secretaries Guide
Filing of Statutory Returns
Foreign Companies Guide
Appointment of Statutory Auditors and Ancillary Matters
Listing of Companies through Initial Public Offerings
Obtaining license by an Association not for profit
Further Issue of Shares otherwise than Rights
Issue of Preference Shares
Making Alteration in Memorandum of Association under Section 21 of Companies Ordinance, 1984
Incorporation of Company Information and Procedures
Investigation into the Affairs of a Company
Company Mortgages and Charges
List of sensitive/prohibited words
Promoters Guide
Modaraba Promoters Guide
Shareholders Rights
Single Member Company Guide (in Urdu)
Winding up / Dissolution of Companies

VOLUME VI
FORMS AND APPLICATIONS
Forms [See under Companies (General Provisions and Forms) Rules, 1985]
Applications
Application for Availability of Name
Application for File Inspection
Application for Refund of Fee
Application for Issuance of Certified To Be True Copy

NOTIFICATIONS (selected)
S.R.O. 282(I)/1986 Company Names Abbreviations and Urdu Equivalents
S.R.O. 865(I)/2005 IFAS 1 Murabaha
S.R.O. 431(I)/2007 IFAS 2 Ijarah
S.R.O. 640(I)/2011 Maintenance of Website
S.R.O. 289(I)/2011 Form of Statement in Lieu of Prospectus
S.R.O. 23(I)/2012 Accounting and Financial Reporting Standards for Medium Sized Enterprises
and Small Sized Enterprises
S.R.O. 25(I)/2012 Maintenance of Website by Listed Companies
S.R.O. 320(I)/2012 Amendments in Sixth Schedule to the Companies Ordinance, 1984
S.R.O. 753(I)/2012 Amendments in First Schedule Table A to the Companies Ordinance, 1984
S.R.O. 1354(I)/2012 Delegation of Powers of Commission
S.R.O. 130(I)/2013 Recovery of Gain
S.R.O. 182(I)/2013 Amendments in Fifth Schedule to the Companies Ordinance, 1984
S.R.O. 183(I)/2013 Amendments in Fourth Schedule to the Companies Ordinance, 1984
S.R.O. 194(I)/2013 Amendments in First Schedule Table A and C to Companies Ordinance, 1984
S.R.O. 210(I)/2013 Amendments in Companies (Registration Offices) Regulations, 2003
S.R.O. 211(I)/2013 eService of SECP
S.R.O. 387(I)/2013 Delegation of Powers of Commission
S.R.O. 479(I)/2013 Amendments in Public Sector Companies (Corporate Governance) Rules, 2013
S.R.O. 571(I)/2013 IFAS 3 Profit and Loss Sharing on Deposits
S.R.O. 677(I)/2013 Amendments Public Sector Companies (Corporate Governance) Rules, 2013

CIRCULARS (selected)
Circular 8/2001 Companies Regularisation Scheme
Circular 1/2002 Adoption of International Accounting Standards 22, 36 and 39
Circular 2/2002 Companies Regularisation Scheme
Circular 3/2002 Adoption of International Accounting Standards 40
Circular 4/2002 Adoption of International Accounting Standards 22, 36 and 39
Circular 15/2002 Transfer off Regulatory Supervision of Non-Banking Financial Institutions and
Submission of Periodical Returns/Statements
Circular 16/2002 Submission of Quarterly Accounts by Listed Companies
Circular 17/2002 Information on Current Credit Rating and COIs/CODs being maintained by
NBFCs
Circular 18/2002 Submission of Quarterly Accounts by Listed Companies
Circular 19/2002 - Appointment of External Auditors by the Listed Companies
Circular 1/2003 Appointment of Sole Proprietor Chartered Accountants as Auditor by Business
Name
Circular 2/2003 International Accounting Standard 40 Investment Property
Circular 7/2003 Appointment of Directors/Chief Executive in the Modaraba Companies
Circular 8/2003 Checklist for Appointment of Directors
Circular 9/2003 Preparation and Transmission of Second Quarterly Accounts by the Listed
Companies
Circular 10/2003 Fresh License(s) to be obtained by Existing Companies in terms of Section 282C
of the Companies Ordinance, 1984 for Business(es) being carried out by existing NBFCs
Circular 12/2003 Fresh License(s) to be obtained by Existing Companies In terms of Section 282C
of the Companies Ordinance, 1984
Circular 13/2003 Maintenance of Website by the Listed Companies
Circular 15/2003 Appointment of Whole Time Company Secretary
Circular 18/2003 Rules of Business for NBFIs and Submission of Periodic Returns/Statements
Circular 19/2003 Applicability of IAS 39 and IAS 40 to NBFCs providing investment finance
services (Investment Banks), discounting services and housing finance services
Circular 24/2003 Assets provided on Lease/loan basis to the Employees (Excluding CEO and
Directors)
Circular 25/2003 Use of word Bank or any of its derivatives
Circular 26/2003 Circular No. 26 of 2003
Circular 29/2003 Corporate Agriculture Farming (CAF) Policy
Circular 30/2003 Attendance of Directors in the Board Meetings through Video Conferencing
Circular 6/2004 Appointment of Sole Proprietor Chartered Accountants as Auditors by Business
Name
Circular 7/2004 Authentication of Statutory Returns
Circular 8/2004 Compliance with IAS 12 (Revised)
Circular 3/2005 Holding of Election of Directors Pursuant to Companies (Amendment) Ordinance
2002
Circular 6/2005 Conditions for Issuance of Foreign Currency Certificate of Deposits (CODs) and
Certificate of Investment (COIs)
Circular 8/2005 Investment Policy under Rule 24(3) and Prescribed Allocation Policy for
Selection by the Individual Participants under Rule 14(3) & 14(4) of the Voluntary Pension System
Rules 2005
Circular 10/2005 Application(s) made under the NBFCs (Establishment and Regulation) Rules,
2003 and the Prudential Regulations for NBFCs
Circular 11/2005 Rating of NBFCs and Collective Investment Scheme(s) managed by NBFCs
Circular 12/2005 Appointment as a Director on the Board of an NBFC
Circular 13/2005 Exemption from Requirements of Clause 3C of Part II of Fourth Schedule to the
Companies Ordinance, 1984
Circular 15/2005 Sale of Assets by NBFCs to its Employees
Circular 17/2005 Violation of Section 143 of the Companies Ordinance, 1984 by mentioning
Incomplete Name
Circular 18/2005 Attendance of Directors in the Board Meetings through Tele-Video Conferencing
Circular 19/2005 Regulation for Housing Finance Applicable to Individual Borrowers
Circular 24/2005 Rotation of External Auditors by Insurance Organizations
Circular 3/2006 Holding of Election of Directors
Circular 1/2008 Publication of Notices etc in Urdu Newspaper
Circular 11/2008 Revision of Fourth and Fifth Schedules to the Companies Ordinance, 1984
Circular 16/2008 Submission of Daily Statement of Assets and Liabilities
Circular 3/2009 Available for Sale Investment
Circular 14/2010 United Nations 1267 Committee's Consolidated List of Individuals and Entities
regarding Freezing of Funds and Other Resources
Circular 14/2010 Amendments dated September 8, 2010
Circular 14/2010 Amendments dated November 2, 2010
Circular 14/2010 Amendments dated December 22, 2010
Circular 15/2010 Related Party Assets
Circular 16/2010 Categorization of Open-End Collective Investment Schemes
Circular 17/2010 Notice Period for Holding Extraordinary General Meeting to pass Resolution for
Filing Application under Companies Easy Exit System (CEES)
Circular 18/2010 Additional Condition to the Modaraba Authorization Certificate
Circular 21/2010 Clarification on Clause 3(ii) of Part II of the Third Schedule to the Modaraba
Companies and Modaraba Rules, 1981
Circular 22/2010 Revised Second Schedule to Modaraba Companies and Modaraba Rules, 1981
Circular 26/2010 Application for Refund of Fees received under Sixth Schedule to the Companies
Ordinance, 1984
Circular 28/2010 Application for Refund of Fees received under Sixth Schedule to the Companies
Ordinance, 1984
Circular 3/2011 Amendments in Circular 36 of 2009 dated December 10, 2009 Investment and
Allocation Policies for Pension Funds Authorized under the VPS Rules, 2005
Circular 5/2011 Appointment of a Member of the Religious Board by the Federal Government
under Section 9 of Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980
Circular 6/2011 Withdrawal of Circular 20/2010 dated 30 July 2010
Circular 7/2011 Maximum Management Expense Limits for Life Insurers under Sections 22(9)
and 23(9) of the Insurance Ordinance, 2000
Circular 10/2011 Constitution of Modaraba Tribunal-II, Karachi under the Modaraba Companies
and Modaraba (Floatation and Control) Ordinance, 1980
Circular 11/2011 Sharing of Costs of Insurance Ombudsman's Secretariat by Insurance/Takaful
Companies
Circular 12/2011 Conditions for Grant of License to Associations not for Profit under Section 42
of the Companies Ordinance, 1984
Circular 14/2011 Meetings of the Board of Directors (Abroad)
Circular 15/2011 Additional Condition to the Modaraba Authorization Certificate
Circular 17/2011 Annual Supervision Fee for 2012
Circular 18/2011 Product Information on websites
Circular 19/2011 Legal Duties of Agents
Circular 1/2012 Reporting of Suspicious Transaction Reports (STR) Currency Transaction
Reports (CTR) to FMU under Anti Money Laundering (AML) Act, 2010
Circular 2/2012 Conditions for Grant of License to Associations not for Profit under Section 42 of
the Companies Ordinance, 1984
Circular 3/2012 Product Publicity Information
Circular 4/2012 S.R.O. 16(I)/2012 dated 9 January, 2012 Amendments in the Securities and
Exchange Commission [Insurance) Rules, 2002
Circular 5/2012 S.R.O. 29(I)/2012 dated 13 January 2012 Takaful Rules, 2012
Circular 7/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section
48(1) of the Insurance Ordinance, 2000
Circular 08/2012 Shariah Compliance and Shariah Audit Mechanism (SCSAM) for Modarabas
Circular 9/2012 Term of Office of Directors
Circular 10/2012 Transmission of Notice of Annual General Meetings (AGM) and Extra-Ordinary
General Meetings (EOGM) through Electronic Medium
Circular 11/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section
48(1) of the Insurance Ordinance, 2000
Circular 12/2012 Launching of Fast Track Registration Services (FTRS)
Circular 13/2012 Approval of Short Term Ijarah (Lease) Agreement
Circular 14/2012 Launch of Inter-CRO Electronic Inspection Service
Circular 15/2012 Minimum Requirement for Exchange Traded Funds to be managed by Asset
Management Companies
Circular 17/2012 Additional Disclosures for Workers Welfare Fund (WWF) Liability for
Collective Investment Schemes
Circular 18/2012 Dividend Mandate under Section 250 of the Companies Ordinance, 1984
Circular 19/2012 Procedure for Convening Meeting of the Unitholders of Open-End and Close-
End Collective Investment Schemes
Circular 20/2012 Reporting of STRs/CTRs to FMU under the AML Act, 2010
Circular Restriction on sharing of management fee by Asset Management Companies with
Unitholders
Circular 21/2012 Filing of Returns through Insurance Companies Return Submission (ICRS)
System
Circular 22/2012 Relaunching of Companies Regularisation Scheme (CRS)
Circular 23/2012 Relaunching of CEES
Circular 31/2012 Extension in time period of CRS and CEES
Circular 37/2012 New Insurance Accounting Regulations 2012; and Amendments in the SEC
(Insurance) Rules, 2002
Circular 39/2012 Clarification on Circular 14/2011 regarding Meetings of Board of Directors
(Abroad)
Circular 40/2012 Extension in Time Period of CRS and CEES
Circular 41/2012 Annual Supervision Fee for the year 2013
Circular 42/2012 Filing of Monthly Returns through Specialised Companies Return System (SCRS)
Circular SECP registered 274 companies in August 2012
Circular 1/2013 Rate of Return Assumptions for Life Insurance and Family Takaful Illustrations
Circular 2/2013 Training of Insurance Agents
Circular 2 of 2/2013 Clarification on the Circular No.2 of 2013 on Training of Insurance Agents
Circular 3/2013 Launching eSInsuranceSurveyors: Online Surveyors Licensing and Registration
System
Circular 5/2013 Examination or Test for Grant of Registration as Authorized Surveying Officer
Circular 6/2013 Amendments in Circular No. 36 of 2009 dated December 10, 2009 Investment
and Allocation Polices for the Pension Funds Authorized under the VPS Rules, 2005
Circular 7/2013 Clarification on Filing of Revised Annual Audited Accounts by Non-Listed
Companies
Circular 11/2013 Amendment to Circular No. 9 of 2005 on Group Insurance Premium Rates
Circular 12/2013 Publication of Public Announcements
Circular 13/2013 Clarification regarding Circular No. 36 of 2009 dated December 10, 2009
Circular 17/2013 Mortality Rates as a Part of the Minimum Valuation Basis for the Determination
of Minimum Actuarial Reserves for Policyholders Liabilities
Circular 18/2013 Draft Bancassurance Regulations, 2013
Circular 19/2013 Appointment of Qualified Auditors
Circular 20/2013 Maximum Management Expense Limits for Life Insurers
Circular 21/2013 Life Insurance Product Submission Requirements

Additional/Joint/Deputy/Assistant Registrar of Companies Date: _________________
Company Registration Office
________________

Subject: APPLICATION FOR AVAILABILITY OF NAME

I/We are desirous to incorporate a company under the Companies Ordinance, 1984.
Please confirm availability of the following proposed name:-

Proposed Name: ________________________________________________
Brief Objects: ________________________________________________
Meaning and Significance: ________________________________________________
Link with Already Incorporated Company (if any):
______________________________________________________________________________
______________________________________________________________________________

2. Original paid Bank Challan (duly deposited in the MCB Bank Limited)
No.______________dated__________________for Rs.500/- on account of availability of name
fee is enclosed.

Signature of applicant_____________________
Name__________________________________
Occupation_____________________________
CNIC#:________________________________
Address: _______________________________
______________________________________
Phone/Mobile No:________________________
Email:_________________________________

Additional/Joint/Deputy/Assistant Registrar of Companies Date: _________________
Company Registration Office
________________

Subject: APPLICATION FOR FILE INSPECTION

I intend to inspect the record of M/s. __________________________________________
maintained by the Registrar at the Company Registration Office under the Companies
Ordinance, 1984. Necessary permission may please be granted in this regard.

No.__________________dated_________________for Rs.500/- on account of inspection fee is
enclosed.

Signature of applicant____________________
Name__________________________________
Occupation_____________________________
CNIC#:________________________________
Address: _______________________________
______________________________________
Phone/Mobile No:________________________
Email:_________________________________

Fee deposited: Challan No.: Date:
(Attach Original Challan & Depositor's Copy)
Applicant's relationship with Company:
Cheque No.
Date:
Signature of Paying Authority: ______________________________ED/Director (Finance)
Date.: _________________________ Signature of Confirming Authority: ___________________________DD (Finance)/
Date.: _________________________
Approving Authority:
No. ________ of 201__
Signature of Approving Authority: ______________________ ED (CCD) / ROC (in case of
absence of ED (CCD))
Reason:
Approved/Not Approved (please provide reason)
Enclosures: 1. Original Challan & Depositir's Copy 2. Authority letter/Affidavit 3. Copy of CNIC (in case of payment in the name of a person) 4. _________________.
PART E - PAYING AUTHORITY
Date.: _________________________
Not Paid Paid
PART D - BANK RECEIPT CONFIRMATION
Bank Receipt Confirmation:
Signature of recommending officer (CCD): ________________________________
Date:______________ Signature of Applicant(s): __________________________________________
Paying Authority:
File No.: _________________________
is recommended for refund.
PART B - VERIFICATION / RECOMMENDATION
Payee's CNIC No.:
I/We affirm that the above information is true according to my/our best of knowledge and belief.
Applicant's Address:
Contact No.
APPLICATION FOR REFUND OF FEE
Payee:
PART A - APPLICATION
Reason for Refund/withdrawal:
CUIN, if any:
(Provide authority letter/affidavit in favour of payee, if other than company)
Nature of Fee:
Amount Admissible for refund
DC No. & Date
Head of Account
Amount of Refund Rs.
Applicant's Name:
Name of Company/ Proposed Company:
Rs.
(Provide copy of CNIC)
Verified that: (a) the above stated particulars are correct; (b) fee is refundable; and (c) amount of Rs. ____________________
Recommended/Not Recommended (please provide reason)
Date.: _________________________ Signature of concerned CRO Incharge: _______________________ CRO :____________
Remarks of recommending officer
(CCD)
PART C - APPROVING AUTHORITY
Additional Comments (if any):
File No.: _________________________
Date.: _________________________

Additional/Joint/Deputy/Assistant Registrar of Companies Date:_________________
Company Registration Office,
____________________

Subject: Issuance of Certified To Be True Copy

Please arrange to issue the Certified to be True Copy of the following documents of
M/s ________________________________________________________________,
i. Certificate of Incorporation.
ii. Memorandum and Articles of Association.
iii. Annual Return of Form A/B made up to ________________.
iv. Particulars of Directors and Officers on From 29 dated _________________.
v. Return of Allotment of shares on Form 3 dated ________________________.
vi. Notice of Increase in Nominal Share Capital on Form 7 dated________________.
vii. Special Resolution on Form 26 dated __________________.
viii. Particulars of Mortgage/ Charge on Form 10 dated _________.
ix. Particulars of Modification of Mortgage/ Charge on Form 16 dated _____________.
x. Memorandum of Complete Satisfaction of Mortgage / Charge on
Form 17 dated __________________.
xi. Annual/Quarterly Audited Accounts for the period ended _____________________.
xii. Notice of situation of Registered Office on Form 21 dated _____________________.
xiii. _______________________________________________.
xiv. _______________________________________________.
xv. _______________________________________________.

No.__________________dated____________________for Rs.________________, on account of necessary
copying fee is enclosed

Signature of applicant______________________
Name___________________________________
Occupation______________________________
CNIC#:_________________________________
Address: ________________________________
_______________________________________
Phone/Mobile No:________________________
Email:__________________________________
41 tlittheaRnE OF PAEISFAN, EXTRA., MARCH 20, 1986 [PARA
FINANCEDIVISION
(Cmposate law Authority)
Islamabad, the. 18th March, 1986
'1/4/ SRO. 222 0)186.In exercise of the potvers conferred by section 507 of
the Companies Ordmance 1984(70-VII of 1980, read withthe Finance Division
Notification No. S. It 0. 535 (1)I857 dMed the 30thMay, 1985,-the Corporate Law
Authority is pleased to permit the use of the following abbreviations and Urdu
equivalents in the names of companies, instead of the Englishword& apq expres-
sions shown against each, pursuant to or for the purpose of the provisions of the
tiocaStid Onlinarce.
AtCPt
E1 thrtsti-elatst'ttiltitti`Othi
of association and the name appmenerin dm-vette of incorporation- -of the
companies :
L. ABBREVIATIONS
Entdisktvint/expressionAbbreviation
Private
LimitedLtd.
COmPulYCo.
Company LimitedCo., Ltd
L. URDU EQUIVALENTS
Stlidielt vondittpretteion
Urdu equivalent
Company
Company Limited
Limited
S. FAYYAZ waimuni
D
ON* ''Registrar.
GOVERNMENT OF PAK1STA1V
SECURITIES ~ D EXCHANGE COMMISSION OF PAKlSTAN
Islamabad, the 24
th
August, 2005.
NOTIFICATION
S.R.O gb;(I)/200S.- In exercise of the powers conferred by sub-section
(3) of section 234 of the Companies Ordinance, 1984 (XLVII of 1984), read with
clause (c) of section 43 of the Securities and Exchange Commission of Pakistan
Act, 1997 (XLII of 1997), the Securities and Exchange Commission of Pakistan is
pleased to direct that the Islamic Financial Accounting Standard 1, annexed to
this notification, issued by the Institute of Chartered Accountants of Pakistan,
shall be followed in regard to the financial statements prepared in the context of
historical cost convention while accounting for Murabaha transactions
undertaken bv a bank as defined bv the said Standard:
J J
Provided that the Commission may, of its own motion or upon an
application made to it, grant exemption to any company or any class of
companies from compliance with all or any of the requirements of the
aforesaid Standard.
ANNEXURE
ISLAMIC FINANCIAL ACCOUNTING STANDAH.D
IFAS 1 MURABA_HA
The Institute of Chartered
Accountants of Pakistan
IFAS 1
SLAMIC FINANCIAL ACCOUNTING STANDARD
IFAS 1 rvlURABAHA
1. Background
1.1 Since early eighties banks and similar financi al institutions (referred to as
"bank(s)" in the Standard) in the Islamic countries have been faced with
the problem of financing different sectors of economy through modes
which do not contravene the injunctions of Shariah regarding riba or
interest.
1,2 One of the most popular modes used by banks in Islamic countries to
promote riba free transactions is Murabaha. The ratio in which this
instrument is being used varies from bank to bank.
1,3 Basically Murabaha is a particular type of sale, Ideal mode of financing
according to Shariah would be Mudarabah or Musharakah. However , in
tile perspective of the current economic set up there are certain practical
difficulties in using Mudarabah and Musharakah instruments in every type
of financing. Therefore, the contemporary Shariah experts have
emphasi zed on rvlurabaha basically as a trading mode of transaction but
in tile contemporary context, the use of Murabaha subject to certain
conditions on deferred payment basis has been allowed as a permissible
mode.
1.4 It should be emphasized here that tile instrument of Murabaha should be
used as a transitory step taken in tile process of the ISlamization of tile
economy, and its use should be restricted only to those cases Where the
Mudarabah and Musharakah are not practicable,
1.5 The second important point is that the rvlurabaha transaction does not
come into existence by merely replacing the word" interest" by the words
" profit" or" mark-up ". Unless basic conditions as laid down by Stuuieh
are fully obse rved, a Murabaha is not valid. In fact, it is the observance of
these conditions, which can draw a clear line of distinction between the
interest-bearing loan and a trading transaction of Murabaha. If any of
thes e conditions is not met, the transaction ceases to be Murabaha
according to Shariah.
1.6 The accounting treatment of Murabaha and its disclosure and
presentation in the financial statements also varies from bank to bank .
1.7 Such diversity of accounting treatment and disclosure has reduced tile
utility of financial statements of such banks to the users of such
statements. .
1,8 Hence there is a need to formulate an accounting standard regarding
2
Murabaha to be observed in the presentation of financial statements of
banks and to promote their widest possible acceptance and observance,
1.9 Definitions
Murabaila : MUI'abaha is a particular kind of sale where seller expressly
mentions the cost he has incurred on the commodities to be sold and
sells it to another person by adding some profit or mark up thereon which
is known to the buyer.
Thus Murabaha is a cost plus transaction where the seller expressly
mentions the cost of a commodity sold and sells it to another person by
adding mutually agreed profit thereon which can be either in lump-sum or
through an agreed ratio of profit to be charged over the cost, thus
. resulting in an absolute price.
Inventories : Inventories are assets held for sale under Murabaha
transactions in the ordinary course of business.
2. Basic Sl1arjah Principles and Features of Murabaha
Basic principles governing Murabaha can be divided into three categories.
Principles regarding sale , deferred payment and other principles.
2.1 Principles regarding sale
2.1,1 "Sale" is defined in Shariah as " the exchange of a Hling of value
by another thing of value with mutual consent",
2.1,2 The subject matter of sale must be exisling at the time of sale .
Thus, a thing, which has not yet come into existence, cannot be
sold. If a non-existent thing has been sold, though by mutual
consent, the sale is void according to Shariah.
Example: A sells the unborn calf of his cow to B. The sale is
void.
2,1',3 The subject matter of sale must be in the ownership of the seller
at the lime of sale, and he must have a good title to it.
Thus, what is not owned by the seller cannot be sold . If he sells
something before acquiring its ownership, the sale is void
according to Shariah.
Example: A sells to B a car, which is presently owned, by C,
but A is hopeful that he will buy it from C and shall
deliver it to B subsequently. The sale is void .
2.1.4 The subject matter of sale must be in the physical or constructive
possession of the seller when he sells it to another person.
3
Examples: i) A has purchased a car from B, B has not yet
delivered it to A or to his agent. A cannot sell the
car to C. If he sells it before taking its delivery real
or constructi ve from B, the sale is void.
li) A has purchased a car from B, B has placed the
car in a garage where A has free access and B has
allowed him to take the delivery real or constructive
from that place whenever he wishes. The car is in
the constructive possession of A. If A sells the car
to C without acquiring physical possession, the sale
is valid.
2.1.5 The gist of the principles mentioned in paras 2.1.2 to 2.1.4 is that
a sale under Murabaha arrangement is not valid under Shariah
principles unless a thing or commodity:-
- is in existence
- is owned by the seller,
- IS in the physical or constructive possession of the seller.
2.1.6 The major difference between an actual sale and a mere promise
to sell is that an actual sale cannot be effected unless the above
three conditions are fulfilled . However one can promise to sell
sornethinq, which is not yet owned or possessed by him. This
promise initially creates just a moral obligation on the promisor to
fulfill his promise, which is normally not legally enforceable.
But the actual sale will have to be effected after the commodity
comes into the possession of the seller, This will require separate
offer and acceptance, and unless the sale is effected in this
manner, the legal consequences of the sale shal l not follow.
2.1,7 The sale must be prompt and absolute. TllUS a sale attributed to a
future date or a sale contingent on a future evenl is void. If tile
parties wish to effect a valid sale, they will have to effecl it fresh
when the fulure date comes or the contingency actually occurs .
2.1.8 The subject matter of sale must be a property of value, Thus, a
thing having no value according to the usage or custom or trade
cannot be sold or purchased. Further the subject matter of sale
must be specifically known and identified to the buyer .
Explanation: The subject matter of sale may be identified either
by pointation or by detailed specification, which
can distinguish it from other things not sold,
Example: There is a building comprising of a number of
apartments built on the same pattern, A, the owner
of the building says to B " I sell one of these
apartments to you", B accepts it. The sale is void
4
, J
- 1; -'
\ f
unless the apartment intended to be sold is
specifically identified or pointed out to the buyer .
And lastly it should not be a thing, which is forbidden (Haram) by
Shariah.
2.1.9 , The delivery of the sold commodity to the buyer must be certain
and should not depend on a contingency or chance.
Example: A sells his car stolen by an anonymous person
and the buyer purchases it under the hope that he
wlll manage to recover it. The sale is void.
2,1,10 The absolute certainty of price is a necessary condition for the
validity of a sale, If the price is uncertain, the sale is void,
Example: A says to B, "if you pay within a month, the price is
Rs.50/. But if you pay after two months, the price is
Rs.55/- 8 agrees without absolutely determining
one of the two prices. In this case as the price
remains uncertain the sale is void, unless anyone
of the two alternatives is seltled by the parties at
the time of concluding the transaction.
2.1,11 The sale must be unconditional. A conditional sale is invalid,
unless the condition is recognized as a part of the transaction
according to the usage of or custom of trade.
Example: (1) A buys a car from 8, with a condition that 8 will
employ his son in his firm. The sale is conditional,
hence invalid.
(2) A buys a refrigerator from 8, with a condition
that 8 undertake its free service for 2 years, The
condition, being recognized as a part of the
transaction, is valid and tile sale is lawful.
2.1,12 In case of imports the issuance of bill of lading in tavour of bank
would be considered constructive possession.
2,2 Principles regarding deferred payment
2.2.1 A sale in which the parties agree that the payment of price shall
be deferred is called a "Bai'Mu'ajjal".
2.2.2 Bai'Mu'a)jal is valid if the price and due date of payment is fixed in
an unambiguous manner.
2.2.3 The due time of payment can be fixed either with reference to a
particular date, or by specifying a period of time, but it cannot be
fixed with reference to a future event, the exact dale of which is
5
.'
unknown or is uncertain. If the time of payment is unknown or
uncertain, the sale is void.
2.2.4 If a particular period is fixed for payment, like one month, it will
deem to commence from the time of delivery, unless the parties
have agreed to otherwise.
2.2.5 The deferred price may be more than the cash price, but it must
be fixed at the time of sale.
2.2.6 Once the price is fixed, it cannot be decreased in case of earlier
payment, nor can it be increased in case of default.
2.2.7 In order to ensure the buyer pays the installments promptly, he
may be asked to promise that in case of a default, he will pay
certain amount of penalty for a charitable purpose. Such penally
shall not constitute bank's income and shall be utili zed for
charitable purposes only .
2.2.8 If a commodity is sold on installments, the seller may put a
condition on the buyer that if he fails to pay any installment on its
due date, the remaining installments will become due immediately.
2.2. 9 In order to secu re the payment of price. the seller may ask the
buyer to furnish a security whether in the form of a mortgage or in
the form of a lien or a charge on any of his existing assets.
2.2.10 The buyer can also be asked to sign a promissory note or a bill of
exchange, but such promissory note or bill or any evidence of
indebtedness cannot be assigned or transferred on a price
different from its face value.
2.3 Otner Principles regarding Murabaha
2. 3.1 rvlurabaha would be valid in case a commodity is to be imported
and its exact cost is unknown but the seller (bank), who is
importing lhe commodity, and the eventual buyer (client ) have
agreed to some profit or margin of profit which could be on FOB or
C&F cost or on the final landed cost . Further, the elements of cost
to be incurred by the bank and to be included in the calculation of
any of these costs have been agreed to beforehand by the client.
2.3.1.1
2.3.1.2
It is not necessary that the bank shou ld bear full
cost of import. It may make itself responsible for
FOB or C&F cost only and all other duties, levies
and importation charges or any part thereof may be
borne by the client.
The FOB or C&F cost may be fixed beforehand
with reference to a fixed or forward rate of
conversion or only the foreign currency cost may be
6
agreed to initially and the conversion to the local
currency may be left to actual rate prevailinq on the
date of payment for import.
2.4 The essential of Islamic Modes of Financing relating to Murabaha issued
by Shariah Board of the State Bank of Pakistan enclosed as Appendix "A"
are an integral part of the Standard,
3.0 Modalities of Murabaha
3.1 The Murabaha should fulfill all the conditions necessary for a valid sale,
i.e. :-
Tile thing or commodity is in existence.
It is owned by the seller.
The bank must have a good title to the commodity before it sells it to its
client.
The commodity must come into the possession of the bank, whether
physically or constructive, in the sense that the commodity must be at
its risk, though for a short period.
3.2 For a Murabaha transaction, the bank itself may purchase the commodity
and keep it in its own possession, or purchase the commodity through a
third person appointed by the bank as agent , before bank sells it to the
customer. However it is also allowed that bank makes the customer its
agent to buy the commodity on its behalf. In this case the client first
purchases the commodity and takes its possession as such on behalf of
the bank. Thereafter, he purchases commodity from the bank for a deferred
price, His possession over the commodity in the first instance is in the
capacity of an agent of his bank. In this capacity Ile is only a custodian
while the ownership vests in the bank and the risk of the commodity is also
borne by the bank as a logical incidence of the ownership, But as soon as
the client purchases the commodity from the bank, the ownership, as well
as the risk, passes to the client.
3.3 As mentioned earlier, the sale cannot take place unless the commodity
comes into the possession of the seller, but the seller can sign an
"agreement to sell " after the bank has acquired ownership title to the goods
though the commodity is not in its possession.
3.4 Having regard to the Shariah principles of the Murabaha a bank can use
the Murabaha by adopting the following procedure:-
3.4,.1 The client and the bank sign an " agreement to sell " whereby the
bank promises to sell and the c1ienl promises to buy commodity up
to a maximum amount of purchases at a profit margin of X
percentage or amount over cost.
3.4.2 The bank appoints the client as his agent for purchasing the
commodity 011 its behalf, and an agreement of agency is signed by
both the parties.
7
3.4.3 The client purchases the commodity on behalf of the bank and
takes its possession as an agent of the bank.
3.4.4 Tile client informs the bank that he has purchased the commodity
on its behalf and has taken possession thereof, and at the same
time, makes an offer to purchase it from the bank at profit margin
over cost as agreed to in the" agreement to sell n referred to in
3.4.1.
3.4.5 The bank accepts the offer and the sale is concluded whereby the
ownership as well as the risk of the commodity is transferred to the
client. An invoice shall be raised by the bank in respect of the
commodity sold to the client.
3.4.6 Another very important point to be followed is that the Purchase
Order, Material Receiving Report and Delivery Challan, by
whatever name called, should be in the name of the bank.
3.4.7 Finally the payment for the commodity purchased may be made
directly by the bank to the supplier or through the agent.
3.5 The purchase of the commodity from the client himself on "buy back"
agreement is not allowed in Shariah.
3,6 The above-mentioned procedure of the Murabaha is a complex transaction
where the parties involved have different capacities in different stages.
3.6.1 At the first stage, the bank and the client agree to sell and purchase
commodity in future. This is not an actual sale. It is just a promise
to effect a sale in future on Murabaha basis. Thus at this stage the
relationship between the bank and the client is that of a promisor
and a promisee.
3.6.2 At the second stage, the relationship between the parties is that of a
principal and an agent.
3.6.3 At the third stage, the relationship between the bank and the
supplier is that of a buyer and a seller.
3.6.4 At the fourth and fifth stage, the relationship of seller and buyer
comes into operation between the bank and the client and thereby
relationship of a debtor and creditor emerges.
4. Standard Accounting Practice
4,1 Scope -This Standard should be applied to financial statements prepared in
the context of historical cost convention in accounting for Murabaha
transactions undertaken by a bank.
4.2 Cost of inventories should comprise all costs of purchases and olher costs
8
I
incurred in bringing the inventories to their present location and condition ,
4.3 Inventories remaining unsold with the bank on the balance sheet date shall
constitute bank 's inventory and shall be valued in accordance with
International Accounting Standard applicable to inventories and shown
under "Other Assets",
4.4 The financial statements of a bank should disclose all the information
prescribed by International Accounting Standard applicable to inventories,
4.5 In case the inventories were acquired by the bank for a client who has
eventually defaulted on his promise to purchase the inventories, it shall be
valued in accordance with International Accounting Standard applicable to
- inventories,
4.6 Mutabaha receivable shall be recorded by the bank at the invoiced amount
and disclosed as such in the balance sheet.
4.7 Profit Recognition
(a) Purchases and sales under Murabaha and the resultant profit should
be accounted for on the culmination of Murabaha transaction;
(b) However, the profit on that portion of sales revenue not due for
payment should be deferred by accounting for by a debit to
"Unearned Murabaha Income" account with the corresponding credit
to "Deferred Murabaha Income" account and shown in the balance
sheet as a liability .
5. Effective date
This standard shall be effective for financial statements of banks for the financial
periods beginning on or after 1-01-2006.
G:I/BCIIFAS-1 for SECP .doc
9
APPENDIX'A'
. } THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
SHARIAH ESSENTIALS ISSUED BY SHARIAH BOARD
OF
THE STATE BANK OF PAKISTAN
This appendix is a ll integra l part oftlte /FAS-l 'Murabaho '
Murabaha (Agreed profit margin sale with cash or deferred payment of price)
I) Murabaha means a sale of goods by a person to another under an arrangement
whereby the seller is obliged to disclose to the buyer the cost of goods sold either
on cash basis or deferred payment basis and a margin of profit included in the sale
price of goods agreed to be sold.
II) Goods to be traded should be real goods but not credit documents.
Ill) Being a sale transaction, it is essential that the commodities which are the subject
of sale in a Murabaha transactioh, must be existing , owned by the seller and in his
physical or constructive possession. Therefore, it is necessary that the, seller must
have assumed the risks of ownership before sell ing the commodit ies to the
buyer/customer.
IV) Murabaha, like any other sale, requires an offer and acceptance which will include
certainty of price , place of del ivery, and -date on which the price, if deferred, will
be paid.
V) In a Murabaha transaction, the appointment of an agent, jf any, the purchase of
goods by or for and on behalf of the bank and the ultimate sale of such goods to
the customer shall all be transactions independent of each other and shall be so
separately documented. An agreement to sell, however, may embody all the
aforesaid events and transactions and can be entered into at the time of inception
of relat ionship. The agent would first purchase the commodity on behalf of his
principal i.e. financier and take its possession as such. Thereafter, the client would
purchase the commodity from the financier, through an offer and
acceptance. According to Sharia it is sufficient in respect of the condition of
' possession' that the supplier from whom the bank has purchased the item, gives
possession to the bank or its agent in such a manner that subject matter of the
sale comes under the risk of the bank . In other words, the commodity will remain
in the risk of the financer during the period of purchase of the commodity by the
agent and its ultimate sale to the client (agent/buyer) and its possession by him.
VI) The invoice issued by the supplier will be in the name of the financier as the
commodity would be purchased by an agent on behalf of such financier. It is
preferable that the payment for such commodities should be made by the financier
directly to the supplier.
VII) Once the sale transaction has been concluded, the selling price determined can
not be changed,
VIII) It can be stipulated while entering into the agreement that in case of late payment
or default by the client , he shall be liable to pay penalty calculated at percent per
day or per annum that will go to the charity fund constituted by the bank. The
amount of penalty cannot be taken to be a source of further return to the bank (the
seller of the goods) but shall be used for charitable purposes including the projects
intended to ameliorate economic conditions of the sections of the society
possessing little or nothing i.e. needy people/peoples without means,
IX) The banks can also approach competent courts for award of solatium which shall
be determined by the Courts at their discretion, on the basis of direct and indirect
costs incurredI other than opportunity cost. Also , security or collateral can be sold
by the bank (seller) without intervention of the court .
X) The buyer may be required to furnish security in the form of pledge,
hypothecation, lien, mortgage or any other form of encumbrance on asset .
However, the mortgagee or the charge-holder shall not derive any financial
benefit from such security.
xi) A Murabaha contract cannot be rolled over because the goods once sold by the bank
become property of the client and, hence, cannot be resold.
xii) Buy-back arrangement is prohibited. Therefore, commodities already owned by
the client cannot become the SUbject of a Murabaha transaction between him and the
same financier.
xiii) The 'promissory note or bill of exchange or any evidence of indebtedness cannot
be assigned or transferred on a price different from its face value.
[No. 9(1) PSPD/PS/2004]

(Mohammad Hayat Jasra)
Secretary
1
TO BE PUBLISH IN PART II OF THE GAZETTE OF PAKISTAN

Statutory Notification (S.R.O.)

GOVERNMENT OF PAKISTAN
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

Islamabad, the May 22, 2007

NOTIFICATION

S.R.O 431(I)/2007.__Inexerciseofthepower conferred bysub-section(3)ofsection234
oftheCompaniesOrdinance,1984(XLVIIof1984),theSecuritiesand ExchangeCommissionof
Pakistanispleased todirectthattheIslamicFinancialAccountingStandard 2,annexed tothis
notification,issued bythe Institute ofChartered AccountantsofPakistan,shallbe followed in
regard to the financialstatements by companies and modarabas while accounting for Ijarah
(Lease)transactionsasdefined bythesaid Standard:
Provided thatthe Commission may grantan exemption to any company or any
modaraba,ifitis in the public interestso to do,from compliance with allor any ofthe
requirementsoftheaforesaid Standard.

Annex to Notification

ISLAMIC FINANCIAL ACCOUNTING STANDARD
IFAS 2 IJARAH
Issued By
The Institute of Chartered Accountants of Pakistan

IFAS 2
ISLAMIC FINANCIAL ACCOUNTING STANDARD

IFAS 2 IJARAH

I. Thestandards,whichhavebeensetinbold italictype,should beread inthecontext
ofthebackground materialand implementationguidanceinthisStandard.Islamic
FinancialAccountingStandardsarenotintended toapplytoimmaterialitems

Objective

2. TheobjectiveofthisStandard istoprescribe,for lesseesand lessors,the
appropriateaccountingpoliciesand disclosuretoapplyinrelationtoljarah

2
Scope

3. ThisStandard shallapplyinaccountingfor ljarahasdefined inparagraph5butshall
notapply to:

3.1 lease agreements to explore for or use minerals, oil, natural gas and
similar non-regenerative resources;

3.2 licensing agreements for such items as motion picture films, video
recordings, plays, manuscripts, patents and copyrights;

3.3 lessorsofinvestmentpropertyleased outunder operatingleases(seelAS
40Investment Property); and

3.4 lessors of biological assets leased out under operating leases (see
lAS 41 Agriculture).

4. This Standard applies to agreements thattransfer the rightto use assets even
thoughsubstantialservicesbythelessor maybecalled for inconnectionwiththe
operationor maintenanceofsuchassets.Ontheother hand,thisStandard doesnot
applytoagreementsthatarecontractsfor servicesthatdonottransfer therightto
useassetsfrom onecontractingpartytotheother.

Definitions

5. The following terms are used in this Standard with the meanings specified:

5.1 ljarah is a contract whereby the owner of an asset, other than
consumable, transfers its usufruct to another person for an agreed
period for an agreed consideration.

Explanation:

Theterm ljarahfor thepurposeofthisStandard alsoincludesacontractofsub-
leaseexecuted bythelesseewiththeexpresspermissionofthelessor (beingthe
owner).

Whether atransactionisanljarahor notdependsonitssubstancerather thanthe
form ofthecontractprovided itcomplieswiththeShariahessentialsasmaybe
prescribed from timetotime.

5.2 Prescribed meansasprescribed byanylaw or regulationsor directivesfor the
timebeinginforce.
5.3 AnljarahisanIjarahthatiscancelableonly:

5.3.1 upon the occurrence of some remote contingency such as force
majeure;

5.3.2 withthemutualconsentofthemujir (lessor)and themustajir (lessee);
or

5.3.3 Ifthe mustajir (lessee)enters into a new ljarah for the same or an
equivalentassetwiththesamemujir (lessor).

3
5.4 Theinceptionoftheljarahshallbeeffectivefrom thedatetheassetleased outis
putintomustajirs(lessees)possessionpursuanttoanljarahcontract.

5.5 Theterm oftheljarahistheperiod for whichthemustajir (lessee)hascontracted
toleasetheassettogether withanyfurther termsfor whichthemustajir (lessee)
hasthe option to continueto lease theasset,withor withoutfurther payment,
which option atthe inception ofthe Ijarah itis reasonably certain thatthe
mustajir (lessee)willexercise.

5.6 Ujrah(lease)paymentsarethepaymentsover theljarahterm thatthemustajir
is,contractuallyrequired topay.

5.7 Fair value isthe amountfor which an assetcould be exchanged or a liability
settled,betweenknowledgeable,willingpartiesinanarmslengthtransaction.

5.8 Economiclifeiseither:

5.8.1 theperiod over whichanassetisexpected tobeeconomicallyusableby
oneor moreusers;or
5.8.2 thenumber ofproductionor similar unitsexpected tobeobtained from
theassetbyoneor moreusers.

5.9 Usefullifeistheestimated period,from thebeginningoftheljarahterm,without
limitationbytheljarahterm,over whichtheeconomicbenefitsembodied inthe
assetareexpected tobeconsumed bytheenterprise.

6. Assetsacquired for ljarahshallberecognized uponacquisitionathistoricalcost.
Historicalcostofassetsacquired for ljarah includesnetpurchasing price plus
wherever applicableallexpendituresnecessarytobringtheassettoitsintended
use,suchascustom duties,taxes,freight,insurance,installation,testing,etc.

Ijarah in the Financial Statements of Mustajir (Lessees)

7. Ujrahpaymentsunder anIjarahshould berecognized asanexpenseintheincome
statementonastraight-linebasisover theljarahterm unlessanother systematic
basisisrepresentativeofthetimepatternoftheusersbenefit.

8. For ljarah,ujrahpaymentsarerecognized asanexpenseintheincomestatement
onastraight-linebasisunlessanother systematicbasisisrepresentativeofthe
timepatternoftheusers
benefit,evenifthepaymentsarenotonthatbasis.

9. Mustajir (Lessees)should,inadditiontomeetingtherequirementsoflAS 32,
FinancialInstruments:Disclosureand Presentation,makethefollowingdisclosures
for ljarah:

9.1 thetotaloffutureujrahpaymentsunder ljarah,for eachofthefollowing
periods:

(i) notlater thanoneyear;

(ii) later thanoneyear and notlater thanfiveyears;
(iii) later thanfiveyears;
4

9.2 thetotaloffuturesub-ijarahpaymentsexpected tobereceived under sub-
ijarahatthebalancesheetdate;

9.3 ljarahand sub-ijarahpaymentsrecognized inincomefor theperiod,with
separateamountsfor ljarahpaymentsand sub-ijarahpayments;
9.4 ageneraldescriptionoftheMustajirs(lessees)significantljarah
arrangementsincluding,butnotlimited torestrictionsimposed byljarah
arrangements,suchasthoseconcerningdividends,additionaldebt,and
further ljarah.

ljarah in the Financial Statements of Mujir (Lessors)

I0.
10.1 Mujir (Lessors)should presentassetssubjecttoljarahintheir balance
sheetaccordingtothenatureoftheasset,distinguished from theassetsin
ownuse.

10.2 ljarahincomefrom ljarahshould berecognized inincomeonaccrualbasis
asand whentherentalbecomesdue,unlessanother ~ systematicbasisis
morerepresentativeofthetimepatterninwhichbenefitofusederived from
theleased assetisdiminished.

10.3 Costs,includingdepreciation,incurred inearningtheljarahincomeare
recognized asanexpense.

10.4 ljarahincomeisrecognized inincomeonaccrualbasisasand whenthe
rentalbecomesdue,unlessanother systematicbasisismore
representativeofthetimepatterninwhichusebenefitderived from the
leased assetisdiminished.

11. Initialdirectcostsincurred specificallytoearnrevenuesfrom anljarahareeither
deferred and allocated toincomeover theljarahterm inproportiontothe
recognitionofUjrah,or arerecognized asanexpenseintheincomestatementin
theperiod inwhichtheyareincurred.

12. Assetsleased outshould bedepreciated over theperiod ofleaseterm using
depreciationmethodssetoutinlAS 16

However,intheeventofanassetexpected tobeavailablefor re-ijarahafter itsfirst
term,depreciationshould becharged over theeconomiclifeofsuchassetonthe
basissetoutinlAS-I6.

13. To determine whether a leased assethas become impaired,thatis when the
expected future economic benefits from thatassetare lower than its carrying
amount,anenterpriseappliestheInternationalAccountingStandard dealingwith
impairmentofassetsthatsetsouttherequirementsfor how anenterpriseshould
perform thereview ofthecarryingamountofitsassets,how itshould determinethe
recoverable amountofan assetand when itshould recognize,or reverse,an
impairmentloss.

5
Sale and Leaseback Transactions

14. A saleand leasebacktransactioninvolvesthesaleofanassetbythevendor and
theleasingofthesameassetbacktothevendor.

15. When an asset is sold with an intention to enter into an ljarah arrangement, any
profit or loss based on the assets fair value should be recognised immediately. If
the sale price is below fair value, any profit or loss should be recognised
immediately except that, if the loss is compensated by future lease payments at
below market price, it should be deferred and amortised in proportion to the lease
payments over the period for which the asset is expected to be used. If the sale
price is above fair value, the excess over fair value should be deferred and
amortised over the period for which the asset is expected to be used.

16. Mujir (Lessors)should,inadditiontomeetingtherequirementsoflAS 32,Financial
Instruments: Disclosure and Presentation,make the following disclosures for
ljarah(Leases):

16.1 thefutureljarahpaymentsintheaggregateand for eachofthefollowing
periods:

(i) notlater thanoneyear;

(ii) later thanoneyear and notlater thanfiveyears;
(iii) later thanfiveyears;and

16.2 a general description of the mujir (lessors) significant leasing
arrangements.

17. In addition,the requirements on disclosure under lAS 16,Property,Plantand
Equipment,lAS 36,ImpairmentofAssets,lAS 38,Intangible Assetsand lAS 40,
InvestmentProperty,applytoassetsleased outunder ljarah.

Effective Date

18. This Islamic Financial Accounting Standard becomes operative for financial
statements covering periods beginning on or after firstday ofJuly 2007..Ifan
enterpriseappliesthisStandard for financialstatementscoveringperiodsbeginning
before firstday ofJuly 2007,the enterprise should disclose the factthatithas
applied thisStandard.

Itisalsoclarified thatthisStandard willberequired tobefollowed onthoseljarahs
which commence after the above-mentioned effective date.However financial
institutionswhohaveentered intoljarahagreementsbeforetheeffectivedateofthis
standard willhave the option for early compliance with the requirements ofthis
beforetheeffectivedate.
Appendix

Essentialsand ModelAgreementsfor
IslamicModesofFinancing

Introduction

The Commission for Transformation ofFinancialSystem setup in the State BankofPakistan
6
pursuanttotheSupremeCourtJudgmentonRibadated December 23,1999approved essentials
ofIslamicmodesoffinancingincludingMusharaka,Mudaraba,Murabaha,Musawama,Leasing,
Salam and Istisna.The recently established State Bank ofPakistans Shariah Board has
reviewed and approved theseessentialsofIslamicmodesoffinancingand recommended that
the same maybe circulated to the banksconducting Islamicbanking businessin Pakistan as
guidelinesthatwould form thebasisfor PrudentialRegulationsonIslamicbankinginduecourse.
Itdoes notpreclude the possibility ofdeveloping new modes or instruments offinancing,
modificationsor variantsofthemodesprovided theyareShariahcompliant.TheljarahEssentials
aregivenbelow:

ljarah (Leasing)

i) In Ijara/leasing,the corpus ofleased commodity remains in the ownership ofthe
lessor and onlyitsusufructistransferred tothelessee.Anything,whichcannotbe
used withoutconsumingthesame,cannotbeleased outlikemoney,edibles,fuel,etc.
Onlysuch assets,which are owned bythe lessor,can be leased outexceptthata
sub-leaseiseffected bythelesseewiththeexpresspermissionofthelessor
.
ii) Untilsuchtimethatassetstobeleased aredelivered tothelessee,leaserentalsdo
notbecomedueand payable.

iii) Duringtheentireterm ofthelease,thelessor mustretaintitletotheassets,and bear
allrisks and rewards pertaining to ownership.However,ifany damage or loss is
caused to the leased assets due to the faultor negligence ofthe lessee,the
consequencesthereofshallbebornebythelessee.Theconsequencesarisingfrom
non-customaryuseoftheassetwithoutmutualagreementwillalsobebornebythe
lessee.The lessee isalso responsible for allrisksand consequencesin relation to
third partyliability,arisingfrom or incidentaltooperationor useoftheleased assets.

iv) The insurance ofthe leased assetshould be inthename oflessor and thecostof
suchinsurancebornebyhim.

(Itishoped thatarrangementshallsoonbemadefor IslamicTakafultoreplacethe
existinginsurancesystem).

v) A lease can be terminated before expiryofthe term ofthe lease butonlywith the
mutualconsentoftheparties.

vi) Either partycanmakeaunilateralpromisetobuy/selltheassetsuponexpiryofthe
term oflease,or earlier atapriceand atsuchtermsand conditionsasareagreed,
provided that the lease agreement shall not be conditional upon such sale.
Alternatively,the lessor may make a promise to giftthe assetto the lessee upon
terminationofthelease,provided thelesseehasfulfilled allhisobligations.However,
there shallnotbe any stipulation in the lease agreementpurporting to transfer of
ownershipoftheleased assetsatafuturedate.

vii) Theamountofrentalmustbeagreed inadvanceinanunambiguousmanner either for
thefullterm oftheleaseor for aspecificperiod inabsoluteterms.

viii) Assignmentofonlytheleaserentalsisnotpermissibleexceptatpar value.

ix) Contractofleasewillbeconsidered terminated iftheleased assetceasestogivethe
7
servicefor whichitwasrented.However,iftheleased assetisdamaged duringthe
period ofthecontractbutiscapableofbeingrepaired,thecontractwillremainvalid.

x) A penaltycanbeagreed abinitiointheleaseagreementfor delayinpaymentofrental
bythe lessee.In thatcase,lessee shallbe liable to paypenaltycalculated atthe
agreed rate in percentper day/annum.However,thatpenaltyshallbe used for the
purposes ofcharity.The banks can also approach competentcourts for award of
damages,atdiscretionofthecourts,whichshallbedetermined onthebasisofdirect
and indirectcostsincurred,other thanopportunitycost.Also,securityor collateralcan
besold bythebank(purchaser)withoutinterventionofthecourt.

________________________________________________________________
__________
No.DIR(CS)/19/2007

(Abdul Rehman Qureshi)
Advisor/Secretary

1

Government of Pakistan

SECURITIES AND EXCHANGE COMMISSION OF PAKSITAN

Islamabad dated: 4
th
April 2011

PART II

Notification

SRO 289 (I)/2011 In exercise of the powers conferred by section 505 of the Companies
Ordinance, 1984 (XLVII of 1984), read with clause (c) of section 43 of the Securities and
Exchange Commission of Pakistan Act, 1997 (XLII of 1997), the Securities and Exchange
Commission of Pakistan is pleased to direct that the Part II of Second Schedule to the said
Ordinance, shall be substituted by the following:-

PART II. FORM OF STATEMENT IN LIEU OF PROSPECTUS TO BE DELIVERED
TO REGISTRAR BY A COMPANY WHICH DOES NOT ISSUE A
PROSPECTUS OR WHICH DOES NOT GO TO ALLOTMENT ON A
PROSPECTUS ISSUED, AND REPORTS TO BE SET OUT THEREIN

SECTION 1
FORM OF STATEMENT AND PARTICULARS TO BE
CONTAINED THEREIN

(Pursuant to section 69 of the Companies Ordinance, 1984)

1. Name of the company-:

2. Corporate Universal
Identification No. (CUIN):

3. Registered Office:

4. Telephone No.

5. Fax No.

6. Website Address:

7. E-mail Address:
2
8. Authorized share capital of the company:-

S.
No.
Kind of
shares
Class of
shares
Face/nominal
value Rs.
Number
of shares
Total
Amount
(Rs.)
Special rights in case of
other than ordinary
shares
1.
2.
3.

9. Description of the business to be actually undertaken:-

10. Future prospects of the said business:-

11. Particulars of chief executive, directors, company secretary, chief accountant, chief
financial officer, auditor, legal advisor and managing agent (if any) of the company:

Name
*
Fathers/
husbands
name
CNIC
No.
Occupation
and
directorship
in other
company
**
Tele.
No.
Cell
No
E-mail
Address
Residential
Address
***

(a) Chief Executive

(b) Directors:-
(1)
(2)
(3)
(4)
(5)
(6)
(7)

(c) Company Secretary:-

(d) Chief Accountant/Chief Financial Officer:-

(e) Auditor(s) of the company:-
3

(f) Legal advisor:-

(g) Managing agent; if any:-

12. Remuneration payable to the persons referred to in 11 above:-

S.
No.
Position in the
Company
Remuneration
payable
Relevant provision
of article, if any
Relevant clause of
agreement if any
(a) Chief Executive
(b) Directors
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(c) Company Secretary
(d) Chief Accountant /
Chief Financial Officer

(f) Auditor
(g) Legal Advisor
(h) Managing Agent

13. Number and amount of shares to be issued, including those agreed to be taken by
virtue of Memorandum of Association for cash:-

S.
No.
Kind of
shares
Class of
shares
Face /
Nominal
Value
Number
of shares
Amount Names of person
who agree to
subscribe the shares

14. Number and amount of shares agreed to be issued for consideration otherwise than in
cash:-

Number
of shares
Face /
nominal
Value
Amount Details of
consideration
otherwise than in
cash
Date for
exercising
the option
To whom
option
offered

4

15. Commission agreed to be paid for arranging the subscribers of shares:-

Nature of
the
commission
Number of
shares
agreed to be
subscribed
against the
commission
Rate of the
commission
Amount
of the
commission
paid
Amount of
the
commission
payable
Direct or
indirect
interest if
any, of
the
persons,
stated in
clause 11

16. Number and amount of debentures agreed to be issued for cash:-

Number of
debentures
Face/
Nominal
Value
Amount Date for
exercising
the option
To whom
option
offered
Whether offer
accepted
Yes / No

17. Number and amount of debentures agreed to be issued for consideration otherwise
than in cash:-

Number
of
debentures
Face
Value
Amount Details of
consideration
Date for
exercising
the option
To
whom
option
offered
Whether
offer
accepted
Yes / No

18. Commission agreed to be paid for arranging the subscribers of debentures:-

Nature of
the
commission
Number of
debentures
agreed to be
subscribed
against the
commission
Rate of the
commission
Amount
of the
commission
paid
Amount
of the
commission
payable
Direct or
indirect
interest
if any,
of the
persons,
stated in
clause
11

19. Details of the every agreement entered into since the date of incorporation relating to
property or other intangible assets of the value exceeding Rs.100,000/- :-

Name(s) &
address(es) of the
Particulars of the
property or other
Amount
intended to be
Consideration Direct or
indirect
5
vendor/purchaser intangible assets
intended to be
purchased or sold

paid or received
in cash
interest
if any,
of the
persons,
stated in
clause
11

20. Details of all other material contracts executed or intended to be executed by the
company:-

S.
No.
Nature
of
contract
Dates and
places of
execution
of contracts
Time and
place for
inspection
of
contracts
Name of
the
parties to
contracts
Important
terms &
conditions
of
contracts
Direct or
indirect interest
if any, of the
persons,
narrated in
clause 11
1.
2.
3.
(Copies of contracts to be enclosed. If a contract is not reduced in writing, a
memorandum giving full particulars and if not in English, its translation in English or
Urdu shall be enclosed)

21. In case it is proposed to acquire a running business, net profit / loss of that business as
certified by the auditor for the last 5 years or such number of years being less than five
year for which the business has been carried on:-

Year ended Amount of
net profit /
loss
Business
carried on
since (date)
Direct or indirect interest, if any,
of the persons, stated in clause 11

22. Details of preliminary expenses:-

S.
No.
Particulars
of payment
Amount of
preliminary
expenses
Paid /
Payable
to
Paid by Payable
by
Consideration
(in cash or
kind to be
specified
1.
2.
3.
4.

6
23. Minimum subscription and its proposed utilization

Amount of minimum subscription
Proposed utilization of minimum subscription:-
(i) Price of any property purchased or to be purchased.

(ii) Preliminary expenses payable by the company.

(iii) Commission payable to any person in consideration of his
agreeing to subscribe or procure any shares in the company

(iv) Repayment of any moneys borrowed by the company in
respect of any of the foregoing matters.

(v) Working capital.

(vi) Other expenditures.

24. Amount to be provided in respect of the matters aforesaid otherwise than out of the
proceeds of minimum subscription and the sources out of which those amount to be
provided.

S.
No.
Amount Source of funds

25. Signatures of the Directors or their agents authorized in writing.

S.
No.
Name Signature

Date: --------------

Note: * - In case of Auditor and Legal Advisor, being a firm the name of firm shall
be mentioned.

** - The occupation of the individual and the name(s) of the company(s) in
which he holds the office of Chief Executive/Director shall be mentioned.

*** - In case of Auditor and Legal Advisor, the address of his/its office shall be
mentioned.
7
SECTION 2
REPORTS TO BE SET OUT

1. Where it is proposed to acquire a business, a report made by auditors (who are named
in the statement) upon:-

(a) the profits or losses of the business in respect of each of the five financial years
immediately preceding the delivery of the statement to the registrar; and

(b) the assets and liabilities of the business as at the last date to which the accounts
of the business were made up.

2. (1) where it is proposed to acquire shares in a body corporate, which by reason of
the acquisition or anything to be done in consequence thereof or in connection therewith will
become a subsidiary of the company, a report made by auditors (who shall be named in the
statement) with respect to the profits and losses and assets and liabilities of the other body
corporate in respect of each of the five financial years immediately preceding the delivery of
the statement to the registrar;

(2) If the other body corporate has no subsidiaries, the report referred to in sub-clause (1)
shall

(a) so far as regards profits and losses, deal with the profits or losses of the body
corporate in respect of each of the five financial years immediately preceding
the delivery of the statement to the registrar; and

(b) so far as regards assets and liabilities, deal with the assets and liabilities of the
body corporate as at the last date to which the accounts of the body corporate
were made up.

(3) If the other body corporate has subsidiaries the report referred to in sub-clause(1) shall

(a) so far as regards profits and losses, deal separately with other body corporates
profits or losses as provided by sub-clause (2), and in addition either

(i) as a whole with the combined profits or losses of its subsidiaries
so far as they concern members of the other body corporate; or

(ii) individual with the profits or losses of each subsidiary, so far as
they concern member of the other body corporate; or instead of
dealing separately with the other body corporates profits or
losses, deal as a whole with the profits or losses of the other body
corporate and, so far as they concern members of the other body
corporate, with the combined profits or losses of its subsidiaries;
and

8
(b) so far as regards assets and liabilities deal separately with the other body
corporates assets and liabilities as provided by sub-clause (2) and, in addition,
deal either

(i) as a whole with the combined assets and liabilities of its
subsidiaries, with or without the other body corporate's assets and
liabilities; or

(ii) individually with the assets and liabilities of each subsidiary; and
shall indicate, as respects the assets and liabilities of the
subsidiaries, the allowance to be made for persons other than
members of the company.

SECTION 3
PROVISIONS APPLYING TO SECTIONS 1 AND 2 OF THIS PART

3. (1) In this Part, the expression vendor includes a vendor as defined in section 3 of
Part I

(2) Clause 35 of Part I shall apply to the interpretation of section 2 of this Part as it applies
to the interpretation of section 2 of Part I.

4. If in the case of a business which has been carried on, or of a body corporate which has
been carrying on business, for less than five financial years, the report on the accounts of the
business or body corporate shall be for the number of years, for which the business has been
carried on and section 2 of this Part shall have mutatis mutandis effect

5. Any report required by section 2 of this Part shall either

(a) indicate by way of note any adjustments as respects and figures of any profits or
losses or assets and liabilities dealt with by the report which appears to the
person making the report necessary; or

(b) make those adjustments and indicate that adjustments have been made.

6. Any report by auditors required by section 2 of this Part, shall be made by auditors
qualified under the Ordinance for appointment as auditors of a company.

(Nazir Ahmed Shaheen)
Executive Director (Registration)

____________________________________________________________________________
No. CLD/RD/-1/Amendment 2
nd
Schedule/2005
Accounting and Financial
Reporting Standards for
Medium-Sized Entities (MSEs)
and
Small-Sized Entities (SSEs)
Effective for annual periods beginning
on or after July 1, 2006
2006
The copyright for the Accounting and Financial Reporting Standards for Medium-Sized Entities (MSEs)
and Small-Sized Entities (SSEs) rests with the Institute of Chartered Accountants of Pakistan.
The Standards are downloadable from the Institutes website at w w w . i c a p . o r g . p k
In addition, for members and other users convenience, this booklet can also be purchased from the
Institutes offices at Karachi, Lahore and Islamabad.
The Accounting and Financial Reporting Standards for Medium-Sized Entities (MSEs)
and Small-Sized Entities (SSEs) were approved for issuance by the Council of the Institute of
Chartered Accountants of Pakistan in its 184
t h
meeting held on July 28, 2006.
Accounting and Financial
Reporting Standards for
Medium-Sized Entities (MSEs)
and
Small-Sized Entities (SSEs)
CONTENTS
Accounting and Financial Reporting Standard for Medium-Sized Entities (MSEs)
Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Qualifying Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Sections
1. Presentation of Financial Statements . . . . . . . . . . . . . . . . . . . . . . .9
2. Cash Flow Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
3. Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
5. Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
6. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
7. Accounting for Government Grants and Disclosure of
Government Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
8. Provisions, Contingent Liabilities and Contingent Assets . . . . . . .45
9. Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
10. Borrowing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
11. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
12. Accounting Policies, Changes in Accounting Estimates and
Errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
13. The Effects of Changes in Foreign Exchange Rates . . . . . . . . . . .65
14. Events after the Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . .67
15. Related Party Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
16. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
17. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81
Annexures
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
2 . Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
Accounting and Financial Reporting Standard for Small-Sized Entities (SSEs) 105
ACCOUNTING AND FINANCIAL REPORTING
STANDARD
FOR
MEDIUM-SIZED ENTITIES
(MSEs)
Medium-Sized Entities
Accounting and Financial Reporting Standard
The Institute of Chartered Accountants of Pakistan 1
Framework
Scope
1. This Framework sets out the conceptual basis for the preparation of general
purpose financial statements of Medium-Sized Entities (MSEs) in accordance
with the Accounting and Financial Reporting Standard for Medium-Sized Entities.
Users
2. Users of financial statements generally include present and potential investors,
employees, lenders, suppliers and other creditors, customers, governments and
their agencies and in some jurisdictions, the public. For MSEs, the most
significant users are likely to be investors/owners and creditors, who may have the
power to obtain information additional to that contained in the financial
statements. Management is also interested in the information contained in the
financial statements, even though it has access to additional management and
financial information.
Objective
3. The objective of financial statements is to provide information about the financial
position, performance and changes in financial position of an entity that is useful
to users of such information in making economic decisions. Financial statements
prepared for this purpose meet the common needs of most economic decisions
since they largely portray the financial effects of past events and do not necessarily
provide non-financial information. Financial statements show the results of
management's stewardship and accountability for the resources entrusted to it.
Underlying Assumptions
4. Financial statements are prepared on the accrual basis of accounting. Under this
basis, the effects of transactions and other events are recognised when they occur
(and not as cash or its equivalent is received or paid) and they are recorded in the
accounting records and reported in the financial statements of the periods to which
they relate. Financial statements prepared on the accrual basis inform users not
only of past transactions involving the payment and receipt of cash but also of
obligations to pay cash in the future and of resources that represent cash to be
received in the future. Hence, they provide the type of information about past
transactions and other events that is most useful to users in making economic
decisions. They are normally prepared on the assumption that an entity is a going
concern that will continue to operate for at least the foreseeable future.
Hence, it is assumed that the entity has neither the intention nor the need to
liquidate or curtail materially the scale of its operations; if such an intention or
need exists, the financial statements may have to be prepared on a different basis
and, if so, the basis used is disclosed.
Qualitative Characteristics
5. Qualitative characteristics are the attributes that make the information provided in
financial statements useful to users. The principal characteristics are:
(a) Understandability: It is essential that information provided in financial
statements be readily understandable by users.
(b) Relevance: To be useful, information must be relevant to the decision
making needs of users.
(c) Materiality: The relevance of information is affected by its nature and
materiality, information is material if its omission or misstatement could
influence the economic decisions of users taken on the basis of the financial
statements. Materiality depends on the size of the item or error judged in the
particular circumstances of its omission or misstatement. Thus, materiality
provides a threshold or cut-off point rather than being a primary qualitative
characteristic which information must have if it is to be useful.
(d) Reliability: Information is reliable when it is free from material error and
bias and can be depended on by users to represent faithfully that which it is
said to represent. In assessing reliability, substance over form, prudence,
neutrality and completeness are also considered.
(e) Faithful Representation: To be reliable, information must represent
faithfully the transactions and other events it either purports to represent or
could reasonably be expected to represent.
(f) Substance Over Form: Information is to represent faithfully the
transactions and other events that it purports to represent, it is necessary that
they are accounted for and presented in accordance with their substance and
economic reality and not merely their legal form.
(g) Neutrality: To be reliable, the information contained in financial statements
must be neutral, that is, free from bias.
(h) Prudence: Prudence is the inclusion of a degree of caution in the exercise
of the judgments needed in making the estimates required under conditions
of uncertainty, such that assets or income are not overstated and liabilities
or expenses are not understated.
(i) Completeness: To be reliable, the information in financial statements must
be complete within the bounds of materiality and cost. An omission can
cause information to be false or misleading and thus unreliable and deficient
in terms of its relevance.
(j) Comparability: Users must be able to compare the financial statements of
an entity over time in order to identify trends in the entity's financial position
and performance. Users must also be able to compare the financial
statements of different entities in order to evaluate their relative financial
position, performance and changes in financial position.
Constraints on Relevant and Reliable Information
Timeliness
6. If there is undue delay in the reporting of information it may lose its relevance.
Management may need to balance the relative merits of timely reporting and the
provision of reliable information. To provide information on a timely basis it may
often be necessary to report before all aspects of a transaction or other event are
known, thus impairing reliability. Conversely, if reporting is delayed until all
aspects are known, the information may be highly reliable but of little use to users
who have had to make decisions in the interim. In achieving a balance between
relevance and reliability, the overriding consideration is how best to satisfy the
economic decisionmaking needs of users.
Balance Between Benefit and Cost
7. The balance between benefit and cost is a pervasive constraint rather than a
qualitative characteristic. The benefits derived from information should exceed the
cost of providing it. The evaluation of benefits and costs is, however, substantially
a judgmental process. The preparers and users of financial statements should be
aware of this constraint. In achieving a balance between relevance and reliability,
the overriding consideration is how best to satisfy the economic decision-making
needs of users.
Balance Between Qualitative Characteristics
8. In practice, trade-offs between qualitative characteristics are often necessary.
Determining the relative importance of the characteristics in different cases is a
matter of professional judgment.
Elements
9. The elements directly related to the measurement of financial position are assets,
liabilities and equity. These are defined as follows:-
(a) An asset is a resource controlled by the entity as a result of past events and
from which future economic benefits are expected to flow to the entity.
(b) A liability is a present obligation of the entity arising from past events, the
settlement of which is expected to result in an outflow from the entity of
resources embodying economic benefits.
(c) Equity is the residual interest in the assets of the entity after deducting all
its liabilities.
10. Profit is frequently used as a measure of performance or as the basis for other
measures, such as return on investment or earnings per share. The elements
directly related to the measurement of profit are income and expenses.
11. The elements of income and expenses are defined as follows:
(a) Income is increase in economic benefits during the accounting period in the
form of inflows or enhancements of assets as well as decreases of liabilities
that results in increase in equity, other than those relating to contributions
from equity participants.
(b) Expenses are decrease in economic benefits during the accounting period in
the form of outflows or depletions of assets or incurrence of liabilities that
results in decrease in equity, other than those relating to distributions to
equity participants.
Recognition
12. An item that meets the definition of an element should be recognised if (a) it is
probable that any future economic benefit associated with the item will flow to or
from the entity, and (b) the item has a cost or value that can be measured with
reliability.
Measurement
13. The measurement basis most commonly adopted by entities in preparing their
financial statements is historical cost. This is usually combined with other
measurement bases. For example, inventories are usually carried at the lower of
cost and net realisable value, marketable securities may be carried at market value
and pension liabilities are carried at their present value.
Transactions not Covered by this Standard
14. Where an entity has a transaction that falls outside this standard, it is suggested
that the preparer look for guidance within the:
(a) International Accounting Standards (IAS) / International Financial
Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB);
(b) interpretations issued by Standing Interpretations Committee (SIC) and
International Financial Reporting Interpretations Committee (IFRIC);
(c) appendices to standards issued by IASB;
(d) implementation guidance issued by IASB;
(e) the definitions, recognition criteria and measurement concepts set out in the
conceptual framework of IASB; and
(f) pronouncements of the Institute of Chartered Accountants of Pakistan
(ICAP) that use a similar conceptual framework to develop accounting
standards; other accounting literature; and accepted industry practice, to the
extent that these are consistent with items (a) to (e) above.
Defined Terms
15. All the terms shown in italics in this standard are defined in Annexure 1 -
Definitions.
Effective Date
16. Medium-Sized Entities shall apply this Accounting and Financial Reporting
Framework and Standard for annual periods beginning on or after July 1, 2006.
Qualifying Entities
Qualifying Entities
1. Entities which qualify to use this standard as framework for preparation of their
financial statements are defined hereunder. Compliance with MSE Framework
and Standard is necessary for an MSE in order to give a true and fair view while
preparing its financial statements.
Medium-Sized Entity (MSE)
2. A Medium-Sized Entity (MSE) is an entity that:
(a) is not a listed company or a subsidiary of a listed company;
(b) has not filed, or is not in the process of filing, its financial statements with
the Securities and Exchange Commission of Pakistan (SECP) or other
regulatory organisation for the purpose of issuing any class of instruments
in a public market;
(c) does not hold assets in a fiduciary capacity for a broad group of outsiders,
such as a bank, insurance company, securities broker/dealer, pension fund,
mutual fund or investment banking entity;
(d) is not a public utility or similar entity that provides an essential public
service;
(e) is not economically significant on the basis of criteria as defined in
paragraph 3 below; and
(f) is not a Small-Sized Entity (SSE) as defined in paragraph 4 below.
Economically Significant Entity
3. An entity is considered to be economically significant if it has:
(i) turnover in excess of Rs. 1 billion, excluding other income;
(ii) number of employees in excess of 750;
(iii) total borrowings (excluding trade creditors and accrued liabilities) in excess
of Rs. 500 million.
In order to be treated as economically significant any two of the criterion
mentioned in (i), (ii) and (iii) above have to be met. The criteria followed will be
based on the previous years audited financial statements. Entities can be delisted
from this category where they do not fall under the aforementioned criteria for two
consecutive years.
Small-Sized Entity (SSE)
4. A Small-Sized Entity (SSE) is an entity that:
(i) has paid up capital plus undistributed reserves (total equity after taking into
account any dividend proposed for the year) not exceeding Rs. 25 million;
and
(ii) has annual turnover not exceeding Rs. 200 million, excluding other income.
In order to qualify as a Small-Sized Entity, both of the above-mentioned
conditions must be satisfied.
Section 1: Presentation of Financial Statements
Components of Financial Statements
1.1 A complete set of financial statements includes the following components:
(a) a balance sheet;
(b) an income statement;
(c) a statement showing either:
(i) all changes in equity; or
(ii) changes in equity other than those arising from capital transactions
with owners and distributions to owners;
(d) a cash flow statement; and
(e) accounting policies and explanatory notes.
Overall Considerations
1.2 Financial statements shall present fairly the financial position, financial
performance and cash flows of an entity. The appropriate application of the
standard, with additional disclosure when necessary, results, in virtually all
circumstances, in financial statements that achieve a fair presentation as
appropriate for MSEs. In the event that a transaction undertaken by an entity, is
not covered by the standard, the entity should look to the full set of International
Accounting Standards (IAS) and International Financial Reporting Standards
(IFRS) for authoritative guidance, as set out in paragraph 12.1.
1.3. An entity whose financial statements are drawn up in compliance with the
standard and the Companies Ordinance, 1984 shall specify in its accounting policy
note that these financial statements are in compliance with Accounting and
Financial Reporting Framework for MSEs and the Companies Ordinance, 1984.
1.4 Inappropriate accounting treatments are not rectified either by disclosure of the
accounting policies used or by notes or explanatory material.
1.5 In the extremely rare circumstances when management concludes that compliance
with a requirement in the standard would be misleading, and departure from a
requirement is necessary in order to achieve a fair presentation, the entity shall
depart from that requirement and shall disclose:
(a) that management has concluded that the financial statements fairly present
the entity's financial position, financial performance and cash flows;
(b) that it has complied in all material respects with the Standard, except for
departing from them in order to achieve a fair presentation;
(c) the nature of the departure, including the treatment required by the standard,
the reason why that treatment would be misleading in the circumstances,
and the treatment adopted; and
(d) for each period presented, the financial impact of the departure on each item
in the financial statements that would have been reported in complying with
the requirement.
1.6 When preparing financial statements, management shall make an assessment of an
entity's ability to continue as a going concern. Financial statements shall be
prepared on a going concern basis unless management either intends to liquidate
the entity or cease trading, or has no realistic alternative but to do so. When
management is aware, in making its assessment, of material uncertainties related
to events or conditions that may cast significant doubt on the entity's ability to
continue as a going concern, those uncertainties shall be disclosed. When the
financial statements are not prepared on a going concern basis, that fact shall be
disclosed, together with the basis on which the financial statements are prepared
and the reason why the entity is not considered to be a going concern.
In assessing whether the going concern assumption is appropriate, management
takes into account all available information for the foreseeable future, which shall
be at least, but is not limited to, twelve months from the balance sheet date. The
degree of consideration depends on the facts in each case. When an entity has a
history of profitable operations and ready access to financial resources, a
conclusion that the going concern basis of accounting is appropriate may be
reached without detailed analysis. In other cases, management may need to
consider a wide range of factors surrounding current and expected profitability,
debt repayment schedules and potential sources of replacement financing before it
can satisfy itself that the going concern basis is appropriate.
1.7 An entity shall prepare its financial statements, except for cash flow information,
under the accrual basis of accounting.
1.8 The presentation and classification of items in the financial statements shall be
retained from one period to the next unless:
(a) a significant change in the nature of the operations of the entity or a review
of its financial statement presentation demonstrates that the change will
result in a more appropriate presentation of events or transactions; or
(b) a change in presentation is required by the standard.
1.9 Each material item shall be presented separately in the financial statements.
Immaterial items shall be aggregated with amounts of a similar nature or function
and need not be presented separately. Information is material if its omission or
misstatement could influence the economic decisions of users taken on the basis
of the financial statements. Materiality depends on the size and nature of the item
judged in the particular circumstances where its presentation comes into question.
1.10 Assets and liabilities shall not normally be offset in the financial statements.
However, some offsetting is required or permitted in exceptional circumstances,
as mandated by the Standard (e.g. paragraph 2.7). Offsetting may also take place
where gains, losses and related expenses arising from the same or similar
transactions are not material.
1.11 Unless the standard permits or requires otherwise, comparative information with
respect to the previous period shall be disclosed for all numerical information in
the financial statements. Comparative information shall be included in narrative
and descriptive information when it is relevant to an understanding of the current
period's financial statements. When the presentation or classification of items in
the financial statements is amended, comparative amounts shall be reclassified
unless the reclassification is impracticable. When comparative amounts are
reclassified, an entity shall disclose the nature, amount and reason of the
reclassification. When it is impracticable to reclassify comparative amounts, an
entity shall disclose the reason for not reclassifying the amounts and the nature of
the adjustments.
Structure and Content
1.12 Each component of the financial statements shall be clearly identified. In addition,
the following information shall be prominently displayed and repeated when it is
necessary for a proper understanding of the information presented:
(a) the name of the reporting entity or other means of identification;
(b) the balance sheet date or the period covered by the other financial
statements, whichever is appropriate to the related component of the
financial statements; and
(c) the reporting currency.
1.13 Financial statements shall be presented at least annually. When, in exceptional
circumstances, an entity's balance sheet date changes and annual financial
statements are presented for a period longer or shorter than one year, an entity
shall disclose, in addition to the period covered by the financial statements:
(a) the reason why a period other than one year is being used; and
(b) the fact that comparative amounts for the income statement, changes in
equity, cash flows and related notes are not comparable.
Balance Sheet
1.14 Each entity shall determine, based on the nature of its operations, whether or not
to present current and non-current assets and current and non-current liabilities as
separate classifications on the face of the balance sheet. Paragraphs 1.16 to 1.20
of this section apply when this distinction is made. When an entity chooses not to
make this classification, assets and liabilities shall be presented broadly in order
of their liquidity.
1.15 Whichever method of presentation is adopted, an entity shall disclose, for each
asset and liability item that combines amounts expected to be recovered or settled
both before and after 12 months from the balance sheet date, the amount expected
to be recovered or settled after more than 12 months.
1.16 An asset shall be classified as a current asset when it:
(a) is expected to be realised in, or is held for sale or consumption in, the normal
course of the entity's operating cycle;
(b) is held primarily for trading purposes or for the short term and is expected
to be realised within 12 months of the balance sheet date; or
(c) is cash or a cash-equivalent asset that is not restricted in its use.
All other assets shall be classified as non-current assets.
1.17 A liability shall be classified as a current liability when:
(a) it is expected to be settled in the normal course of the entity's operating
cycle;
(b) it is due to be settled within 12 months of the balance sheet date;
(c) it is held primarily for the purpose of being traded; or
(d) the entity does not have an unconditional right to defer settlement of the
liability for at least twelve months after the balance sheet date.
All other liabilities shall be classified as non-current liabilities.
1.18 An entity classifies its financial liabilities as current when they are due to be
settled within twelve months after the balance sheet date, even if:
(a) the original term was for a period longer than twelve months; and
(b) an agreement to refinance, or to reschedule payments, on a long-term basis
is completed after the balance sheet date and before the financial statements
are authorised for issue.
1.19 At a minimum, the face of the balance sheet shall include line items presenting the
following amounts:
(a) property, plant and equipment;
(b) intangible assets;
(c) investments;
(d) inventories;
(e) trade and other receivables;
(f) cash and cash equivalents;
(g) trade and other payables;
(h) tax liabilities and assets;
(i) provisions;
(j) non-current interest-bearing liabilities; and
(k) capital and reserves.
1.20 Additional line items, headings and subtotals shall be presented on the face of the
balance sheet when such presentation is necessary to present fairly the entity's
financial position.
1.21 An entity shall disclose the following, either on the face of the balance sheet or in
the notes:
(a) for each class of share capital:
(i) the number of shares authorised;
(ii) the number of shares issued and fully paid, and issued but not fully paid;
(iii) par value per share, or that the shares have no par value;
(iv) a reconciliation of the number of shares outstanding at the beginning
and at the end of the year;
(v) the rights, preferences and restrictions attaching to that class,
including restrictions on the distribution of dividends and the
repayment of capital;
(vi) shares in the entity held by the entity itself; and
(vii) shares reserved for issuance under options and sales contracts,
including the terms and amounts; and
(b) a description of the nature and purpose of each reserve within equity.
Income Statement
1.22 At a minimum, the face of the income statement shall include line items that
present the following amounts:
(a) revenue;
(b) the results of operating activities;
(c) finance costs;
(d) tax expense;
(e) net profit or loss for the period.
Additional line items, headings and subtotals shall be presented on the face of the
income statement when such presentation is necessary to present fairly the entity's
financial performance.
1.23 All items of income and expense recognised in a period shall be included in the
determination of the net profit or loss for the period unless the standard requires
or permit otherwise.
1.24 When items of income and expense within profit or loss from ordinary activities
are of such size, nature or incidence that their disclosure is relevant to explain the
performance of the entity for the period, the nature and amount of such items shall
be disclosed separately.
1.25 Circumstances that may give rise to the separate disclosure of items of income and
expense in accordance with paragraph 1.24 include the following:
(a) the write-down of inventories to net realisable value or property, plant and
equipment to recoverable amount, as well as the reversal of such write-
downs;
(b) a restructuring of the activities of an entity and the reversal of any provisions
for the costs of restructuring;
(c) disposals of items of property, plant and equipment;
(d) disposals of long-term investments;
(e) discontinuing operations;
(f) litigation settlements; and
(g) other reversals of provisions.
1.26 An entity shall present, either on the face of the income statement or in the notes
to the income statement, an analysis of expenses using a classification based on
either the nature of expenses or their function within the entity.
1.27 Entities classifying expenses by function shall disclose additional information on
the nature of expenses, including depreciation and amortisation expense and staff
costs.
1.28 An entity shall disclose, in the notes, the amount of dividends per share, declared,
for the period covered by the financial statements.
1.29 An entity shall not present any items of income and expense as extraordinary
items, either on the face of the income statement or in the notes.
Changes in Equity
1.30 An entity shall present, as a separate component of its financial statements, a
statement showing the following:
(a) the net profit or loss for the period;
(b) each item of income and expense, gain or loss that, as required by the
Standard, is recognised directly in equity, and the total of these items; and
(c) the cumulative effect of changes in accounting policy and the correction of
fundamental errors.
In addition, an entity shall present, either within this statement or in the notes, the
following:
(d) capital transactions with owners and distributions to owners;
(e) the balance of accumulated profit or loss at the beginning of the period and
at the balance sheet date, and the movements for the period; and
(f) a reconciliation between the carrying amount of each class of equity capital,
share premium and each reserve at the beginning and the end of the period,
separately disclosing each movement.
Notes to the Financial Statements
1.31 The notes to the financial statements of an entity shall:
(a) present information about the basis of preparation of the financial statements
and the specific accounting policies selected and applied for significant
transactions and events;
(b) disclose the information required by the standard that is not presented
elsewhere in the financial statements;
(c) provide additional information that is not presented on the face of the
financial statements but that is necessary for a fair presentation;
(d) the amount of dividends that were declared after the balance sheet date but
before the financial statements were authorised for issue; and
(e) the amount of any cumulative preference dividends not recognised.
1.32 Notes to the financial statements shall be presented in a systematic manner. Each
item on the face of the balance sheet, the income statement and the cash flow
statement shall be cross-referenced to any related information in the notes.
1.33 The accounting policies section of the notes to the financial statements shall
describe the following:
(a) the measurement basis (or bases) used in preparing the financial statements; and
(b) each specific accounting policy that is necessary for a proper understanding
of the financial statements.
1.34 An entity shall disclose in the notes information about the key assumptions
concerning the future, and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year. In
respect of those assets and liabilities, the notes shall include details of:
(a) their nature; and
(b) their carrying amount as at the balance sheet date.
1.35 Determining the carrying amounts of some a s s e t s and l i a b i l i t i e s r e q u i r e s
estimation of the effects of uncertain future events on those assets and liabilities
at the balance sheet date. For example, in the absence of recently observed market
prices used to measure the following assets and liabilities, future-oriented
estimates are necessary to measure the recoverable amount of classes of property,
plant and equipment, the effect of technological obsolescence on inventories,
provisions subject to the future outcome of litigation in progress, and long-term
employee benefit liabilities such as pension obligations. These estimates involve
assumptions about such items as the risk adjustment to cash flows or discount rates
used, future changes in salaries and future changes in prices affecting other costs.
1.36 An entity shall disclose the following, if the information is not disclosed elsewhere
in information published with the financial statements:
(a) the domicile and legal form of the entity, its place of incorporation and the
address of the registered office (or principal place of business, if different
from the registered office);
(b) a description of the nature of the entity's operations and its principal
activities; and
(c) the name of the parent and the ultimate parent of the group.
Section 2: Cash Flow Statements
2.1 The cash flow statement shall report cash flows during the period classified by
operating, investing and financing activities.
Operating Activities
2.2 Cash flows from operating activities are primarily derived from the principal
revenue producing activities of the entity. Therefore, they generally result from
the transactions and other events that enter into the determination of net profit or
loss. Some transactions, such as the sale of an item of plant, may give rise to a gain
or loss that is included in the determination of net profit or loss. However, the cash
flows relating to such transactions are cash flows from investing activities.
Investing Activities
2.3 The separate disclosure of cash flows arising from investing activities is important
because the cash flows represent the extent to which expenditures have been made
for resources intended to generate future income and cash flows.
Financing Activities
2.4 The separate disclosure of cash flows arising from financing activities is important
because it is useful in predicting claims on future cash flows by providers of
capital to the entity.
2.5 An entity shall report cash flows from operating activities using either:
(a) the direct method, whereby major classes of gross cash receipts and gross
cash payments are disclosed; or
(b) the indirect method, whereby net profit or loss is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments, and items of income or expense
associated with investing or financing cash flows.
2.6 An entity shall report separately major classes of gross cash receipts and gross
cash payments arising from financing and investing activities, except to the extent
that cash flows described in paragraph 2.7 are reported on a net basis.
2.7 Cash flows arising from the following operating, investing or financing activities
may be reported on a net basis:
(a) cash receipts and payments on behalf of customers when the cash flows
reflect the activities of the customer rather than those of the entity; and
(b) cash receipts and payments for items in which the turnover is quick, the
amounts are large, and the maturities are short.
2 . 8 Cash flows arising from transactions in a foreign currency shall be recorded in an entitys
reporting currency by applying to the foreign currency amount the exchange rate
between the reporting currency and the foreign currency at the date of the cash flow.
2.9 Investing and financing transactions that do not require the use of cash or cash
equivalents shall be excluded from a cash flow statement. Such transactions shall
be disclosed elsewhere in the financial statements in a way that provides all the
relevant information about these investing and financing activities.
2.10 An entity shall disclose the components of cash and cash equivalents and shall
present a reconciliation of the amounts in its cash flow statement with the
equivalent items reported in the balance sheet.
2.11 Cash flows from interest and dividends received and paid shall each be disclosed
separately. Each shall be classified in a consistent manner from period to period
as either operating, investing or financing activities.
2.12 Cash flows arising from income taxes shall be separately disclosed within the
operating activities section unless they can be specifically identified with
financing and investing activities.
Cash and Cash Equivalents
2.13 Cash equivalents are held for the purpose of meeting short-term cash
commitments rather than for investment or other purposes. To qualify as a cash
equivalent, an investment must be readily convertible to a known amount of cash
and be subject to an insignificant risk of changes in value. Therefore, an
investment normally qualifies as a cash equivalent only when it has a short
maturity of, say, three months or less from the date of acquisition. Equity
investments are excluded from cash equivalents unless they are, in substance, cash
equivalents for example, in the case of preferred shares acquired within a short
period of their maturity and with a specified redemption date.
2 . 1 4 Bank borrowings are generally considered to be financing activities. However, bank
overdrafts that are repayable on demand form an integral part of an entity's cash
management. In these circumstances, bank overdrafts are included as a component
of c a s h and cash equivalents. A characteristic of such banking arrangements is that
the bank balance often fluctuates between being positive and being overdrawn.
Other Disclosures
2.15 An entity shall disclose, together with a commentary by management, the amount
of significant cash and cash equivalent balances held by the entity that are not
available for use by the entity.
Section 3: Property, Plant and Equipment
Recognition
3.1 An item of property, plant and equipment shall be recognised as an asset when:
(a) it is probable that future economic benefits associated with the asset will
flow to the entity; and
(b) the cost of the asset to the entity can be measured reliably.
3.2 Spare parts and servicing equipment are usually carried as i n v e n t o r y a n d
recognised in profit or loss as consumed. However, major spare parts and stand-
by equipment qualify as property, plant and equipment when an entity expects to
use them during more than one period. Similarly, if the spare parts and servicing
equipment can be used only in connection with an item of property, plant and
equipment, they are accounted for as property, plant and equipment.
Measurement at Initial Recognition
3.3 An item of property, plant and equipment that qualifies for recognition as an asset
shall initially be measured at its cost.
(a) The cost of an item of property, plant and equipment comprises its purchase
price, including import duties and non-refundable purchase taxes after
deducting trade discounts and rebates;
(b) any directly attributable costs of bringing the asset to working condition for
its intended use the initial estimate of the costs of dismantling and removing
the item and restoring the site on which it is located, the obligation for which
an entity incurs either when the item is acquired or as a consequence of
having used the item during a particular period for purposes other than to
produce inventories during that period.
3.4 Examples of directly attributable costs include the following:
(a) costs of employee benefits (as defined in Section 17 Employee Benefits)
arising directly from the construction or acquisition of the item of property,
plant and equipment;
(b) costs of site preparation;
(c) initial delivery and handling costs;
(d) installation and assembly costs;
(e) costs of testing whether the asset is functioning properly, after deducting the
net proceeds from selling any items produced while bringing the asset to that
location and condition (such as samples produced when testing equipment);
and
(f) professional fees.
3.5 Examples of costs that are not costs of an item of property, plant and equipment a r e :
(a) costs of opening a new facility;
(b) costs of introducing a new product or service (including costs of advertising
and promotional activities);
(c) costs of conducting business in a new location or with a new class of
customer (including costs of staff training); and
(d) administration and other general overhead costs.
3.6 Recognition of costs in the carrying amount of an item of property, plant and
equipment ceases when the item is in the location and condition necessary for it to
be capable of operating in the manner intended by management. Therefore, costs
incurred in using or redeploying an item are not included in the carrying amount
of that item. For example, the following costs are not included in the carrying
amount of an item of property, plant and equipment:
(a) costs incurred while an item capable of operating in the manner intended by
management has yet to be brought into use or is operated at less than full
capacity;
(b) initial operating losses, such as those incurred while demand for the items
output builds up; and
(c) costs of relocating or reorganising part or all of an entitys operations.
3.7 The cost of a self-constructed asset is determined using the same principles as for
an acquired asset.
3.8 An item of property, plant and equipment may be acquired in exchange or part
exchange for a dissimilar item of property, plant and equipment or other asset.
The fair value of an asset for which comparable market transactions do not exist
is reliably measurable if (a) the variability in the range of reasonable fair value
estimates is not significant for that asset or (b) the probabilities of the various
estimates within the range can be reasonably assessed and used in estimating fair
value. If an entity is able to determine reliably the fair value of either the asset
received or the asset given up, then the fair value of the asset given up is used to
measure the cost of the asset received unless the fair value of the asset received is
more clearly evident.
3.9 Parts of some items of property, plant and equipment may require replacement at
regular intervals. Items of property, plant and equipment may also be acquired to
make a less frequently recurring replacement, such as replacing the interior walls
of a building, or to make a nonrecurring replacement. Under the recognition
principle in paragraph 3.1, an entity recognises in the carrying amount of an item
of property, plant and equipment the cost of replacing part of such an item when
that cost is incurred if the recognition criteria are met. The carrying amount of
those parts that are replaced is derecognised in accordance with the derecognition
provisions of this section.
3.10 A condition of continuing to operate an item of property, plant and equipment (for
example, an aircraft) may be performing regular major inspections for faults
regardless of whether parts of the item are replaced. When each major inspection
is performed, its cost is recognised in the carrying amount of the item of property,
plant and equipment as a replacement if the recognition criteria are satisfied. Any
remaining carrying amount of the cost of the previous inspection (as distinct from
physical parts) is derecognised. This occurs regardless of whether the cost of the
previous inspection was identified in the transaction in which the item was
acquired or constructed. If necessary, the estimated cost of a future similar
inspection may be used as an indication of what the cost of the existing inspection
component was when the item was acquired or constructed.
3.11 An entity does not recognise in the carrying amount of an item of property, plant
and equipment the costs of the day-to-day servicing of the item. Rather, these costs
are recognised in profit or loss as incurred. Costs of day-to-day servicing are
primarily the costs of labour and consumables, and may include the cost of small
parts. The purpose of these expenditures is often described as for the repairs and
maintenance of the item of property, plant and equipment.
3.12 Major components of some items of property, plant and equipment may require
replacement at regular intervals. For example, a furnace may require relining after
a specified number of hours of usage. The components are accounted for as
separate assets because they have useful lives different from those of the items of
property, plant and equipment to which they relate. Therefore, provided the
recognition criteria in paragraph 3.1 are satisfied, the expenditure incurred in
replacing or renewing the component is accounted for as the acquisition of a
separate asset, and the replaced asset is written off.
Measurement Subsequent to Initial Recognition
3.13 An entity shall choose either the cost model or the revaluation model as its
accounting policy and shall apply that policy to an entire class of property, plant
and equipment.
Cost Model
3.14 After recognition as an asset, an item of property, plant and equipment shall be
carried at its cost less any accumulated depreciation and any accumulated
impairment losses.
Revaluation Model
3.15 After recognition as an asset, an item of property, plant and equipment whose fair
value can be measured reliably shall be carried at a revalued amount, being its fair
value at the date of the revaluation less any subsequent accumulated depreciation
and subsequent accumulated impairment losses. Revaluations shall be made with
sufficient regularity to ensure that the carrying amount does not differ materially
from that which would be determined using fair value at the balance sheet date.
3.16 The fair value of land and buildings is usually the market value. This value is
determined by appraisal, which is normally undertaken by professionally qualified
valuers. The fair value of items of plant and equipment is usually their market
value determined by appraisal.
3.17 When there is no evidence of market value because of the specialised nature of the
plant and equipment and because these items are rarely sold, except as part of a
continuing business, they are valued at their depreciated replacement cost.
3.18 When an item of property, plant and equipment is revalued, any accumulated
depreciation at the date of the revaluation is either:
(a) Restated proportionately with the change in the gross carrying amount of
the asset so that the carrying amount of the asset after revaluation equals its
revalued amount (this method is often used when an asset is revalued by
means of an index to its depreciated replacement cost); or
(b) Eliminated against the gross carrying amount of the asset and the net
amount restated to the revalued amount of the asset. For example, this
method is used for buildings that are revalued to their market value.
The amount of the adjustment arising on the restatement or elimination of
accumulated depreciation forms part of the increase or decrease in carrying
amount, in accordance with paragraph 3.20 and 3.22.
3.19 When an item of property, plant and equipment is revalued, the entire class of
property, plant and equipment to which that asset belongs shall be revalued.
3.20 When an asset's carrying amount is increased as a result of revaluation, the
increase shall be credited directly to the Surplus on Revaluation of Fixed Assets
Accounts and disclosed in the balance sheet of the entity after Capital and
Reserves.
3.21 Except and to the extent actually realised on disposal of the assets which are
revalued, the surplus on revaluation of fixed assets shall not be applied to set-off
or reduce any deficit or loss, whether past, current or future, or in any manner
applied, adjusted or treated so as to add to the income, profit or surplus of the
entity, or utilised directly or indirectly by way of dividend or bonus.
3.22 When an assets carrying amount is decreased as a result of a revaluation, the
decrease shall be recognised as an expense. The surplus on revaluation of fixed
assets may be applied by the entity in setting off or in diminution of any deficit
arising from the revaluation of any other fixed assets of the entity.
3.23 Depreciation on assets which are revalued shall be determined with reference to
the value assigned to such assets on revaluation and depreciation charge for the
period shall be taken to the Profit and Loss Account.
3.24 An amount equal to incremental depreciation for the period shall be transferred
from Surplus on Revaluation of Fixed Assets Account to unappropriated profit /
accumulated loss through Statement of Changes in Equity to record realisation
of surplus to the extent of the incremental depreciation.
Depreciation
3.25 Each part of an item of property, plant and equipment with a cost that is significant
in relation to the total cost of the item shall be depreciated separately. A significant
part of an item of property, plant and equipment may have a useful life and a
depreciation method that are the same as the useful life and the depreciation
method of another significant part of that same item. Such parts may be grouped
in determining the depreciation charge.
3.26 The depreciable amount of an item of property, plant and equipment shall be
allocated on a systematic basis over its useful life. The depreciation method used
shall reflect the pattern according to which the asset's economic benefits are
consumed by the entity. The depreciation charge for each period shall be
recognised as an expense unless it is included in the carrying amount of another
asset.
3.27 The economic benefits embodied in an item of property, plant and equipment are
consumed by the entity principally through the use of the asset. However, other
factors such as technical obsolescence and wear and tear while an asset remains
idle often result in the diminution of the economic benefits that might have been
expected to be available from the asset. Consequently, all the following factors
need to be considered in determining the useful life of an asset:
(a) the expected usage of the asset by the entity (usage is assessed by reference
to the asset's expected capacity or physical output);
(b) the expected physical wear and tear, which depends on operational factors
such as the number of shifts for which the asset is to be used, the repair and
maintenance programme of the entity, and the care and maintenance of the
asset while idle;
(c) technical obsolescence arising from changes or improvements in
production, or from a change in the market demand for the product or the
service output of the asset; and
(d) legal or similar limits on the use of the asset, such as the expiry dates of
related leases.
3.28 Land and buildings are separable assets and are dealt with separately for
accounting purposes, even when they are acquired together. Land normally has an
unlimited life and, therefore, is not depreciated. Buildings have a limited life and,
therefore, are depreciable assets. An increase in the value of the land on which a
building stands does not affect the determination of the useful life of the building.
3.29 A variety of depreciation methods can be used to allocate the depreciable amount
of an asset on a systematic basis over its useful life. These methods include the
straight-line method, the diminishing balance method and the sum-of-the-units
method. Straight-line depreciation results in a constant charge over the useful life
of the asset. The diminishing balance method results in a decreasing charge over
the useful life of the asset. The sum-of-the-units method results in a charge based
on the expected use or output of the asset. The method used for an asset is selected
based on the expected pattern of economic benefits and is consistently applied
from period to period unless there is a change in the expected pattern of economic
benefits from that asset.
3.30 The residual value and the useful life of an asset shall be reviewed at least at each
financial year-end and, if expectations differ from previous estimates, the
change(s) shall be accounted for as a change in an accounting estimate in
accordance with paragraphs 12.10 to 12.12.
3.31 The depreciable amount of an asset is determined after deducting its residual
value. In practice, the residual value of an asset is often insignificant and therefore
immaterial in the calculation of the depreciable amount.
3.32 The depreciation method applied to property, plant and equipment shall be
reviewed periodically and, if there has been a significant change in the expected
pattern of economic benefits from those assets, the method shall be changed to
reflect the changed pattern. When such a change in depreciation method is
necessary, the change shall be accounted for as a change in accounting estimate,
and the depreciation charge for the current and future periods shall be adjusted.
3.33 Depreciation of an asset begins when it is available for use, i.e. when it is in the
location and condition necessary for it to be capable of operating in the manner
intended by management. Depreciation of an asset ceases the date when the asset
is derecognised. Therefore, depreciation does not cease when the asset becomes
idle or is retired from active use unless the asset is fully depreciated. However,
under usage methods of depreciation the depreciation charge can be zero while
there is no production.
Impairment
3.34 At each balance sheet date, the entity shall assess whether there is any indication
that an asset may be impaired. If there is any such indication, the entity shall
consider whether the continued use of the asset, or group of assets forming a cash
generating unit, is likely to generate cash flows sufficient to absorb the
amortisation of the cost of the asset. In the event that the undiscounted future cash
flows are expected to be insufficient, the carrying value shall be reduced.
Derecognition
3.35 The carrying amount of an item of property, plant and equipment shall be
derecognised:
(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal.
3.36 The gain or loss arising from the derecognition of an item of property, plant and
equipment shall be included in profit or loss when the item is derecognised. Gains
shall not be classified as revenue.
3.37 The disposal of an item of property, plant and equipment may occur in a variety
of ways. In determining the date of disposal of an item, an entity applies the
criteria applicable for recognising revenue from the sale of goods.
Disclosure
3.38 The financial statements shall disclose, for each class of property, plant and
equipment:
(a) the measurement bases used for determining the gross carrying amount
(when more than one basis has been used, the gross carrying amount for that
basis in each category shall be disclosed);
(b) the depreciation methods used;
(c) the useful lives or the depreciation rates used;
(d) the gross carrying amount and the accumulated depreciation (aggregated
with accumulated impairment losses) at the beginning and end of the period;
and
(e) a reconciliation of the carrying amount at the beginning and end of the
period showing:
(i) additions;
(ii) disposals;
(iii) increases or decreases during the period resulting from revaluations;
(iv) impairment losses recognised in the income statement during the
period (if any);
(v) impairment losses reversed in the income statement during the period
(if any);
(vi) depreciation; and
(vii) other movements.
Comparative information is not required for the reconciliation in (e) above.
3.39 The financial statements shall also disclose the existence and amounts of
restrictions on title, as well as property, plant and equipment pledged as security
for liabilities.
3.40 When items of property, plant and equipment are stated at revalued amounts, the
following shall be disclosed:
(a) the basis used to revalue the assets;
(b) the effective date of the revaluation; and
(c) whether an independent valuer was involved.
Section 4: Leases
Classification of Leases
4.1 The classification of leases is based on the extent to which risks and rewards
incidental to ownership of a leased asset lie with the lessor or the lessee. Risks
include the possibility of losses from idle capacity or technological obsolescence
and of variations in return caused by changing economic conditions. Rewards may
be represented by the expectation of profitable operation over the asset's economic
life and of gain from appreciation in value or realisation of a residual value.
4.2 A lease is classified as a finance lease if it transfers substantially all the risks and
rewards incidental to ownership. A lease is classified as an operating lease if it
does not transfer substantially all the risks and rewards incidental to ownership.
4.3 Whether a lease is a finance lease or an operating lease depends on the substance
of the transaction rather than the form of the contract. Following are examples of
situations that would normally lead to a lease being classified as a finance lease:
(a) the lease transfers ownership of the asset to the lessee by the end of the lease
term;
(b) the lessee has the option to purchase the asset at a price that is expected to
be sufficiently lower than the fair value at the date the option becomes
exercisable such that, at the inception of the lease, it is reasonably certain
that the option will be exercised;
(c) the lease term is for the major part of the economic life of the asset, even if
title is not transferred;
(d) at the inception of the lease, the present value of the minimum lease
payments amounts to at least substantially all of the fair value of the leased
asset; and
(e) the leased assets are of a specialised nature such that only the lessee can use
them without major modifications.
4.4 Following are indicators of situations that individually or in combination, could
also lead to a lease being classified as a finance lease:
(a) if the lessee can cancel the lease, the lessor's losses associated with the
cancellation are borne by the lessee;
(b) gains or losses from the fluctuation in the fair value of the residual fall to
the lessee (for example, in the form of a rent rebate equalling most of the
sales proceeds at the end of the lease); and
(c) the lessee has the ability to continue the lease for a secondary period at a
rent substantially lower than market rent.
Finance Leases
4.5 At the commencement of the lease term, lessees shall recognise finance leases as
assets and liabilities in their balance sheets at amounts equal to the fair value of
the leased property or, if lower, at the present value of the minimum lease
payments. In calculating the present value of the minimum lease payments, the
discount factor is the interest rate implicit in the lease, if this is practicable to
determine; if not, the lessee's incremental borrowing rate shall be used. Any initial
direct costs of the lessee are added to the amount recognised as an asset.
4.6 Minimum lease payments shall be apportioned between the finance charge and the
reduction of the outstanding liability. The finance charge shall be allocated to
periods during the lease term so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period. Contingent rents shall be
charged as expenses in the periods in which they are incurred.
4.7 A finance lease gives rise to a depreciation expense for the depreciable asset as
well as a finance expense for each accounting period. The depreciation policy for
depreciable leased assets shall be consistent with that for depreciable assets that
are owned, and the depreciation recognised shall be calculated in accordance with
Section 3 Property, Plant and Equipment and Section 5 Intangible Assets.
4.8 If there is no reasonable certainty that the lessee will obtain ownership by the end
of the lease term, the asset shall be fully depreciated over the lease term or its
useful life, whichever is shorter.
4.9 Lessees shall make the following disclosures for finance leases:
(a) for each class of asset, the net carrying amount at the balance sheet date.
(b) a reconciliation between the total of future minimum lease payments at the
balance sheet date, and their present value. In addition, an entity shall
disclose the total of future minimum lease payments at the balance sheet
date, and their present value, for each of the following periods:
(i) not later than one year;
(ii) later than one year and not later than five years;
(iii) later than five years.
(c) contingent rent recognised as an expense in the period.
Operating Leases
4.10 Lease payments under an operating lease shall be recognised as an expense in the
income statement on a straight-line basis over the lease term unless another
systematic basis is representative of the time pattern of the user's benefit.
4.11 All incentives for the agreement of a new or renewed operating lease shall be
recognised as an integral part of the net consideration agreed for the use of the
leased asset. The lessee shall recognise the aggregate benefit of incentives as a
reduction of rental expense over the lease term.
4.12 Lessees shall disclose the total of future minimum lease payments under non-
cancellable operating leases for each of the following periods:
(a) not later than one year;
(b) later than one year and not later than five years;
(c) later than five years.
Sale and Leaseback
4.13 A sale and leaseback transaction involves the sale of an asset by the vendor and
the leasing of the same asset back to the vendor. The lease payment and the sale
price are usually interdependent since they are negotiated as a package. The
accounting treatment of a sale and leaseback transaction depends on the type of
lease involved.
4.14 If a sale and leaseback transaction results in a finance lease, any excess of sales
proceeds over the carrying amount shall not be immediately recognised as income
in the financial statements of a seller-lessee. Instead, it shall be deferred and
amortised over the lease term.
4.15 If a sale and leaseback transaction results in an operating lease and it is clear that
the transaction is established at fair value, any profit or loss shall be recognised
immediately. If the sale price is below fair value, any profit or loss shall be
recognised immediately except that, if the loss is compensated by future lease
payments at below market price, it shall be deferred and amortised in proportion
to the lease payments over the period for which the asset is expected to be used.
If the sale price is above fair value, the excess over fair value shall be deferred and
amortised over the period for which the asset is expected to be used.
4.16 For operating leases, if the fair value at the time of a sale and leaseback
transaction is less than the carrying amount of the asset, a loss equal to the amount
of the difference between the carrying amount and fair value shall be recognised
immediately.
Section 5: Intangible Assets
Recognition and Initial Measurement of an Intangible Asset
5.1 An intangible asset shall be recognised if, and only if, it meets the definition of an
asset, and:
(a) it is probable that the future economic benefits that are attributable to the
asset will flow to the entity; and
(b) the cost of the asset can be measured reliably.
An entity controls an asset if the entity has the power to obtain the future
economic benefits flowing from the underlying resource and also can restrict the
access of others to those benefits. The capacity of an entity to control the future
economic benefits from an intangible asset would normally stem from legal rights
that are enforceable in a court of law. In the absence of legal rights, it is more
difficult to demonstrate control. However, legal enforceability of a right is not a
necessary condition for control, since an entity may be able to control the future
economic benefits in some other way.
5.2 An entity shall assess the probability of future economic benefits using reasonable
and supportable assumptions that represent managements best estimate of the set
of economic conditions that will exist over the useful life of the asset.
5.3 An intangible asset shall be measured initially at cost.
5.4 Internally generated goodwill shall not be recognised as an asset.
Internally Generated Intangible Assets
Research Phase
5.5. No intangible asset arising from research (or from the research phase of an
internal project) shall be recognised. Expenditure on research (or on the research
phase of an internal project) shall be recognised as an expense when it is incurred.
Development Phase
5.6. An intangible asset arising from development (or from the development phase of
an internal project) shall be recognised if, and only if, an entity can demonstrate
all of the following:
(a) the technical feasibility of completing the intangible asset so that it will be
available for use or sale;
(b) the entity's intention to complete the intangible asset and use or sell it;
(c) its ability to use or sell the intangible asset;
(d) how the intangible asset will generate probable future economic benefits
(among other things, the entity shall demonstrate the existence of a market
for the output of the intangible asset or the intangible asset itself or, if it is
to be used internally, the usefulness of the intangible asset);
(e) the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
(f) its ability to measure reliably the expenditure attributable to the intangible
asset during its development.
5.7 Internally generated brands, mastheads, publishing titles, customer lists and items
similar in substance shall not be recognised as intangible assets.
Recognition of an Expense
5.8 Expenditure on an intangible item shall be recognised as an expense when it is
incurred, unless it forms part of the cost of an intangible asset that meets the
recognition criteria (see paragraphs 5.1 to 5.7).
5.9 Expenditure on an intangible item that was initially recognised as an expense by a
reporting entity in previous annual financial statements or interim financial reports
shall not be recognised as part of the cost of an intangible asset at a later date.
5.10 Subsequent expenditure on an intangible asset after its purchase or its completion
shall be recognised as an expense when it is incurred unless:
(a) it is probable that this expenditure will enable the asset to generate future
economic benefits in excess of its originally assessed standard of
performance; and
(b) this expenditure can be reliably measured and attributed to the asset.
If these conditions are met, the subsequent expenditure shall be added to the cost
of the intangible asset.
5.11 In some cases, expenditure is incurred to provide future economic benefits to an
entity, but no intangible asset or other asset is acquired or created that can be
recognised. In these cases, the expenditure is recognised as an expense when it is
incurred. For example, except when it forms part of the cost of a business
combination, expenditure on research is recognised as an expense when it is
incurred. Other examples of expenditure that is recognised as an expense when it
is incurred include:
(a) expenditure on start-up activities (i.e. start-up costs), unless this expenditure
is included in the cost of an item of property, plant and equipment. Start-up
costs may consist of establishment costs such as legal and secretarial costs
incurred in establishing a legal entity, expenditure to open a new facility or
business (i.e. pre-opening costs) or expenditures for starting new operations
or launching new products or processes (i.e. pre-operating costs).
(b) expenditure on training activities.
(c) expenditure on advertising and promotional activities.
(d) expenditure on relocating or reorganising part or all of an entity.
Measurement after Recognition
5.12 An entity shall choose either the cost model or the revaluation model as its
accounting policy. If an intangible asset is accounted for using the revaluation
model, all the other assets in its class shall also be accounted for using the same
model, unless there is no active market for those assets.
Cost Model
5.13 After initial recognition, an intangible asset shall be carried at its cost less any
accumulated amortisation and any accumulated impairment losses.
Revaluation Model
5 . 1 4 After initial recognition, an intangible asset shall be carried at a revalued amount,
being its fair value at the date of the revaluation less any subsequent accumulated
a m o r t i s a t i o n and any subsequent accumulated impairment losses. For the purpose of
revaluations under this section, fair value shall be determined by reference to an
active market. Revaluations shall be made with such regularity that at the balance
sheet date the carrying amount of the asset does not differ materially from its f a i r
v a l u e .
Useful Life
5.15 An entity shall assess whether the useful life of an intangible asset is finite or
indefinite and, if finite, the length of, or number of production or similar units
constituting, that useful life. An intangible asset shall be regarded by the entity as
having an indefinite useful life when, based on an analysis of all of the relevant
factors, there is no foreseeable limit to the period over which the asset is expected
to generate net cash inflows for the entity.
5.16 The useful life of an intangible asset that arises from contractual or other legal
rights shall not exceed the period of the contractual or other legal rights, but may
be shorter depending on the period over which the entity expects to use the asset.
If the contractual or other legal rights are conveyed for a limited term that can be
renewed, the useful life of the intangible asset shall include the renewal period(s)
only if there is evidence to support renewal by the entity without significant cost.
Amortisation
Intangible Assets with Finite Useful Lives
Amortisation Period and Amortisation Method
5.17 The depreciable amount of an intangible asset with a finite useful life shall be
allocated on a systematic basis over its useful life. Amortisation shall begin when
the asset is available for use, i.e. when it is in the location and condition necessary
for it to be capable of operating in the manner intended by management.
Amortisation shall cease at the earlier of the date that the asset is classified as held
for sale and the date that the asset is derecognised. The amortisation method used
shall reflect the pattern in which the assets future economic benefits are expected
to be consumed by the entity. If that pattern cannot be determined reliably, the
straight-line method shall be used. The amortisation charge for each period shall
be recognised in profit or loss unless this or another section permits or requires it
to be included in the carrying amount of another asset.
Residual Value
5.18 The residual value of an intangible asset with a finite useful life shall be assumed
to be zero unless:
(a) there is a commitment by a third party to purchase the asset at the end of its
useful life; or
(b) there is an active market for the asset and:
(i) residual value can be determined by reference to that market; and
(ii) it is probable that such a market will exist at the end of the assets
useful life.
Review of Amortisation Period and Amortisation Method
5.19 The amortisation period and the amortisation method for an intangible asset with
a finite useful life shall be reviewed at least at each financial year-end. If the
expected useful life of the asset is different from previous estimates, the
amortisation period shall be changed accordingly. If there has been a change in the
expected pattern of consumption of the future economic benefits embodied in the
asset, the amortisation method shall be changed to reflect the changed pattern.
Such changes shall be accounted for as changes in accounting estimates in
accordance with paragraphs 12.10 to 12.12.
Intangible Assets with Indefinite Useful Lives
5.20 An intangible asset with an indefinite useful life shall not be amortised.
5.21 An entity is required to test an intangible asset with an indefinite useful life for
impairment by comparing its recoverable amount with its carrying amount:
(a) annually, and
(b) whenever there is an indication that the intangible asset may be impaired.
Review of Useful Life Assessment
5.22 The useful life of an intangible asset that is not being amortised shall be reviewed
each period to determine whether events and circumstances continue to support an
indefinite useful life assessment for that asset. If they do not, the change in the
useful life assessment from indefinite to finite shall be accounted for as a change
in an accounting estimate.
Recoverability of the Carrying Amount: Impairment Losses
5.23 At each balance sheet date, the entity shall assess whether there is any indication
that an asset may be impaired. If there is any such indication, the entity shall
consider whether the continued use of the asset, or group of assets forming a cash-
generating unit, is likely to generate cash flows sufficient to absorb the
amortisation of the cost of the asset. In the event that the undiscounted future cash
flows are expected to be insufficient, the carrying value shall be reduced.
Retirements and Disposals
5.24 An intangible asset shall be derecognised (eliminated from the balance sheet) on
disposal or when no future economic benefits are expected from its use and
subsequent disposal.
5.25 Gains or losses arising from the retirement or disposal of an intangible asset shall be
determined as the difference between the net disposal proceeds and the carrying amount
of the asset and shall be recognised as income or expense in the income statement.
Disclosure
5.26 The financial statements shall disclose the following for each class of intangible
assets, distinguishing between internally generated intangible assets and other
intangible assets:
(a) whether the useful lives are indefinite or finite and, if finite, the useful lives
or the amortisation rates used;
(b) the amortisation methods used for intangible assets with finite useful lives;
(c) the gross carrying amount and the accumulated amortisation (aggregated
with accumulated impairment losses) at the beginning and end of the period;
(d) the line item(s) of the income statement in which the amortisation of
intangible assets is included; and
(e) a reconciliation of the carrying amount at the beginning and end of the
period showing:
(i) retirements and disposals;
(ii) impairment losses recognised;
(iii) impairment losses reversed;
(iv) amortisation recognised during the period; and
(v) additions and other changes in the carrying amount during the period.
Comparative information is not required.
5.27 The financial statements shall also disclose:
(a) for an intangible asset assessed as having an indefinite useful life, the
carrying amount of that asset and the reasons supporting the assessment of
an indefinite useful life. In giving these reasons, the entity shall describe the
factor(s) that played a significant role in determining that the asset has an
indefinite useful life.
(b) a description, the carrying amount and remaining amortisation period of
any individual intangible asset that is material to the entitys financial
statements.
(c) for intangible assets acquired by way of a government grant and initially
recognised at fair value:
(i) the fair value initially recognised for these assets;
(ii) their carrying amount; and
(iii) whether they are measured after recognition under the cost model or
the revaluation model.
(d) the existence and carrying amounts of intangible assets whose title is
restricted and the carrying amounts of intangible assets pledged as security
for liabilities.
(e) the amount of contractual commitments for the acquisition of intangible
assets.
Section 6: Inventories
6.1 Inventories shall be measured at the lower of cost and net realisable value.
6.2 The cost of inventories shall comprise all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their present location and
condition.
6.3 The cost of inventories of items that are not ordinarily interchangeable and goods
or services produced and segregated for specific projects shall be assigned by
using specific identification of their individual costs.
6.4 The cost of inventories, other than those dealt with in paragraph 6.2 shall be
assigned by using the first-in, first-out (FIFO) or weighted average cost formulas.
An entity shall use the same cost formula for all inventories having a similar
nature and use to the entity. For inventories with a different nature or use, different
cost formulas may be justified.
Recognition as an Expense
6.5 When inventories are sold, the carrying amount of those inventories shall be
recognised as an expense in the period in which the related revenue is recognised.
The amount of any write-down of inventories to net realisable value and all losses
of inventories shall be recognised as an expense in the period in which the write-
down or loss occurs. The amount of any reversal of any write-down of inventories
arising from an increase in net realisable value shall be recognised as a reduction
in the amount of inventories recognised as an expense in the period in which the
reversal occurs.
Disclosure
6.6 The financial statements shall disclose:
(a) the accounting policies adopted in measuring inventories, including the cost
formula used;
(b) the total carrying amount of inventories and the carrying amount in
classifications appropriate to the entity;
(c) the carrying amount of inventories carried at fair value less costs to sell;
(d) the amount of inventories recognised as an expense in the period;
(e) the amount of any write-down of inventories recognised as an expense in the
period in accordance with paragraph 6.5;
(f) the amount of any reversal of any write-down that is recognised as a
reduction in the amount of inventories recognised as expense in the period
in accordance with paragraph 6.5;
(g) the circumstances or events that led to the reversal of a write-down of
inventories in accordance with paragraph 6.5; and
(h) the carrying amount of inventories pledged as security for liabilities.
Section 7: Accounting for Government Grants and Disclosure of
Government Assistance
7.1 Government grants are assistance by government in the form of transfers of
resources to an entity in return for past or future compliance with certain
conditions relating to the operating activities of the entity. They exclude those
forms of government assistance which cannot reasonably have a value placed
upon them and transactions with government which cannot be distinguished from
the normal trading transactions of the entity.
7.2 Government grants, including non-monetary grants at fair value, shall not be
recognised until there is reasonable assurance that:
(a) the entity will comply with the conditions attaching to them; and
(b) the grants will be received.
7.3 Government grants shall be recognised as income over the periods necessary to
match them with the related costs they are intended to compensate, on a systematic
basis. They shall not be credited directly to shareholders' interests.
7.4 In most cases, the periods over which an entity recognises the costs or expenses
related to a government grant are readily ascertainable, and thus grants in
recognition of specific expenses are recognised as income in the same period as
the relevant expense. Similarly, grants related to depreciable assets are usually
recognised as income over the periods and in the proportions in which
depreciation on those assets is charged.
7.5 A government grant that becomes receivable as compensation for expenses or
losses already incurred or for the purpose of giving immediate financial support to
the entity, with no future related costs, shall be recognised as income of the period
in which it becomes receivable.
7.6 Government grants related to assets, including non-monetary grants at fair value,
shall be presented on the balance sheet either by setting up the grant as deferred
income or by deducting the grant in arriving at the carrying amount of the asset.
7.7 Grants related to income are sometimes presented as a credit in the income
statement, either separately or under a general heading such as Other income;
alternatively, they are deducted in reporting the related expense.
7.8 A government grant that becomes repayable shall be accounted for as a revision
to an accounting estimate. Repayment of a grant related to income shall be applied
first against any unamortised deferred credit set up in respect of the grant. To the
extent that the repayment exceeds any such deferred credit, or where no deferred
credit exists, the repayment shall be recognised immediately as an expense.
Repayment of a grant related to an asset shall be recorded by increasing the
carrying amount of the asset or reducing the deferred income balance by the
amount repayable. The cumulative additional depreciation that would have been
recognised to date as an expense in the absence of the grant shall be recognised
immediately as an expense.
Government Assistance
7.9 Excluded from the definition of government grants in paragraph 7.1 are certain
forms of government assistance that cannot reasonably have a value placed on
them and transactions that cannot be distinguished from the normal trading
transactions of the entity.
7.10 Examples of assistance that cannot reasonably have a value placed on them are
free technical or marketing advice and the provision of guarantees. An example of
assistance that cannot be distinguished from the normal trading transactions of the
entity is a government procurement policy that is responsible for a portion of the
entity's sales. The existence of the benefit might be unquestioned, but any attempt
to segregate the trading activities from government assistance could well be
arbitrary.
7.11 The significance of the benefit in the above examples may be such that disclosure
of the nature, extent and duration of the assistance is necessary so that the financial
statements will not be misleading.
7.12 Loans at Nil or low interest rates are a form of government assistance, but the
benefit is not quantified by the imputation of interest.
7.13 Government assistance to entities meets the definition of government grants even
if there are no conditions specifically relating to the operating activities of the
entity other than the requirement to operate in certain regions or industry sectors.
Such grants shall therefore not be credited to equity.
Disclosure
7.14 The following matters shall be disclosed:
(a) the accounting policy adopted for government grants, including the methods
of presentation adopted in the financial statements;
(b) the nature and extent of government grants recognised in the financial
statements and an indication of other forms of government assistance from
which the entity has directly benefited; and
(c) unfulfilled conditions and other contingencies attaching to government
assistance that has been recognised.
Section 8: Provisions, Contingent Liabilities and Contingent Assets
8.1 A provision shall be recognised when:
(a) an entity has a present obligation (legal or constructive) as a result of a past
event, excluding those arising from executory contracts, except where these
are onerous;
(b) it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation; and
(c) a reliable estimate can be made of the amount of the obligation.
If these conditions are not met, no provision shall be recognised.
Probable Outflow of Resources Embodying Economic Benefits
8.2 For a liability to qualify for recognition, there must be not only a present
obligation but also the probability of an outflow of resources embodying
economic benefits to settle that obligation. For the purpose of this section, an
outflow of resources or other event is regarded as probable if the event is more
likely than not to occur (i.e. the probability that the event will occur is greater than
the probability that it will not). Where it is not probable that a present obligation
exists, an entity discloses a contingent liability, unless the possibility of an outflow
of resources embodying economic benefits is remote (see paragraph 8.26).
Reliable Estimate of the Obligation
8.3 The use of estimates is an essential part of the preparation of financial statements
and does not undermine their reliability. This is especially true in the case of
provisions, which by their nature are more uncertain than most other balance sheet
items. Except in extremely rare cases, an entity will be able to determine a range
of possible outcomes and can therefore make an estimate of the obligation that is
sufficiently reliable to use in recognising a provision.
Contingent Liabilities
8.4 An entity shall not recognise a contingent liability.
8.5 A contingent liability is disclosed, as required by paragraph 8.26, unless the
possibility of an outflow of resources embodying economic benefits is remote.
Contingent Assets
8.6 An entity shall not recognise a contingent asset.
8.7 Contingent assets are not recognised in financial statements, since this may result
in the recognition of income that may never be realised. However, when the
realisation of income is virtually certain, then the related asset is not a contingent
asset and its recognition is appropriate.
8.8 A contingent asset is disclosed, as required by paragraph 8.27 where an inflow of
economic benefits is probable.
Measurement
8.9 The amount recognised as a provision shall be the best estimate of the expenditure
required to settle the present obligation at the balance sheet date. The entity shall
disclose whether the amount has been discounted.
Risks and Uncertainties
8.10 Risk describes variability of outcome. A risk adjustment may increase the amount
at which a liability is measured. Caution is needed in making judgments under
conditions of uncertainty, so that income or assets are not overstated and expenses
or liabilities are not understated. However, uncertainty does not justify the
creation of excessive provisions or a deliberate overstatement of liabilities. For
example, if the projected costs of a particularly adverse outcome are estimated on
a prudent basis, that outcome is not then deliberately treated as more probable than
is realistically the case. Care is needed to avoid duplicating adjustments for risk
and uncertainty with consequent overstatement of a provision.
8 . 1 1 The risks and uncertainties that inevitably surround many events and circumstances
shall be taken into account in reaching the best estimate of a p r o v i s i o n .
8.12 Where some or all of the expenditure required to settle a provision is expected to
be reimbursed by another party, the reimbursement shall be recognised when, and
only when, it is virtually certain that reimbursement will be received if the entity
settles the obligation. The reimbursement shall be treated as a separate asset. The
amount recognised for the reimbursement shall not exceed the amount of the
provision. Gains from the expected disposal of assets shall not be taken into
account when measuring a provision.
8.13 In the income statement, the expense relating to a provision may be presented net
of the amount recognised for a reimbursement.
8.14 Provisions shall be reviewed at each balance sheet date and adjusted to reflect the
current best estimate. If it is no longer probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, the
provision shall be reversed.
8.15 A provision shall be used only for expenditures for which the provision was
originally recognised.
8.16 Provisions shall not be recognised for future operating losses.
8.17 If an entity has a contract that is onerous, the present obligation under the contract
shall be recognised and measured as a provision.
Present Value
8.18 Where the effect of the time value of money is material, the amount of a provision
shall be the present value of the expenditures expected to be required to settle the
obligation.
8.19 The discount rate (or rates) shall be a pre-tax rate (or rates) that reflect(s) current
market assessments of the time value of money and the risks specific to the
liability. The discount rate(s) shall not reflect risks for which future cash flow
estimates have been adjusted.
Future Events and Expected Disposal of Assets
8.20 Future events that may affect the amount required to settle an obligation shall be
reflected in the amount of a provision where there is sufficient objective evidence
that they will occur. Gains from the expected disposal of assets shall not be taken
into account in measuring a provision.
Restructuring
8.21 A p r o v i s i o n for restructuring costs is recognised only when the general
recognition criteria for provisions are met.
8.22 Constructive obligation to restructure arises only when an entity:
(a) has a detailed formal plan for the restructuring identifying at least:
(i) the business or part of a business concerned;
(ii) the principal locations affected;
(iii) the location, function, and approximate number of employees who
will be compensated for terminating their services;
(iv) the expenditures that will be undertaken; and
(v) when the plan will be implemented; and
(b) has raised a valid expectation in those affected that it will carry out the
restructuring by starting to implement that plan or announcing its main
features to those affected by it.
8.23 No obligation arises for the sale of an operation until the entity is committed to the
sale, i.e. there is a binding sale agreement. Even when an entity has taken a
decision to sell an operation and announced that decision publicly, it cannot be
committed to the sale until a purchaser has been identified and there is a binding
sale agreement. Until there is a binding sale agreement, the entity will be able to
change its mind and indeed will have to take another course of action if a
purchaser cannot be found on acceptable terms.
8.24 A restructuring provision shall include only the direct expenditures arising from
the restructuring, which are those that are both:
(a) necessarily entailed by the restructuring; and
(b) not associated with the ongoing activities of the entity.
Disclosure
8.25 For each class of provision, an entity shall disclose:
(a) the carrying amount at the beginning and end of the period;
(b) a brief description of the nature of the obligation and the expected timing of
any resulting outflows of economic benefits;
(c) additional provisions made in the period, including increases to existing
provisions;
( d ) amounts used (i.e. incurred and charged against the p r o v i s i o n) during the period;
(e) unused amounts reversed during the period;
(f) the increase during the period in the discounted amount arising from the
passage of time and the effect of any change in the discount rate; and
(g) a brief description of the nature of the obligation and the expected timing of
any resulting outflows of economic benefits including an indication of the
uncertainties about the amount or timing of those outflows. Where
necessary to provide adequate information, an entity shall disclose the major
assumptions made concerning future events.
8.26 Unless the possibility of any outflow in settlement is remote, an entity shall
disclose for each class of contingent liability at the balance sheet date a brief
description of the nature of the contingent liability and, where practicable, an
estimate of its financial effect, measured under paragraphs 8.9 and 8.10. An
indication of the uncertainties relating to the amount or timing of any outflow; and
the possibility of any reimbursement shall also be disclosed.
8.27 Where an inflow of economic benefits is probable, an entity shall disclose a brief
description of the nature of the contingent assets at the balance sheet date and,
where practicable, an estimate of their financial effect, measured using the
principles set out for provisions in paragraphs 8.9 and 8.10.
8.28 Where any of the information required by paragraphs 8.26 and 8.27 is not
disclosed because it is not practicable to do so, that fact shall be stated.
8.29 In extremely rare cases, disclosure of some or all of the information required by
paragraphs 8.25 to 8.27 can be expected to prejudice seriously the position of the
entity in a dispute with other parties on the subject matter of the provision,
contingent liability or contingent asset. In such cases, an entity need not disclose
the information but shall disclose the general nature of the dispute, together with
the fact that, and the reason why, the information has not been disclosed.
8.30 Examples of accounting for provisions are given in Part A of Annexure 2 .
Section 9: Revenue
Measurement of Revenue
9.1 Revenue shall be measured at the fair value of the consideration received or
receivable.
9.2 Revenue includes only the gross inflows of economic benefits received and
receivable by the entity on its own account. Amounts collected on behalf of third
parties, such as sales taxes, federal excise duties, including any other goods and
services taxes and value added taxes, are not economic benefits flowing to the
entity and hence do not result in increases in equity. Therefore, they are excluded
from revenue. Similarly, in an agency relationship, the gross inflows of economic
benefits include amounts collected on behalf of the principal and which do not
result in increases in equity for the entity. The amounts collected on behalf of the
principal are not revenue. Instead, revenue is the amount of commission.
Sale of Goods
9.3 Revenue from the sale of goods shall be recognised when all the following
conditions have been satisfied:
(a) the entity has transferred to the buyer the significant risks and rewards of
ownership of the goods;
(b) the entity retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold;
(c) the amount of revenue can be measured reliably;
(d) it is probable that the economic benefits associated with the transaction will
(e) the costs incurred or to be incurred in respect of the transaction can be
measured reliably.
9.4 Goods include goods produced by the entity for the purpose of sale and goods
purchased for resale, such as merchandise purchased by a retailer or land and other
property held for resale.
Rendering of Services
9.5 The rendering of services typically involves the performance by the entity of a
contractually agreed task over an agreed period of time. The services may be
rendered within a single period or over more than one period. Some contracts for
the rendering of services are directly related to construction contracts for
example, those for the services of project managers and architects.
9.6 When the outcome of a transaction involving the rendering of services can be
estimated reliably, revenue associated with the transaction shall be recognised by
reference to the stage of completion of the transaction at the balance sheet date.
The outcome of a transaction can be estimated reliably when all the following
conditions are satisfied:
(a) the amount of revenue can be measured reliably;
(b) it is probable that the economic benefits associated with the transaction will
flow to the entity;
(c) the stage of completion of the transaction at the balance sheet date can be
measured reliably; and
(d) the costs incurred for the transaction and the costs to complete the
transaction can be measured reliably.
9.7 When the outcome of the transaction involving the rendering of services cannot be
estimated reliably, revenue shall be recognised only to the extent of the expenses
recognised that are recoverable.
Interest, Royalties and Dividends
9.8 Revenue arising from the use by others of entity assets yielding interest, royalties
and dividends shall be recognised on the bases set out in paragraph 9.9 when:
(a) it is probable that the economic benefits associated with the transaction will
(b) the amount of the revenue can be measured reliably.
9.9 Revenue shall be recognised on the following bases:
(a) interest shall be recognised using the effective interest method taking into
account the effective interest rate that exactly discounts the estimated future
cash receipts to the net carrying amount of the related asset.
(b) royalties shall be recognised on an accrual basis in accordance with the
substance of the relevant agreement; and
(c) dividends shall be recognised when the shareholder's right to receive
payment is established.
9.10 Revenue is recognised only when it is probable that the economic benefits
associated with the transaction will flow to the entity. However, when uncertainty
arises about the collectibility of an amount already included in revenue, the
uncollectible amount, or the amount in respect of which recovery has ceased to be
probable, is recognised as an expense rather than as an adjustment of the amount
of revenue originally recognised. Some examples of revenue recognition issues
are given in Annexure 2, Part B.
Disclosure
9.11 An entity shall disclose:
(a) the accounting policies adopted for the recognition of revenue, including the
methods adopted to determine the stage of completion of transactions
involving the rendering of services;
(b) the amount of each significant category of revenue recognised during the
period, including revenue arising from:
(i) the sale of goods;
(ii) the rendering of services;
(iii) interest;
(iv) royalties;
(v) dividends; and
(c) the amount of revenue arising from exchanges of goods or services included
in each significant category of revenue.
Section 10: Borrowing Costs
10.1 Borrowing costs may include:
(a) interest on bank overdrafts and short-term and long-term borrowings;
(b) amortisation of ancillary costs incurred in connection with the arrangement
of borrowings;
(c) finance charges in respect of finance leases; and
(d) exchange differences arising from foreign currency borrowings to the extent
that they are regarded as an adjustment to interest costs.
Recognition
Borrowing Costs: Benchmark Treatment
10.2 Borrowing costs shall be recognised as an expense in the period in which they are
incurred.
10.3 Borrowing costs shall be recognised as an expense in the period in which they are
incurred, except to the extent that they are capitalised in accordance with
paragraph 10.4.
Borrowing Costs: Allowed Alternative Treatment
10.4 Borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset shall be capitalised as part of the cost of that asset.
The amount of borrowing costs eligible for capitalisation shall be determined in
accordance with this section.
10.5 Examples of qualifying assets are i n v e n t o r i e s that require a substantial period of
time to bring them to a saleable condition, manufacturing plants, power generation
facilities and investment properties. Other i n v e s t m e n t s, and those i n v e n t o r i e s t h a t
are routinely manufactured or otherwise produced in large quantities on a repetitive
basis over a short period of time, are not qualifying assets. Assets that are ready for
their intended use or sale when acquired also are not qualifying assets.
Borrowing Costs: Eligible for Capitalisation
10.6 To the extent that funds are borrowed specifically for the purpose of obtaining a
qualifying asset, the amount of borrowing costs eligible for capitalisation on that
asset shall be determined as the actual borrowing costs incurred on that borrowing
during the period less any investment income on the temporary investment of those
borrowings.
10.7 To the extent that funds are borrowed generally and used for the purpose of
obtaining a qualifying asset, the amount of borrowing costs eligible for
capitalisation shall be determined by applying a capitalisation rate to the
expenditures on that asset. The capitalisation rate shall be the weighted average of
the borrowing costs applicable to the borrowings of the entity that are outstanding
during the period, other than borrowings made specifically for the purpose of
obtaining a qualifying asset. The amount of borrowing costs capitalised during a
period shall not exceed the amount of borrowing costs incurred during that period.
10.8 The capitalisation of borrowing costs as part of the cost of a qualifying asset shall
commence when:
(a) expenditures for the asset are being incurred;
(b) borrowing costs are being incurred; and
(c) activities that are necessary to prepare the asset for its intended use or sale
are in progress.
10.9 Capitalisation of borrowing costs shall be suspended during extended periods in
which active development is interrupted.
10.10 Capitalisation of borrowing costs shall cease when substantially all the activities
necessary to prepare the qualifying asset for its intended use or sale are complete.
10.11 When the construction of a qualifying asset is completed in parts and each part is
capable of being used while construction continues on other parts, capitalisation
of borrowing costs shall cease when substantially all the activities necessary to
prepare that part for its intended use or sale are completed.
10.12 When the carrying amount or the expected ultimate cost of the qualifying asset
exceeds its recoverable amount or net realisable value, the carrying amount is
written down or written off to the recoverable amount or net realisable value.
Disclosure
10.13 The financial statements shall disclose:
(a) the accounting policy adopted for borrowing costs;
(b) the amount of borrowing costs capitalised during the period; and
(c) the capitalisation rate used to determine the amount of borrowing costs
eligible for capitalisation.
Section 11: Income Taxes
Current Tax
11.1 Current tax for current and prior periods shall, to the extent unpaid, be recognised
as a liability. If the amount already paid in respect of current and prior periods
exceeds the amount due for those periods, the excess shall be recognised as an
asset.
11.2 The benefit relating to a tax loss that can be carried back to recover current tax of
a previous period shall be recognised as an asset.
11.3 Current tax liabilities (assets) for the current and prior periods shall be measured
at the amount expected to be paid to (recovered from) the taxation authorities,
using the tax rates (and tax laws) that have been enacted or substantively enacted
by the balance sheet date.
Deferred Tax
11.4 A deferred tax liability shall be recognised for all taxable temporary differences,
except to the extent that the deferred tax liability arises from:
(a) the initial recognition of goodwill; or
(b) the initial recognition of an asset or liability in a transaction which:
(i) is not a business combination; and
(ii) at the time of the transaction, affects neither accounting profit nor
taxable profit (tax loss).
11.5 A deferred tax asset shall be recognised for all deductible temporary differences
to the extent that it is probable that taxable profit will be available against which
the deductible temporary difference can be utilised, unless the deferred tax asset
arises from the initial recognition of an asset or liability in a transaction that:
(a) is not a business combination; and
(b) at the time of the transaction, affects neither accounting profit nor taxable
profit (tax loss).
11.6 A deferred tax asset shall be recognised for the carry forward of unused tax losses
and unused tax credits to the extent that it is probable that future taxable profit will
be available against which the unused tax losses and unused tax credits can be
utilised.
11.7 Deferred tax assets and liabilities shall be measured at the tax rates that are
expected to apply to the period when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been enacted or substantively enacted
by the balance sheet date.
11.8 The measurement of deferred tax liabilities and deferred tax assets shall reflect the
tax consequences that would follow from the manner in which the entity expects,
at the balance sheet date, to recover or settle the carrying amount of its assets and
liabilities.
Income Statement
11.9 Current tax and deferred tax shall be recognised as income or an expense and
included in profit or loss for the period, except to the extent that the tax arises
from:
(a) a transaction or event which is recognised, in the same or a different period,
directly in equity); or
(b) a business combination.
11.10 Current tax and deferred tax shall be charged or credited directly to equity if the
tax relates to items that are credited or charged, in the same or a different period,
directly to equity.
Presentation
11.11 Tax assets and tax liabilities shall be presented separately from other assets and
liabilities in the balance sheet. Deferred tax assets and liabilities, if recognised,
shall be distinguished from current tax assets and liabilities.
11.12 When an entity makes a distinction between current and non-current assets and
liabilities in its financial statements, and has decided to account for deferred taxes,
it shall not classify deferred tax assets (liabilities) as current assets (liabilities).
11.13 An entity shall offset current and deferred tax assets and current and deferred tax
liabilities if, and only if, the entity:
(a) has a legally enforceable right to set off the recognised amounts; and
(b) intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
11.14 The major components of tax expense (income) shall be disclosed separately.
11.15 An entity shall disclose the amount of a deferred tax asset and the nature of the
evidence supporting its recognition, when:
(a) the utilisation of the deferred tax asset is dependent on future taxable profits
in excess of the profits arising from the reversal of existing taxable
temporary differences; and
(b) the entity has suffered a loss in either the current or preceding period in the
tax jurisdiction to which the deferred tax asset relates.
11.16 The entity shall disclose the amount (and expiry date, if any) of deductible
temporary differences, unused tax losses, and unused tax credits for which no
deferred tax asset is recognised in the balance sheet.
Section 12: Accounting Policies, Changes in Accounting Estimates
and Errors
12.1 Management shall select and apply an entity's accounting policies so that the
financial statements comply with all the requirements of this section. Where there
is no specific requirement, management shall look in turn to the following for
guidance:
(a) International Accounting Standards (IAS) / International Financial
Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB);
(b) interpretations issued by Standard Interpretations Committee (SIC) and
International Financial Reporting Interpretations Committee (IFRIC);
(c) appendices to standards issued by IASB;
(d) implementation guidance issued by IASB;
(e) the definitions, recognition criteria and measurement concepts set out in the
conceptual framework of IASB; and
(f) pronouncements of the Institute of Chartered Accountants of Pakistan
(ICAP) that use a similar conceptual framework to develop accounting
standards; other accounting literature; and accepted industry practice, to the
extent that these are consistent with items (a) to (e) above.
Management shall use its judgment in developing an accounting policy resulting
in information that is relevant to the needs of investors and creditors and is reliable
in nature.
12.2 An entity shall select and apply its accounting policies for a period consistently for
similar transactions, other events and circumstances, unless the Standard elsewhere
specifically requires or permits categorisation of items for which different policies may
be appropriate. If this section requires or permits such categorisation, an appropriate
accounting policy shall be selected and applied consistently to each category.
12.3 A change in accounting policy shall be made only if it is required by the Standard
or if it results in a more relevant and reliable presentation in the financial
statements of the effects of transactions or other events on the entity's financial
position, financial performance or cash flows.
12.4 The following are not changes in accounting policies:
(a) the adoption of an accounting policy for transactions or other events that
differ in substance from those previously occurring; and
(b) the adoption of a new accounting policy for transactions or other events that
did not occur previously or were immaterial.
The initial application of a policy to revalue assets in accordance with Section 3
Property, Plant and Equipment or Section 5 Intangible Assets is a change in an
accounting policy to be dealt with as a revaluation in accordance with Sections 3
or 5, rather than in accordance with this section.
12.5 A change in an accounting policy that is made following an amendment to the
Standard shall be accounted for in accordance with the transitional provisions, if
any, issued with the Standard.
12.6 Where application of a change in the Standard has a material effect on the current
period or any prior period presented, an entity shall disclose the following:
(a) the fact that the change in accounting policy is made in accordance with the
change in the Standard, with a description of those provisions;
(b) the amount of the adjustment for the current period and for each prior period
presented;
(c) the amount of the adjustment relating to periods prior to those included in
the comparative information; and
(d) the fact that comparative information has been restated, or that restatement
for a particular prior period has not been made because it would require
undue cost and effort.
12.7 A change in an accounting policy other than one mandated under paragraph 12.5
shall be applied retrospectively. The opening balance of retained earnings for the
earliest prior period presented and the other comparative amounts disclosed for
each prior period presented shall be adjusted, where applicable, as if the new
accounting policy had always been in use.
12.8 Comparative information presented for a particular prior period need not be
restated if restating the information would require undue cost or effort. When
comparative information for a particular prior period is not restated, the new
accounting policy shall be applied to the balances of assets and liabilities as at the
beginning of the next period, and a corresponding adjustment shall be made to the
opening balance of retained earnings for the next period.
12.9 When a change in an accounting policy has an effect on the current period or any
prior period presented, or may have an affect in subsequent periods, an entity shall
disclose the following:
(a) the reasons for the change;
(b) the amount of the adjustment for the current period and for each prior period
presented;
(c) the amount of the adjustment relating to periods prior to those presented;
and
(d) that comparative information has been restated, or that restatement for a
particular prior period has not been made because it would require undue
cost or effort.
Changes in Accounting Estimates
12.10 The effect of a change in an accounting estimateshall be recognised prospectively
by including it in profit or loss in:
(a) the period of the change, if the change affects that period only; or
(b) the period of the change and future periods, if the change affects both.
12.11 To the extent that a change in an accounting estimate gives rise to changes in
assets and liabilities, or relates to an item of equity, it shall be recognised by
adjusting the carrying amount of the related asset, liability or equity item in the
period of the change.
12.12 The nature and amount of a change in an accounting estimate that has an affect on
the current period or is expected to have an effect in subsequent periods shall be
disclosed. If it is impractical to quantify that amount, this fact shall be disclosed.
Errors
12.13 An entity shall correct material prior period errors retrospectively in the first set
of financial statements authorised for issue after their discovery by:
(a) restating the comparative amounts for the prior period(s) presented in which
the error occurred; or
(b) if the error occurred before the earliest prior period presented, restating the
opening balances of assets, liabilities and equity for the earliest prior period
presented.
Limitations on Retrospective Restatement
12.14 A prior period error shall be corrected by retrospective restatement except to the
extent that it is impracticable to determine either the period-specific effects or the
cumulative effect of the error.
Disclosure
12.15 An entity shall disclose:
(a) the nature of the error; and
(b) the amount of the correction for each prior period presented.
Section 13: The Effects of Changes in Foreign Exchange Rates
Foreign Currency Transactions
13.1 A foreign currency transaction, other than derivative transactions, shall be
recorded, on initial recognition in the reporting currency, by applying the spot
exchange rate between the reporting currency and the foreign currency at the date
of the transaction. The date of a transaction is the date on which the transaction
first qualifies for recognition. For practical reasons, a rate that approximates the
actual rate at the date of the transaction is often used, for example, an average rate
for a week or a month might be used for all transactions in each foreign currency
occurring during that period. However, if exchange rates fluctuate significantly,
the use of the average rate for a period is inappropriate.
13.2 At each balance sheet date:
(a) foreign currency monetary items shall be reported using the closing rate;
(b) non-monetary items that are carried in terms of historical cost denominated
in a foreign currency shall be reported using the exchange rate at the date of
the transaction; and
(c) non-monetary items that are carried at fair value denominated in a foreign
currency shall be reported using the exchange rate at the date when the fair
values were determined.
13.3 Exchange differences arising on the settlement of monetary items or on reporting
an entity's monetary items at rates different from those at which they were initially
recorded during the period, or reported in previous financial statements, shall be
recognised as income or as expenses in the period in which they arise.
13.4 When a gain or loss on a non-monetary item is recognised directly in equity, any
exchange component of that gain or loss shall be recognised directly in equity.
Conversely, when a gain or loss on a non-monetary item is recognised in profit or
loss, any exchange component of that gain or loss shall be recognised in profit or
loss.
Disclosure
13.5 An entity shall disclose the amount of exchange differences included in the net
profit or loss for the period.
13.6 When the reporting currency is different from the currency of the country in
which the entity is domiciled, the reason for using a different currency shall be
disclosed. The reason for any change in the reporting currency shall also be
disclosed.
Section 14: Events After the Balance Sheet Date
14.1 An entity shall adjust the amounts recognised in its financial statements to reflect
adjusting events after the balance sheet date.
14.2 The following are examples of adjusting events after the balance sheet date that
require an entity to adjust the amounts recognised in its financial statements, or to
recognise items that were not previously recognised:
(a) the resolution after the balance sheet date of a court case which, because it
confirms that an entity already had a present obligation at the balance sheet
date, requires the entity to adjust a provision already recognised, or to
recognise a provision instead of merely disclosing a contingent liability;
(b) the receipt of information after the balance sheet date indicating that an asset
was impaired at the balance sheet date, or that the amount of a previously
recognised impairment loss for that asset needs to be adjusted. For example:
(i) when the bankruptcy of a customer occurs after the balance sheet
date, it usually confirms that a loss already existed at the balance
sheet date on a trade receivable account and that the entity needs to
adjust the carrying amount of the trade receivable account; and
(ii) the sale of inventories after the balance sheet date may give evidence
about their net realisable value at the balance sheet date;
(c) the determination after the balance sheet date of the cost of assets
purchased, or the proceeds from assets sold, before the balance sheet date;
(d) the determination after the balance sheet date of the amount of profit-sharing
or bonus payments, if the entity had a present legal or constructive
obligation at the balance sheet date to make such payments as a result of
events before that date; and
(e) the discovery of fraud or errors indicating that the financial statements were
incorrect.
14.3 An entity shall not prepare its financial statements on a going concern basis if
management determines, after the balance sheet date, either that it intends to
liquidate the entity or to cease trading, or that it has no realistic alternative but to
do so.
14.4 An entity shall not adjust the amounts recognised in its financial statements to
reflect non-adjusting events after the balance sheet date.
14.5 An example of a non-adjusting event after the balance sheet date is a decline in
market value of investments between the balance sheet date and the date when the
financial statements are authorised for issue. The fall in market value does not
normally relate to the condition of the investments at the balance sheet date, but
reflects circumstances that arise in the following period. Therefore, an entity does
not adjust the amounts recognised in its financial statements for the investments.
Similarly, the entity does not update the amounts disclosed for the investments as
at the balance sheet date, although it may need to give additional disclosure under
paragraph 14.7.
14.6 If an entity receives information after the balance sheet date about conditions that
existed at the balance sheet date, the entity shall, in light of the new information,
update disclosures that relate to these conditions.
14.7 Where non-adjusting events after the balance sheet date are of such importance
that non-disclosure would affect the ability of the users of the financial statements
to make proper evaluations and decisions, an entity shall disclose the following
information for each significant category of non-adjusting event after the balance
sheet date:
(a) the nature of the event; and
(b) an estimate of its financial effect, or a statement that such an estimate cannot
be made.
14.8 The following are examples of non-adjusting events after the balance sheet date
that may be of such importance that non-disclosure would affect the ability of the
users of the financial statements to make proper evaluations and decisions:
(a) announcing a plan to discontinue an operation, disposing of assets or
settling liabilities attributable to a discontinuing operation, or entering into
binding agreements to sell such assets or settle such liabilities;
(b) major purchases and disposals of assets, or expropriation of major assets by
government;
(c) the destruction of a major production plant by a fire after the balance sheet
date;
(d) abnormally large changes after the balance sheet date in asset prices or
foreign exchange rates; and
(e) changes in tax rates or tax laws enacted or announced after the balance sheet
date that have a significant effect on current and deferred tax assets and
liabilities.
14.9 If dividends to holders of equity instruments (for example, common shares, certain
preferred shares, warrants or options to purchase common shares) are proposed or
declared after the balance sheet date, an entity shall not recognise those dividends
as a liability at the balance sheet date.
14.10 An entity shall disclose the date when the financial statements were approved and
who has approved the financial statements.
Section 15: Related Party Disclosures
15.1 This section deals only with those related party relationships described in (a) to (g)
below:
A party is related to an entity if:
(a) directly or indirectly through one or more intermediaries, the party:
(i) controls, is controlled by, or is under common control with, the entity
(this includes parents, subsidiaries and fellow subsidiaries);
(ii) has an interest in the entity that gives it significant influence over the
entity; or
(iii) has joint control over the entity;
(b) the party is an associate of the entity;
(c) the party is a joint venture in which the entity is a venturer;
(d) the party is a member of the key management personnel of the entity or its
parent;
(e) the party is a close member of the family of any individual referred to in (a)
or (d);
(f) the party is an entity that is controlled, jointly controlled or significantly
influenced by, or for which significant voting power in such entity resides
with, directly or indirectly, any individual referred to in (d) or (e); or
(g) the party is a post-employment benefit plan for the benefit of employees of
the entity, or of any entity that is a related party of the entity.
In considering each possible related party relationship, attention is directed to the
substance of the relationship, and not merely the legal form.
15.2 In the context of this section, the following are not necessarily related parties:
(a) two entities simply because they have a director or other member of key
management personnel in common, notwithstanding (d) and (f) in the
definition of related party;
(b) two venturers simply because they share joint control over a joint venture;
(c) (i) providers of finance;
(ii) trade unions;
(iii) public utilities; and
(iv) government departments and agencies,
simply by virtue of their normal dealings with an entity (even though they
may affect the freedom of action of an entity or participate in its decision-
making process).
(d) a customer, supplier, franchisor, distributor, or general agent with whom an
entity transacts a significant volume of business, merely by virtue of the
resulting economic dependence.
Disclosure
15.3 Relationships between parents and subsidiaries shall be disclosed irrespective of
whether there have been transactions between those related parties. An entity shall
disclose the name of the entitys parent and, if different, the ultimate controlling
party. If neither the entitys parent nor the ultimate controlling party produces
financial statements available for public use, the name of the next most senior
parent that does so shall also be disclosed.
15.4 If there have been transactions between related parties, an entity shall disclose the
nature of the related party relationships as well as information about the
transactions and outstanding balance necessary for an understanding of the
potential effect of the relationship on the financial statements. At a minimum the
disclosures shall include:
(a) the amount of the transactions;
(b) the amount of outstanding balances and:
(i) their terms and conditions, including whether they are secured, and the
nature of the consideration to be provided in settlement; and
(ii) details of any guarantees given or received;
(c) provisions for doubtful debts related to the amount of outstanding balances;
and
(d) the expense recognised during the period in respect of bad or doubtful debts
due from related parties.
15.5 The following are examples of transactions that are disclosed if they are with a
related party:
(a) purchases or sales of goods (finished or unfinished);
(b) purchases or sales of property and other assets;
(c) rendering or receiving of services;
(d) leases;
(e) transfers of research and development;
(f) transfers under licence agreements;
(g) transfers under finance arrangements (including loans and equity
contributions in cash or in kind);
(h) provision of guarantees and collaterals; and
(i) settlement of liabilities on behalf of the entity or by the entity on behalf of
another party.
15.6 Disclosures that related party transactions were made on terms equivalent to those
that prevail in arms length transactions are made only if such terms can be
substantiated.
15.7 Items of a similar nature may be disclosed in aggregate except when separate
disclosure is necessary for an understanding of the effects of related party
transactions on the financial statements of the entity.
Section 16: Investments
Classification of Investments
16.1 Investments can be classified into following three categories:
(a) at fair value through profit or loss
(b) held-to-maturity
(c) available for sale
Initial Measurement of Investments
16.2 When an investment is recognised initially, an entity shall measure it at its fair
value plus, in the case of an investment not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition or issue of an
investment.
Subsequent Measurement of Investments
16.3 After initial recognition, an entity shall measure investments at their fair values,
without any deduction for transaction costs it may incur on sale or other disposal,
except for the following investments:
(a) held-to-maturity investments, which shall be measured at amortised cost
using the effective interest method; and
(b) investments in equity instruments that do not have a quoted market price in
an active market and whose fair value cannot be reliably measured, which
shall be measured at cost.
Reclassification of Investments
16.4 An entity shall not reclassify an investment into or out of the fair value through
profit or loss category while it is held or issued.
16.5 If, as a result of a change in intention or ability, it is no longer appropriate to
classify an investment as heldto-maturity, it shall be reclassified as available for
sale and remeasured at fair value, and the difference between its carrying amount
and fair value shall be accounted for in accordance with paragraph 16.9(b).
16.6 Whenever sales or reclassification of more than an insignificant amount of held-
to-maturity investments do not meet any of the conditions specified in the
definition of held-to-maturity investments, any remaining h e l d - t o - m a t u r i t y
investments shall be reclassified as available for sale. On such reclassification, the
difference between their carrying amount and fair value shall be accounted for in
accordance with paragraph 16.9(b).
16.7 If a reliable measure becomes available for an investment for which such a
measure was previously not available, and the investment is required to be
measured at fair value if a reliable measure is available, the investment shall be
remeasured at fair value, and the difference between its carrying amount and fair
value shall be accounted for in accordance with paragraph 16.9.
16.8 If, as a result of a change in intention or ability or in the rare circumstance that a
reliable measure of fair value is no longer available or because the two preceding
financial years referred to in the definition of held-to-maturity investments have
passed, it becomes appropriate to carry an investment at cost or amortised cost
rather than at fair value, the fair value carrying amount of the investment on that
date becomes its new cost or amortised cost, as applicable. Any previous gain or
loss on that asset that has been recognised directly in equity in accordance with
paragraph 16.9(b) shall be accounted for as follows:
(a) In the case of an investment with a fixed maturity, the gain or loss shall be
amortised to profit or loss over the remaining life of the held-to-maturity
investment using the effective interest method. Any difference between the
new amortised cost and maturity amount shall also be amortised over the
remaining life of the investment using the effective interest method, similar
to the amortisation of a premium and a discount If an investment is
subsequently impaired, any gain or loss that has been recognised directly in
equity is recognised in profit or loss in accordance with paragraph 16.14.
(b) In the case of an investment that does not have a fixed maturity, the gain or
loss shall remain in equity until the investment is sold or otherwise disposed
of, when it shall be recognised in profit or loss. If the investment is
subsequently impaired any previous gain or loss that has been recognised
directly in equity is recognised in profit or loss in accordance with paragraph
16.14.
Gains and Losses
16.9 A gain or loss arising from a change in the fair value of an investment shall be
recognised as follows.
(a) A gain or loss on an investment classified as at fair value through profit or
loss shall be recognised in profit or loss.
(b) A gain or loss on an available-for-sale investment shall be recognised
directly in equity, through the statement of changes in equity, except for
impairment losses and foreign exchange gains or losses, until the investment
is derecognised, at which time the cumulative gain or loss previously
recognised in equity shall be recognised in profit or loss. However, interest
calculated using the effective interest method is recognised in profit or loss.
16.10 For investments carried at amortised cost, a gain or loss is recognised in profit or
loss when an investment is derecognised or impaired, and through the amortisation
process.
Impairment and Uncollectibility of Investments
Investments Carried at Amortised Cost
16.11 If there is objective evidence that an impairment loss on held-to-maturity
investments carried at amortised cost has been incurred, the amount of the loss is
measured as the difference between the investments carrying amount and the
present value of estimated future cash flows discounted at the investments
original effective interest rate (i.e. the effective interest rate computed at initial
recognition). The carrying amount of an investment shall be reduced either
directly or through use of an allowance account. The amount of the loss shall be
recognised in profit or loss.
16.12 If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss shall be reversed either
directly or by adjusting an allowance account. The reversal shall not result in a
carrying amount of an investment that exceeds what the amortised cost would
have been had the impairment not been recognised at the date the impairment is
reversed. The amount of the reversal shall be recognised in profit or loss.
Investments Carried at Cost
16.13 If there is objective evidence that an impairment loss has been incurred on an
unquoted equity instrument that is not carried at fair value because its fair value
cannot be reliably measured, the amount of the impairment loss is measured as the
difference between the carrying amount of the investment and the present value of
estimated future cash flows discounted at the current market rate of return for a
similar investment. Such impairment losses shall not be reversed.
Available-for-Sale Investments
16.14 When a decline in the fair value of an available-for-sale investment has been
recognised directly in equity and there is objective evidence that the asset is
impaired, the cumulative loss that had been recognised directly in equity shall be
removed from equity and recognised in profit or loss even though the investment
has not been derecognised.
16.15 The amount of the cumulative loss that is removed from equity and recognised in
profit or loss under paragraph 16.14 shall be the difference between the acquisition
cost (net of any principal repayment and amortisation) and current fair value, less
any impairment loss on that investment previously recognised in profit or loss.
16.16 Impairment losses recognised in profit or loss for an investment in an equity
instrument classified as available-for-sale shall not be reversed through profit or
loss.
16.17 If, in a subsequent period, the fair value of a debt instrument classified as
available-for-sale increases and the increase can be objectively related to an event
occurring after the impairment loss was recognised in profit or loss, the
impairment loss shall be reversed, with the amount of the reversal recognised in
profit or loss.
Disposals of Investments
16.18 On disposal of an investment, the difference between:
(a) the carrying amount; and
(b) the sum of (i) the consideration received and (ii) any cumulative gain or loss
that had been recognised directly in equity shall be recognised in profit or
loss.
Disclosure
16.19 For each class of investment, an entity shall disclose:
(i) information about the extent and nature of investment, including significant
terms and conditions that may affect the amount, timing and certainty of
future cash flows; and
(ii) the accounting policies and methods adopted, including the criteria for
recognition and the basis of measurement applied.
16.20 For each class of investment, an entity shall disclose the fair value of that class of
investment in a way that permits it to be compared with the corresponding
carrying amount in the balance sheet.
16.21 If investments in unquoted shares are measured at cost because their fair value
cannot be measured reliably, that fact shall be disclosed together with a
description of the investment, their carrying amount, an explanation of why fair
value cannot be measured reliably and, if possible, the range of estimates within
which fair value is highly likely to lie. Furthermore, if investments whose fair
value previously could not be reliably measured are sold, that fact, the carrying
amount of such investments at the time of sale and the amount of gain or loss
recognised shall be disclosed.
16.22 An entity shall disclose the carrying amount of investments pledged as collateral
for liabilities, the carrying amount of investments pledged as collateral for
contingent liabilities, and any material terms and conditions relating to assets
pledged as collateral.
16.23 If the entity has reclassified an investment as one measured at cost or amortised
cost rather than at fair value, it shall disclose the reason for that reclassification.
16.24 An entity shall disclose the nature and amount of any impairment loss recognised
in profit or loss for an investment, separately for each significant class of
investment.
Section 17: Employee Benefits
17.1 Employee benefits among others include:
(a) short-term employee benefits such as wages, salaries and social security
contributions, paid annual leave and paid sick leave, profit sharing and
bonuses and non monetary benefits (such as medical care, housing, cars and
free or subsidised goods or services) for current employees: and
(b) Post-employment benefits such as pensions, other retirement benefits, etc.
The above two benefits are considered most common therefore this section
establishes requirement for these.
Short-term Employee Benefits
17.2 When an employee has rendered service to an entity during an accounting period,
the entity shall recognise the undiscounted amount of short-term employee
benefits expected to be paid in exchange for that service:
(a) as a liability (accrued expense), after deducting any amount already paid. If
the amount already paid exceeds the undiscounted amount of the benefits,
an entity shall recognise that excess as an asset (prepaid expense) to the
extent that the prepayment will lead to, for example, a reduction in future
payments or a cash refund; and
(b) as an expense, unless another section requires or permits the inclusion of the
benefits in the cost of an asset (for example, cost of production of
inventories to be included in cost of inventories and cost incurred on
acquisition of Property, Plant and Equipment).
17.3 The cost of short-term employee benefits in the form of compensated absences
shall be recognised as follows:
( a ) in the case of accumulating compensated absences, when the employees render
service that increases their entitlement to future compensated absences; and
(b) in the case of non-accumulating compensated absences, when the absences
occur.
17.4 An entity shall measure the expected cost of accumulating compensated absences
as the additional amount that the entity expects to pay as a result of the unused
entitlement that has accumulated at the balance sheet date.
17.5 An entity shall recognise the expected cost of profit sharing and bonus payments
when and only when:
(a) the entity has a present legal or constructive obligation to make such
payments as a result of past events; and
(b) a reliable estimate of the obligation can be made.
A present obligation exists when, and only when, the entity has no realistic
alternative but to make the payments.
Postemployment Benefits: Defined Contribution Plans
17.6 In respect of retirement benefits in the form of provident fund and other defined
contribution schemes, the contribution payable by the employer for a year shall be
charged to profit or loss for the year. Thus, besides the amount of contribution
paid, a shortfall of the amount of contribution paid compared to the amount
payable for the year shall also be charged to profit or loss for the year. On the other
hand, if contribution paid is in excess of the amount payable for the year, the
excess shall be treated as a prepayment.
17.7 When an employee has rendered service to an entity during a period, the entity
shall recognise the contribution payable to a defined contribution plan in exchange
for that service:
(a) as a liability (accrued expense), after deducting any contribution already
paid. If the contribution already paid exceeds the contribution due for
service before the balance sheet date, an entity shall recognise that excess as
an asset (prepaid expense) to the extent that the prepayment will lead to, for
example, a reduction in future payments or a cash refund; and
(b) as an expense, unless another section requires or permits the inclusion of the
contribution in the cost of an asset (see, for example, Section 3 Property,
Plant and Equipment).
Postemployment Benefits: Defined Benefit Plans
17.8. In respect of gratuity benefit and other defined benefit schemes, the accounting
treatment will depend on the type of arrangement which the employer has chosen
to make.
(a) If the employer has chosen to make payment for retirement benefits out of
his own funds, an appropriate charge to the statement of profit and loss for
the year shall be made through a provision for the accruing liability. The
accruing liability shall be calculated according to actuarial valuation.
However, entities may opt to calculate the accrued liability by reference to
any other rational method e.g. a method based on the assumption that such
benefits are payable to all employees at the end of the accounting year.
(b) In case the liability for retirement benefits is funded through creation of a
trust, the cost incurred for the year shall be determined actuarially. Such
actuarial valuation shall normally be conducted at least once in every three
years. However, where the actuarial valuations are not conducted annually,
the actuarys report shall specify the contributions to be made by the
employer on annual basis during the inter valuation period. This annual
contribution (which is in addition to the contribution that may be required to
finance unfunded past service cost) reflects proper accrual of retirement
benefit cost for each of the years during the inter valuation period and shall
be charged to the statement of profit and loss for each such year. Where the
contribution paid during a year is lower than the amount required to be
contributed during the year to meet the accrued liability as certified by the
actuary, the shortfall shall be charged to the statement of profit and loss for
the year. Where the contribution paid during a year is in excess of the
amount required to be contributed during the year to meet the accrued
liability as certified by the actuary, the excess shall be treated as a
prepayment.
(c) In case the liability for retirement benefits is funded through a scheme
administered by an insurer, an actuarial certificate or a confirmation from
the insurer shall be obtained that the contribution payable to the insurer is
the appropriate accrual of the liability for the year. Where the contribution
paid during a year is lower than amount required to be contributed during
the year to meet the accrued liability as certified by the actuary or confirmed
by the insurer, as the case may be, the shortfall shall be charged to the
statement of profit and loss for the year. Where the contribution paid during
a year is in excess of the amount required to be contributed during the year
to meet the accrued liability as certified by the actuary or confirmed by the
insurer, as the case may be, the excess shall be treated as a prepayment.
17.9 Where actuarial valuation is conducted, it shall be in accordance with
requirements of IAS 19 Employee Benefits.
17.10 Any alterations in the retirement benefit costs arising from:
(a) introduction of a retirement benefit scheme for existing employees or
improvements to an existing scheme, or
(b) changes in the assumptions adopted, shall be charged or credited to the
statement of profit and loss as they arise in accordance with paragraphs 12.1
to 12.14.
17.11 When a retirement benefit scheme is amended with the result that additional
benefits are provided to retired employees, the cost of the additional benefits shall
be accounted for in accordance with paragraph 17.8 above.
17.12 The financial statements shall disclose the method by which retirement benefit
costs for the period have been determined. In case the costs related to gratuity and
other defined benefit schemes are based on an actuarial valuation, the financial
statements shall also disclose whether the actuarial valuation was made at the end
of period or at an earlier date. In the latter case, the date of the actuarial valuation
shall be specified and the method by which the accrual for the period has been
determined shall also be briefly described, if the same is not based on the report
of the actuary.
Annexure 1
Definitions
Accounting policies are the specific principles, bases, conventions, rules and practices
adopted by an entity in preparing and presenting financial statements.
An active market is a market where all the following conditions exist:
(a) the items traded within the market are homogeneous;
(b) willing buyers and sellers can normally be found at any time; and
(c) prices are available to the public.
Amortisation is the systematic allocation of the depreciable amount of an intangible asset
over its useful life.
Amortised cost of an investment is the amount at which an investment is measured at
initial recognition minus principal repayments, plus or minus the cumulative amortisation
using the Effective Interest Method of any difference between that initial amount and the
maturity amount, and minus any reduction (directly or through the use of an allowance
account) for impairment or uncollectibility.
An asset is a resource
(a) controlled by an entity as a result of past events; and
(b) from which future economic benefits are expected to flow to the entity.
Available-for-sale investments are investments that are designated as available for sale or
are not classified as
(a) held-to-maturity investments; or
(b) investments at fair value through profit or loss.
Borrowing costs are interest and other costs incurred by an entity in connection with the
borrowing of funds.
The carrying amount (value) is the amount at which an asset is recognised in the balance
sheet after deduction of any accumulated depreciation and accumulated impairment losses
thereon.
Cash comprises cash on hand and demand deposits.
Cash equivalents are short-term, highly liquid investments that are readily convertible to
known amounts of cash and are subject to an insignificant risk of changes in value.
Cash flows are inflows and outflows of cash and cash equivalents.
A cash-generating unit is the smallest identifiable group of assets that generates cash
inflows from continuing use that are largely independent of the cash flows from other
assets or groups of assets.
A change in accounting estimate is an adjustment of the carrying amount of an asset or
a liability, or the amount of the periodic consumption of an asset, that results from the
assessment of the present status of, and expected future benefits and obligations
associated with, assets and liabilities. Changes in accounting estimates result from new
information or new developments and, accordingly, are not corrections of errors.
Close members of the family of an individual are those family members who may be
expected to influence, or be influenced by, that individual in their dealings with the entity.
They may include:
(a) the individuals domestic partner and children;
(b) children of the individuals domestic partner; and
(c) dependents of the individual or the individuals domestic partner.
The closing rate is the spot exchange rate at the balance sheet date.
A construction contract is a contract specifically negotiated for the construction of an
asset or a combination of assets that are closely interrelated or interdependent in terms of
their design, technology and function or their ultimate purpose or use.
A constructive obligation is an obligation that derives from an entity's actions where,
(a) by an established pattern of past practice, published policies or a sufficiently
specific current statement, the entity has indicated to other parties that it will
accept certain responsibilities; and
(b) as a result, the entity has created a valid expectation on the part of those
other parties that it will discharge those responsibilities.
A contingent asset is a possible asset that arises from past events and whose existence will
be confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the entity.
A contingent liability is
(a) a possible obligation that arises from past events and whose existence will
be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not recognised
because:
(i) it is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient
reliability.
Contingent rent is that portion of the lease payments which is not fixed in amount but is
based on a factor other than the passage of time (e.g. percentage of sales, amount of usage,
price indices, market rates of interest).
Control (of an entity) is ownership, either directly or indirectly through subsidiaries, of
more than one half of the voting power of an entity, or a substantial interest in voting
power and the power to direct, by statute or agreement, the financial and operating
policies of the management of the entity.
Cost is the amount of cash or cash equivalents paid or the fair value of the other
consideration given to acquire an asset at the time of its acquisition, production or
construction.
Current tax is the amount of income taxes payable (recoverable) in respect of the taxable
profit (tax loss) for a period.
Deferred tax assets are the amounts of income taxes recoverable in future periods in
respect of
(a) deductible temporary differences;
(b) the carry forward of unused tax losses; and
(c) the carry forward of unused tax credits.
Deferred tax liabilities are the amounts of income taxes payable in future periods in
respect of taxable temporary differences.
Defined benefit plans are post-employment benefit plans other than defined contribution
plans.
Defined contribution plans are post-employment benefit plans under which an entity
pays fixed contributions into a separate entity (a fund) and will have no legal or
constructive obligation to pay further contributions if the fund does not hold sufficient
assets to pay all employee benefits relating to employee service in the current and prior
periods.
Depreciable amount is the cost of an asset, or other amount substituted for cost in the
financial statements, less its residual value.
Depreciation is the systematic allocation of the depreciable amount of an asset over its
useful life.
Development is the application of research findings or other knowledge to a plan or design
for the production of new or substantially improved materials, devices, products,
processes, systems or services prior to the commencement of commercial production or
use.
Economic life is either
(a) the period over which an asset is expected to be economically usable by one
or more users; or
(b) the number of production or similar units expected to be obtained from the
asset by one or more users.
Effective interest method is a method of calculating the amortised cost of an investment
and of allocating the interest income or interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of an investment or, when appropriate, a shorter period
to the net carrying amount of an investment. When calculating the effective interest rate,
an entity shall estimate cash flows considering all contractual terms of an investment but
shall not consider future credit losses. The calculation includes all fees and points paid or
received between parties to the contract that are an integral part of the effective interest
rate, transaction costs, and all other premiums or discounts. There is a presumption that
the cash flows and the expected life of a group of similar investment can be estimated
reliably. However, in those rare cases when it is not possible to estimate reliably the cash
flows or the expected life of an investment, the entity shall use the contractual cash flows
over the full contractual term of an investment.
Employee benefits are all forms of consideration given by an entity in exchange for
service rendered by employees.
Events after the balance sheet date are events, both favourable and unfavourable, that
occur between the balance sheet date and the date when the financial statements are
authorised for issue. Two types of events can be identified:
(a) those providing evidence of conditions that existed at the balance sheet date
(adjusting events after the balance sheet date); and
(b) those indicative of conditions that arose after the balance sheet date (non-
adjusting events after the balance sheet date).
The exchange difference is the difference resulting from reporting the same number of
units of a foreign currency in the reporting currency at different exchange rates.
The exchange rate is the ratio for exchange of two currencies.
Executory contracts are contracts under which neither party has performed any of its
obligations or both parties have partially performed their obligations to an equal extent.
Fair value is the amount for which an asset could be exchanged, or a liability settled,
between knowledgeable, willing parties in an arms length transaction.
A Finance lease is a lease that transfers substantially all the risks and rewards incident to
ownership of an asset. Title may or may not eventually be transferred.
Financing activities are activities that result in changes in the size and composition of the
equity capital and borrowings of the entity.
Foreign currency is a currency other than the reporting currency of an entity.
Fundamental errors are errors discovered in the current period that are of such
significance that the financial statements of one or more prior periods can no longer be
considered to have been reliable at the date of their issue.
Government refers to government, government agencies and similar bodies, whether
local, national or international.
Government assistance is action by government designed to provide an economic benefit
specific to an entity or range of entities qualifying under certain criteria. Government
assistance for the purpose of this section does not include benefits provided only
indirectly through action affecting general trading conditions, such as the provision of
infrastructure in development areas or the imposition of trading constraints on
competitors.
Government grants are assistance by government in the form of transfer of resources to
an entity in return for past or future compliance with certain conditions relating to the
operating activities of the entity. They exclude those forms of government assistance
which cannot reasonably have a value placed on them and transactions with government
which cannot be distinguished from the normal trading transactions of the entity.
Grants related to assets are government grants whose primary condition is that an entity
qualifying for them shall purchase, construct or otherwise acquire long-term assets.
Subsidiary conditions may also be attached restricting the type or location of the assets or
the periods during which they are to be acquired or held.
Grants related to income are government grants other than those related to assets.
Held-to-maturity investments are investments with fixed or determinable payments and
fixed maturity that an entity has the positive intention and ability to hold to maturity other
than:
(a) those that the entity upon initial recognition designates as at fair
value through profit or loss; and
(b) those that the entity designates as available for sale.
An entity shall not classify any investment as held to maturity if the entity has, during the
current financial year or during the two preceding financial years, sold or reclassified
more than an insignificant amount of held-to-maturity investments before maturity (more
than insignificant in relation to the total amount of held-to-maturity investments) other
than sales or reclassifications that:
(i) are so close to maturity or the investments call date (for example,
less than three months before maturity) that changes in the market
rate of interest would not have a significant effect on the investment's
fair value;
(ii) occur after the entity has collected substantially all of the
investment's original principal through scheduled payments or
prepayments; or
(iii) are attributable to an isolated event that is beyond the entity's control,
is non-recurring and could not have been reasonably anticipated by
the entity.
Historical cost assets are recorded at the amount of cash or cash equivalents paid or the
fair value of the consideration given to acquire them at the time of their acquisition.
Liabilities are recorded at the amount of proceeds received in exchange for the obligation,
or, in some circumstances (for example, income taxes), at the amounts of cash or cash
equivalents expected to be paid to satisfy the liability in the normal course of business.
An impairment loss is the amount by which the carrying amount of an asset exceeds its
recoverable amount.
The inception of the lease is the earlier of the date of the lease agreement or the date of a
commitment by the parties to the principal provisions of the lease.
An intangible asset is an identifiable non-monetary asset without physical substance held
for use in the production or supply of goods or services, for rental to others, or for
administrative purposes.
The interest rate implicit in the lease is the discount rate that, at the inception of the lease,
causes the aggregate present value of
(a) the minimum lease payments; and
(b) the unguaranteed residual value to be equal to the fair value of the leased
asset.
Inventories are assets:
(a) held for sale in the ordinary course of business;
(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production
process or in the rendering of services.
Investment is an asset held by an entity for the accretion of wealth through distribution
(such as interest, royalties and dividends), for capital appreciation or for other benefits to
investing entity such as those obtained through trading relationships. Inventories and
Property, plant and equipment as defined in Annexure 1 of the standard are not
investments
Investments at fair value through profit or loss is an investment that meets either of the
following conditions is classified as at fair value through profit or loss
(a) It is classified as held for trading. An investment is classified as held for
trading if it is:
(i) acquired or incurred principally for the purpose of selling or
repurchasing it in the near term;
(ii) part of a portfolio of identified investments that are managed together
and for which there is evidence of a recent actual pattern of short-
term profit-taking.
(b) Upon initial recognition it is designated by the entity as at fair value through
profit or loss. Any investment within the scope of this section may be
designated when initially recognised as an investment at fair value through
profit or loss except for investments in equity instruments that do not have
a quoted market price in an active market, and whose fair value cannot be
reliably measured.
Investing activities are the acquisition and disposal of long-term assets and other
investments not included in cash equivalents.
Joint control is the contractually agreed sharing of control over an economic activity.
Key management personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the entity, directly or indirectly,
including any director (whether executive or otherwise) of that entity.
A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment
or series of payments, the right to use an asset for an agreed period of time.
The lease term is the non-cancellable period for which the lessee has contracted to lease
the asset, together with any further terms for which the lessee has the option to continue
to lease the asset, with or without further payment, which option at the inception of the
lease it is reasonably certain that the lessee will exercise.
A legal obligation is an obligation that derives from
(a) a contract (through its explicit or implicit terms);
(b) legislation; or
(c) other operation of law.
A liability is a present obligation of an entity arising from past events, the settlement of
which is expected to result in an outflow from the entity of resources embodying
economic benefits.
Minimum lease payments are the payments over the lease term that the lessee is, or can
be required, to make, excluding contingent rent, costs for services and taxes to be paid by
and reimbursed to the lessor, together with, in the case of the lessee, any amounts
guaranteed by the lessee or by a party related to the lessee. However, if the lessee has an
option to purchase the asset at a price that is expected to be sufficiently lower than the fair
value at the date the option becomes exercisable, and if, at the inception of the lease, it is
reasonably certain that the option will be exercised, then the minimum lease payments
comprise the minimum payments payable over the lease term and the payment required to
exercise this purchase option.
Monetary items are money held and assets and liabilities to be received or paid in fixed
or determinable amounts of money.
Net realisable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale.
A non-cancellable lease is a lease that is cancellable only
(a) upon the occurrence of some remote contingency;
(b) with the permission of the lessor;
(c) if the lessee enters into a new lease for the same or an equivalent asset with
the same lessor; or
(d) upon payment by the lessee of an additional amount such that, at inception,
continuation of the lease is reasonably certain.
An obligating event is an event that creates a legal or constructive obligation that results
in an entitys having no realistic alternative to settling that obligation.
An onerous contract is a contract in which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received under
it.
Operating activities are the principal revenue-producing activities of the entity and other
activities that are not investing or financing activities.
An operating lease is a lease other than a finance lease.
Ordinary activities are any activities undertaken by an entity as part of its business and
related activities in which the entity engages in furtherance of, incidental to, or arising
from these activities.
Past service cost is the increase in the present value of the defined benefit obligation for
employee service in prior periods, resulting in the current period from the introduction of,
or changes to, post-employment benefits or other long-term employee benefits. Past
service cost may be either positive (where benefits are introduced or improved) or
negative (where existing benefits are reduced).
Post-employment benefits are employee benefits (other than termination benefits) which
are payable after the completion of employment.
Post-employment benefit plans are formal or informal arrangements under which an
entity provides post-employment benefits for one or more employees.
The present value of a defined benefit obligation is the present value, without deducting
any plan assets, of expected future payments required to settle the obligation resulting
from employee service in the current and prior periods.
Prior period errors are omissions from, and misstatements in, the entitys financial
statements for one or more prior periods arising from a failure to use, or misuse of, reliable
information that:
(a) was available when financial statements for those periods were authorised
for issue; and
(b) could reasonably be expected to have been obtained and taken into account
in the preparation and presentation of those financial statements.
Such errors include the effects of mathematical mistakes, mistakes in applying accounting
policies, oversights or misinterpretations of facts, and fraud.
Property, plant and equipment are tangible assets that:
(a) are held by an entity for use in the production or supply of goods or services,
for rental to others, or for administrative purposes; and
(b) are expected to be used during more than one period.
Prospective application (prospectively) of a change in accounting policy and of
recognising the effect of a change in an accounting estimate, respectively, are:
(a) applying the new accounting policy to transactions, other events and
conditions occurring after the date as at which the policy is changed; and
(b) recognising the effect of the change in the accounting estimate in the current
and future periods affected by the change.
A provision is a liability of uncertain timing or amount.
A qualifying asset is an asset that necessarily takes a substantial period of time to get
ready for its intended use or sale.
The recoverable amount of an asset is the higher of its fair value less costs to sell and its
present value of the future cash flows expected to be derived from an asset by the entity.
A related party transaction is a transfer of resources, services or obligations between
related parties, regardless of whether a price is charged.
Reporting currency is the currency used in presenting the financial statements.
Research is original and planned investigation undertaken with the prospect of gaining
new scientific or technical knowledge and understanding.
Residual value is the net amount an entity expects to obtain for an asset at the end of its
useful life after deducting the expected costs of disposal.
Retrospective application (retrospectively) is applying a new accounting policy to
transactions, other events and conditions as if that policy had always been applied.
Retrospective restatement is correcting the recognition, measurement and disclosure of
amounts of elements of financial statements as if a prior period error had never occurred.
Revenue is the gross inflow of economic benefits during the period arising in the course
of the ordinary activities of an entity when those inflows result in increases in equity,
other than increases relating to contributions from equity participants.
Short-term employee benefits are employee benefits (other than termination benefits)
which fall due wholly within twelve months after the end of the period in which the
employees render the related service.
Significant influence is the power to participate in the financial and operating policy
decisions of an entity but not control over those policies. Significant influence may be
gained by share ownership, statute or agreement .
Tax expense (tax income) is the aggregate amount included in the determination of net
profit or loss for the period in respect of current tax and deferred tax.
Taxable profit (tax loss) is the profit (loss) for a period, determined in accordance with
the rules established by the taxation authorities, on which income taxes are payable
(recoverable).
Temporary differences are differences between the carrying amount of an asset or
liability in the balance sheet and its tax base. Temporary differences may be either:
(a) taxable temporary differences, which are temporary differences that will
result in taxable amounts in determining taxable profit (tax loss) of future
periods when the carrying amount of the asset or liability is recovered or
settled; or
(b) deductible temporary differences, which are temporary differences that will
result in amounts that are deductible in determining taxable profit (tax loss)
of future periods when the carrying amount of the asset or liability is
recovered or settled.
Transaction costs are incremental costs that are directly attributable to the acquisition,
issue or disposal of an investment. An incremental cost is one that would not have been
incurred if the entity had not acquired, issued or disposed of an investment.
Unguaranteed residual value is that portion of the residual value of the leased asset, the
realisation of which by the lessor is not assured or is guaranteed solely by a party related
to the lessor.
Useful life is either
(a) the period of time over which an asset is expected to be used by the entity; or
(b) the number of production or similar units expected to be obtained from the
asset by the entity.
Annexure 2
Examples
These examples illustrate the application of the related sections and are provided to assist
in clarifying their meaning.
A. Recognition of Provisions
Example 1: Warranties
A manufacturer gives warranties at the time of sale to purchasers of its product. Under the
terms of the contract for sale, the manufacturer undertakes to make good, by repair or
replacement, manufacturing defects that become apparent within three years from the date
of sale. Based on past experience, it is probable (i.e. more likely than not) that there will
be some claims under the warranties.
Present obligation as a result of a past obligating event: The obligating event is the sale
of the product with a warranty, which gives rise to a legal obligation.
An outflow of resources embodying economic benefits in settlement: Probable for the
warranties as a whole.
Conclusion: A provision is recognised for the best estimate of the costs of making good
under the warranty products sold before the balance sheet date.
Example 2: Legal Requirement to Fit Smoke Filters
Under new legislation, an entity is required to install smoke filters in its factories by 30
June 2005. The entity has not fitted the smoke filters.
(a) At the balance sheet date of 31 December 2004:
Present obligation as a result of a past obligating event: There is no
obligation because there is no obligating event either for the costs of fitting
smoke filters or for fines under the legislation.
Conclusion: No provision is recognised for the cost of fitting the smoke filters.
(b) At the balance sheet date of 31 December 2005:
Present obligation as a result of a past obligating event: There is still no
obligation for the costs of fitting smoke filters because no obligating event has
occurred (the fitting of the filters). However, an obligation might arise to pay fines
or penalties under the legislation because the obligating event has occurred (the non-
compliant operation of the factory).
An outflow of resources embodying economic benefits in settlement: The
likelihood of incurring fines and penalties for non-compliant operation depends on
the details of the legislation and the stringency of the enforcement regime.
Conclusion: No provision is recognised for the costs of fitting smoke filters.
However, a provision is recognised for the best estimate of any fines and penalties
that are more likely than not to be imposed.
Example 3: A Court Case
After a wedding in 2004, 10 people died, possibly as a result of food poisoning from
products sold by the entity. Legal proceedings are underway seeking damages from the
entity, but it disputes its liability. Up to the date of authorisation of the financial
statements for the year to 31 December 2004 for issue, the entity's lawyers advise that it
is probable that the entity will not be found liable. However, when the entity prepares the
financial statements for the year ending 31 December 2005, its lawyers advise that,
because of new developments in the case, it is probable that the entity will be found liable.
(a) At the balance sheet date of 31 December 2004:
Present obligation as a result of a past obligating event: On the basis of the
evidence available when the financial statements were approved, there is no
obligation as a result of past events.
Conclusion: No provision is recognised. The matter is disclosed as a contingent
liability unless the probability of any outflow is regarded as remote.
(b) At the balance sheet date of 31 December 2005:
Present obligation as a result of a past obligating event: On the basis of the
evidence available, there is a present obligation.
An outflow of resources embodying economic benefits in settlement: Probable.
Conclusion: A provision is recognised for the best estimate of the amount required
to settle the obligation.
Example 4: Refurbishment Costs No Legislative Requirement
A furnace has a lining that needs to be replaced every five years for technical reasons. At
the balance sheet date, the lining has been in use for three years.
Present obligation as a result of a past obligating event: There is no present obligation.
Conclusion: No provision is recognised.
The cost of replacing the lining is not recognised because, at the balance sheet date, no
obligation to replace the lining exists independently of the company's future actions; even
the intention to incur the expenditure depends on the company's deciding to continue
operating the furnace or to replace the lining. Instead of a provision being recognised, the
depreciation of the lining takes into account its consumption (i.e. it is depreciated over
five years). The relining costs then incurred are capitalised, with the consumption of each
new lining shown by depreciation over the subsequent five years.
B. Revenue Recognition
The following examples illustrate the application of the standard in a number of
commercial situations in order to clarify their meaning. The examples focus on particular
aspects of a transaction and do not constitute comprehensive discussions of all the
relevant factors that might influence the recognition of revenue. The examples generally
assume that the amount of revenue can be measured reliably; that it is probable that the
economic benefits will flow to the entity; and that the costs incurred or to be incurred can
be measured reliably. The examples do not modify or override the standard.
Sale of Goods
Since laws vary from country to country, the recognition criteria in this standard will be
met at different times. In particular, the law may determine the point in time at which the
entity transfers the significant risks and rewards of ownership. Therefore, the examples in
this section of the appendix need to be read in the context of the laws relating to the sale
of goods in the country in which the transaction takes place.
1. "Bill and hold" sales, in which delivery is delayed at the buyer's request but the
buyer takes title and accepts billing. Revenue is recognised when the buyer takes
title, provided:
(a) it is probable that delivery will be made;
(b) the item is on hand, identified and ready for delivery to the buyer at
the time the sale is recognised;
(c) the buyer specifically acknowledges the deferred delivery instructions; and
(d) the usual payment terms apply.
Revenue is not recognised when there is simply an intention to acquire or
manufacture the goods in time for delivery.
2. Goods shipped subject to conditions, including the following situations:
(a) Installation and inspection.
100
Revenue is normally recognised when the buyer accepts delivery and installation
and inspection are complete. However, revenue is recognised immediately upon the
buyer's acceptance of delivery when:
(i) the installation process is simple in nature (e.g. the installation of
a factory- tested television receiver that only requires unpacking
and connection of power and antennae); or
(ii) the inspection is performed only for purposes of final
determination of contract prices (e.g. for shipments of iron ore,
sugar or soya beans).
(b) On approval when the buyer has negotiated a limited right of return. If there
is uncertainty about the possibility of return, revenue is
recognised when the shipment has been formally accepted by the
buyer or the goods have been delivered and the time period for
rejection has elapsed.
(c) Consignment sales under which the recipient (buyer) undertakes to sell the
goods on behalf of the shipper (seller).
Revenue is recognised by the shipper when the goods are sold by the
recipient to a third party.
(d) Cash on delivery sales.
Revenue is recognised when delivery is made and cash is received by the
seller or its agent.
3. Layaway sales, in which the goods are delivered only when the buyer makes the
final payment in a series of installments.
Revenue from such sales is recognised when the goods are delivered. However,
when experience indicates that most such sales are consummated, revenue may be
recognised when a significant deposit is received, provided the goods are on hand,
identified and ready for delivery to the buyer.
4. Orders in which payment (or partial payment) is received in advance of delivery
for goods not presently held in inventory (e.g. the goods are still to be
manufactured or will be delivered directly to the customer from a third party).
Revenue is recognised when the goods are delivered to the buyer.
5. Sale and repurchase agreements (other than swap transactions) under which the
seller concurrently agrees to repurchase the same goods at a later date, or when the
seller has a call option to repurchase, or the buyer has a put option to require the
repurchase by the seller of the goods.
The terms of the agreement need to be analysed to ascertain whether, in substance,
the seller has transferred the risks and rewards of ownership to the buyer and
hence revenue is recognised. When the seller has retained the risks and rewards of
ownership, even though legal title has been transferred, the transaction is a
financing arrangement and does not give rise to revenue.
6. Sales to intermediate parties, such as distributors, dealers or others, for resale.
Revenue from such sales is generally recognised when the risks and rewards of
ownership have passed. However, when the buyer is acting, in substance, as an
agent, the sale is treated as a consignment sale.
7. Subscriptions to publications and similar items.
When the items involved are of similar value in each time period, revenue is
recognised on a straight-line basis over the period in which the items are
dispatched. When the items vary in value from period to period, revenue is
recognised on the basis of the sales value of the item dispatched in relation to the
total estimated sales value of all items covered by the subscription.
8. Installment sales, under which the consideration is receivable in installments.
Revenue attributable to the sales price, exclusive of interest, is recognised at the
date of sale. The sale price is the present value of the consideration, determined by
discounting the installments receivable at the imputed rate of interest. The interest
element is recognised as revenue as it is earned, on a time proportion basis that
takes into account the imputed rate of interest.
9. Real estate sales.
Revenue is normally recognised when legal title passes to the buyer. However, in
some jurisdictions the equitable interest in a property may vest in the buyer before
legal title passes and, therefore, the risks and rewards of ownership have been
transferred at that stage. In such cases, provided that the seller has no further
substantial acts to complete under the contract, it may be appropriate to recognise
revenue. In either case, if the seller is obliged to perform any significant acts after
the transfer of the equitable and/or legal title, revenue is recognised as the acts are
performed. An example is a building or other facility on which construction has
not been completed.
In some cases, real estate may be sold with a degree of continuing involvement by
the seller such that the risks and rewards of ownership have not been transferred.
Examples are sale and repurchase agreements that include put and call options, and
agreements whereby the seller guarantees occupancy of the property for a specified
period, or guarantees a return on the buyer's investment for a specified period. In
such cases, the nature and extent of the seller's continuing involvement determine
how the transaction is accounted for. It may be accounted for as a sale, or as a
financing, a leasing or some other profit-sharing arrangement. If it is accounted for
as a sale, the continuing involvement of the seller may delay the recognition of
r e v e n u e.
A seller must also consider the means of payment and evidence of the buyer's
commitment to complete payment. For example, when the aggregate of the
payments received, including the buyer's initial down payment or continuing
payments by the buyer, provide insufficient evidence of the buyer's commitment
to complete payment, revenue is recognised only to the extent that cash is
received.
Rendering of Services
10. Installation fees.
Installation fees are recognised as revenue by reference to the stage of completion
of the installation, unless they are incidental to the sale of a product, in which case
they are recognised when the goods are sold.
11. Servicing fees included in the price of the product.
When the selling price of a product includes an identifiable amount for subsequent
servicing (e.g. after sales support and product enhancement on the sale of
software), that amount is deferred and recognised as revenue over the period
during which the service is performed. The amount deferred is that which will
cover the expected costs of the services under the agreement, together with a
reasonable profit on those services.
12. Advertising commissions.
Media commissions are recognised when the related advertisement or commercial
appears before the public. Production commissions are recognised by reference to
the stage of completion of the project.
13. Insurance agency commissions.
Insurance agency commissions received or receivable that do not require the agent
to render further service are recognised as revenue by the agent on the effective
commencement or renewal dates of the related policies. However, when it is
probable that the agent will be required to render further services during the life of
the policy, the commission, or part thereof, is deferred and recognised as revenue
over the period during which the policy is in force.
14. Admission fees.
R e v e n u e from artistic performances, banquets and other special events is
recognised when the event takes place. When a subscription to a number of events
is sold, the fee is allocated to each event on a basis that reflects the extent to which
services are performed at each event.
15. Tuition fees.
Revenue is recognised over the period of instruction.
16. Initiation, entrance and membership fees.
Revenue recognition depends on the nature of the services provided. If the fee
permits only membership, and all other services or products are paid for
separately, or if there is a separate annual subscription, the fee is recognised as
revenue when no significant uncertainty as to its collectability exists. If the fee
entitles the member to services or publications to be provided during the
membership period, or to the purchase of goods or services at prices lower than
those charged to non-members, it is recognised on a basis that reflects the timing,
nature and value of the benefits provided.
17. Franchise fees.
Franchise fees may cover the supply of initial and subsequent services, equipment
and other tangible assets, and know-how. Accordingly, franchise fees are
recognised as revenue on a basis that reflects the purpose for which the fees were
charged. The following methods of franchise fee recognition are appropriate:
(a) Supplies of equipment and other tangible assets.
The amount, based on the fair value of the assets sold, is recognised as
revenue when the items are delivered or title passes.
(b) Supplies of initial and subsequent services.
Fees for the provision of continuing services, whether part of the initial fee
or a separate fee, are recognised as revenue as the services are rendered.
When the separate fee does not cover the cost of continuing services
together with a reasonable profit, part of the initial fee, sufficient to cover
the costs of continuing services and to provide a reasonable profit on those
services, is deferred and recognised as revenue as the services are rendered.
The franchise agreement may provide for the franchisor to supply
equipment, inventories, or other tangible assets at a price lower than that
charged to others or a price that does not provide a reasonable profit on
those sales. In these circumstances, part of the initial fee, sufficient to cover
estimated costs in excess of that price and to provide a reasonable profit on
those sales, is deferred and recognised over the period during which the
goods are likely to be sold to the franchisee. The balance of an initial fee is
recognised as revenue when performance of all the initial services and other
obligations required of the franchisor (e.g. assistance with site selection,
staff training, financing and advertising) has been substantially
accomplished.
The initial services and other obligations under an area franchise agreement
may depend on the number of individual outlets established in the area. In
this case, the fees attributable to the initial services are recognised as
revenue in proportion to the number of outlets for which the initial services
have been substantially completed. If the initial fee is collectable over an
extended period and there is a significant uncertainty that it will be collected
in full, the fee is recognised as cash installments are received.
(c) Continuing franchise fees.
Fees charged for the use of continuing rights granted by the agreement, or
for other services provided during the period of the agreement, are
recognised as revenue as the services are provided or the rights used.
(d) Agency transactions.
Transactions may take place between the franchisor and the franchisee
which, in substance, involve the franchisor's acting as agent for the
franchisee. For example, the franchisor may order supplies and arrange for
their delivery to the franchisee at no profit. Such transactions do not give
rise to revenue.
18. Fees from the development of customised software.
Fees from the development of customised software are recognised as
r e v e n u e by reference to the stage of completion of the development,
including completion of services provided for post delivery service support.
Interest, royalties and dividends
19. License fees and royalties.
Fees and royalties paid for the use of an entity's assets (e.g. trademarks, patents,
software, music copyright, record masters and motion picture films) are normally
recognised in accordance with the substance of the agreement. As a practical
matter, this may be on a straight-line basis over the life of the agreement for
example, when a licensee has the right to use certain technology for a specified
period of time.
An assignment of rights for a fixed fee or non-refundable guarantee under a non-
cancellable contract that permits the licensee to exploit those rights freely such
that the licensor has no remaining obligations to perform is, in substance, a sale.
An example is a licensing agreement for the use of software when the licensor has
no obligations subsequent to delivery. Another example is the granting of rights to
exhibit a motion picture film in markets where the licensor has no control over the
distributor and expects to receive no further revenues from the box office receipts.
In such cases, revenue is recognised at the time of sale.
In some cases, whether or not a license fee or royalty will be received is contingent
on the occurrence of a future event. In such cases, revenue is recognised only
when it is probable that the fee or royalty will be received, which is normally when
the event has occurred.
ACCOUNTING AND FINANCIAL REPORTING
STANDARD
FOR
SMALL-SIZED ENTITIES
(SSEs)
Small-Sized Entities
Introduction
1. This Standard is designed for financial statements of Small-Sized Entities (SSEs)
that are mostly owner managed entities with limited stakeholders in terms of
employees, public and financiers. These are entities that:
(i) have paid up capital plus undistributed reserves (total equity after
taking into account dividend, if any, proposed for the year) not
exceeding Rs. 25 million; and
(ii) have annual turnover not exceeding Rs. 200 million, excluding other
income.
2. This Standard mainly requires entities to follow accrual principles of accounting.
Components of Financial Statements
3. A set of financial statements for these entities includes the following components:
(a) an income statement;
(b) a balance sheet; and
(c) explanatory notes.
The Accounting Framework
4. The two financial statements the income statement and the balance sheet are
based on a simple accrual accounting and historical cost approach.
5. SSEs statements will normally be prepared on the assumption that an entity is a
going concern and will continue in operation for the foreseeable future (see
paragraph 24).
The Objectives of SSEs Financial Statements
6. The objective of SSEs financial statements is to provide information about the
reporting entitys financial performance and financial position that will be useful
to users in assessing the performance of the entity and the stewardship of the
entitys management.
Users and their Needs
7. The objective of financial statements is to help develop the business by providing
useful information to users. Therefore, the statements are designed to reflect user
needs. Evidence suggests that the principal users of financial statements of Small-
Sized Entities are likely to be:
(a) management;
(b) lenders and other creditors;
(c) government; and
(d) taxation authorities.
8. The following is a summary of the likely needs of these users:
Management:
(a) ascertain the entitys performance during the year (including the
levels of income, costs and revenues);
(b) for applying for external financing;
(c) for financial management purposes (e.g. deciding what portion of
profits to retain etc.); and/or
(d) as a tool for succession planning and management of wealth.
Lenders and Other Creditors:
(a) to assess risk in the credit decision; and
(b) to monitor the performance of entities that have been given credit.
Government: for macro and microeconomic planning purposes
Tax Authorities: for tax assessment purposes.
Qualitative Characteristics
9. Qualitative characteristics are the attributes that make the information provided in
financial statements useful to users. The four principal characteristics are:
(a) Understandability: It is essential that information provided in
financial statements be readily understandable by users.
(b) Relevance: To be useful, information must be relevant to the
decision-making needs of users.
(c) Reliability: Information is considered to be reliable when it is free
from material error and bias and can be depended on by users to
represent faithfully that which it purports to represent.
(d) C o m p a r a b i l i t y : Users must be able to compare the financial
statements of an entity over time in order to identify trends in the
entitys financial position and performance.
10. The balance between benefit and cost is a pervasive constraint rather than a
qualitative characteristic. The benefits derived from information should exceed the
cost of providing it. The evaluation of benefits and costs is, however, substantially
a judgmental process.
The preparers and users of financial statements should be aware of this constraint.
11. In practice, trade-offs between qualitative characteristics are often necessary.
Determining the relative importance of the characteristics in different cases is a
matter of professional judgement.
Elements
12. Asset: An asset is a resource controlled by the entity as a result of past events and
from which future economic benefits are expected to flow to the entity.
13. Liability: A liability is a present obligation of the entity arising from past events,
the settlement of which is expected to result in an outflow from the entity of
resources embodying economic benefits.
14. Equity: Equity is the residual interest in the assets of the entity after all its
liabilities have been deducted.
15. Income encompasses both revenue and gains. It includes increases in economic
benefits during the accounting period in the form of inflows or enhancements of
assets as well as decreases of liabilities that result in increases in equity, other than
those relating to contributions from equity participants.
16. Expenses encompass losses as well as those expenses that arise in the course of
the ordinary activities of the entity. Expenses are decreases in economic benefits.
Recognition
17. An item that meets the definition of an element shall be recognized if (a) it is
probable that any future economic benefit associated with the item will flow to or
from the entity, and (b) the item has a cost or value that can be measured with
reliability.
Measurement
18. The measurement base most commonly adopted by entities in preparing their
financial statements is historical cost.
SSEs and Financial Management
19. For day-to-day management of the entity, owner-managers will tend to rely
heavily on cash flow information. It is widely recognized that the managing of
cash is critical to the survival of a business and to managing relationships with
banks and other providers of finance. It is recommended that owner-managers
keep cash records whether produced manually or using a software package, will
be an important component in the financial management of SSEs.
Defined Terms
20. All the terms shown in italics in this standard are defined in Annexure 1
Definitions of the Accounting and Financial Reporting Standard for Medium-
Sized Entities (MSEs).
Effective Date
21. Small-Sized Entities shall apply this Accounting and Financial Reporting
Framework and Standard for annual periods beginning on or after July 1, 2006.
Basic Requirements
22. The following details the basic guidance for small-sized entities. For material
transactions or events not covered by this standard, reference shall be made to the
MSEs Standard.
23. The minimum set of primary financial statements includes the following components:
(a) A Balance Sheet;
(b) An Income Statement; and
(c) Explanatory Notes.
24. Entities may wish to include other statements that are likely to enhance the overall
transparency and quality of the entitys provision of information to users, for
example a cash flow statement.
25. Financial statements shall be prepared on a going concern basis unless
management either intends to liquidate the entity or cease trading, or has no
realistic alternative but to do so.
26. An entity shall prepare its financial statements using a simplified accruals basis of
accounting.
27. The following information shall be prominently displayed:
(a) the name of the reporting entity; and
(b) the balance sheet date and the period covered by the income statement.
28. Financial statements shall be presented at least annually.
29. The entity shall present current and non-current assets and current and non-current
liabilities as separate classifications on the face of the balance sheet.
30. An asset shall be classified as a current asset when it:
(a) is expected to be realized in, or is held for sale or consumption in, the
normal course of the entitys operating cycle; or
(b) is held primarily for trading purposes or for the short term and is
expected to be realised within 12 months of the balance sheet date; or
(c) is cash on hand
All other assets shall be classified as non-current assets.
31. A liability shall be classified as a current liability when it:
(a) is expected to be settled in the normal course of the entitys operating
cycle; or
(b) is due to be settled within 12 months of the balance sheet date.
All other liabilities shall be classified as non-current liabilities.
32. At a minimum, the face of the balance sheet shall include line items presenting the
following amounts:
(a) property, plant and equipment;
(b) intangible assets;
(c) investments;
(d) inventories;
(e) trade and other receivables;
(f) cash and cash equivalents;
(g) trade and other payables;
(h) tax liabilities and assets;
(i) provisions;
(j) non-current interest-bearing liabilities; and
(k) issued capital and reserves.
33. Additional line items, headings and subtotals shall, if relevant to the entity, be
presented on the face of the balance sheet.
34. An entity shall disclose the movement of owners equity during the financial year.
35. At a minimum, the face of the income statement shall include line items that
present the following amounts:
(a) revenue;
(b) the results of operating activities;
(c) finance costs;
(d) tax expense;
(e) net profit or loss for the period.
Additional line items, headings and subtotals shall be presented on the face of the
income statement when such presentation is necessary to present fairly the entity's
financial performance.
36. An item of property, plant or equipment shall initially be measured at its cost. The
cost of an item of property, plant or equipment comprises its purchase price,
including import duties and non-refundable purchase taxes, and any directly
attributable costs of bringing the asset to working condition for its intended use;
any trade discounts and rebates are deducted in arriving at the purchase price.
37. The depreciable amount (cost less expected proceeds from disposal) of an item of
property, plant or equipment shall be allocated on a systematic basis over its
useful life. Straight-line depreciation is the simplest method.
38. If an item of property, plant or equipment becomes impaired, in that it is unlikely
to generate cash flows to absorb the depreciable amount of the item over its useful
life, its carrying value shall be reduced.
39. Land normally has an unlimited life and, therefore, is not depreciated. Buildings
have a limited life and, therefore, are depreciable assets.
40. The financial statements shall disclose for each class of property, plant and
equipment a reconciliation of the carrying amount at the beginning and end of the
period showing:
(a) additions;
(b) disposals;
(c) depreciation; and
(d) other movements.
41. Lease payments, deriving from an operating or finance lease, shall be recognized
as an expense (on an accrual basis). If the payments are material, the expense
should be shown under a specific lease payment heading in the income statement.
42. The value of the lease should not be shown either as an asset or as a liability on
the balance sheet.
43. Inventories shall be measured at the lower of cost and net realizable value (the
estimated selling price in the ordinary course of business less the estimated costs
of completion and the estimated costs necessary to make the sale).
44. The cost of inventories shall comprise all costs of purchase and other costs
incurred in bringing the inventories to their present location and condition.
45. The cost of inventories shall be assigned by using specific identification of the
individual costs of items whenever possible. The cost of other inventories shall be
assigned by using the first-in, first-out (FIFO) or weighted average cost formulas.
46. Revenue shall exclude taxes on goods and services but shall include commissions
receivable.
47. Revenue from the sale of goods shall be recognized when the entity has transferred
to the buyer the significant risks and rewards of ownership of the goods.
48. Revenue from the rendering of services shall be recognized to the extent that the
service has been provided.
49. Where there is uncertainty as to the receipt of payment for a trade debt, a
reasonable provision shall be made against trade receivables.
50. Any significant gains or losses shall be separately disclosed.
Head Office
ICAPHouse
Chartered Accountants Avenue
Block-8, Clifton
Karachi-75600
Tel: 92-21-111 000 422
Fax: 92-21-9251626
Lahore Office
ICAPHouse
155-156, West Wood Colony
Thokar Niaz Baig, Raiwand Road
Lahore
Tel: 92-42-111 000 422
Fax: 92-42-5414486
Islamabad Office
ICAPHouse
Sector G-10/4
Mauve Area
Islamabad
Tel: 92-51-111 000 422
Fax: 92-51-9266052
PART II
Statutory Notifications (S.R.O)
NOTIFICATION
Islamabad. January 16,2012
SRO 2.S (1)/201,,= In exercise of the powers conferred by Section 506B of the Companies Ordinance,
1984 (XLVII of 1984) and in supersession of Circular No. 13 dated May 26, 2003 titled maintenance of website
by listed companies, the Securities and Exchange Commission of Pakistan is hereby pleased to direct that every
listed companies shall maintain a functional website with effect from April 30, 2012.
Listed companies are encouraged to use their website to provide all relevant information to stakeholders. The
website shall contain, at the minimum, information listed below as well as all material information:
A) Profile of Company
i) Vision, mission and details of permissible business activities
ii) Company Registration number and National Tax Number
iii) Address of registered office, head office, all other branch offices
iv) Phone numbers (fax if available) of head office, registered office and branch offices
v) Email address
vi) Detail of associated companies and their website links, if available
B) Governance
i) Profile of Board of Directors and office address
ii) Shareholding pattern
iii) Following information pertains specifically to election of Directors and shall be available as per the time
line given below:
a) Proxies, in number and value, deposited by each candidate as and when submitted
b) Detailed profile of candidates contesting the elections alongwith their office address shall be
available on website seven days prior to the date of election till the date of election
c) 21 days prior to the date ofelection to thedate of election:
i) Proxy forms to be placed on website
ii) List of shareholders and their addresses accessible by candidate intending to contest
elections (protected by password issued by Company or personalized login mechanism)
C) Investor Information
i) Symbol of the company assigned by respective Stock Exchange and website links of stock exchanges
where the company is listed
ii) Annual reports for the current financial year as well as the previous two years
iii) Financial highlights for previous five years
iv) Interim accounts i.e. latest available accounts as well as for the last three quarters
v) As per the latest available yearly financial statements: Earning per share, PIE ratio and breakup value
vi) Name of Auditor of the Company
vii) Name and address of share registrar \
viii) Free Float of the shares ofCompany V
ix) Rating of Company and instrument (if any)
D) Investor Relations
i) Online form / Contact details of person designated for assisting and handling investor grievances
(including website link of SECP's investor complaint section: http://www.secp.gov.pklComplaintForml.asp)
ii) Notices of general meetings, election of directors, dividend / bonus declarations and right issue
iii) Site map
iv) Search facility
E) Media
i) Nationaliinternational Awards, recognition, if any
ii) Membership of industry associations and trade bodies, if any
iii) Any other announcements or clarifications issued by the company
iv) Latest Date of updating website
The listed companies shall report compliance with this notification by intimating their website address to the
Enforcement department of the Commission latest by April 30, 2012.
[EMD/Website-Reg/74/20II]
Abdu Qureshi
Advisor/ Secretary

Islamabad, 29
th
March, 2012

NOTIFICATION

S.R.O.320(I)/2012.- In exercise of the powers conferred by section 505 of the
Companies Ordinance, 1984 (XLVII of 1984), read with section 470 thereof and clause (c) of
section 43 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) and
SRO No. 698(I)/86 dated 2
nd
July, 1986, the Securities and Exchange Commission of Pakistan is
pleased to make the following amendments in the Sixth Schedule to the said Ordinance,
namely:-
AMENDMENTS

In the aforesaid Schedule for sub-item (6) of item VII, the following shall be substituted,
namely:-

(6) approval to issue, circulate and
publish the prospectus under section 57
or 62, a non-refundable fee in the
following manner:-
Rs.
(i) For issue of shares:
(a) In case post IPO paid-up capital of
the issuing company is upto Rs.1
billion, a fee of
100,000
(b) In case post IPO paid-up capital of
the issuing company is above Rs.1
billion, a fee of
200,000
(ii) For issue of debentures
(a) In case total issue size including
green shoe option, if any, is upto Rs.1
billion, a fee of
100,000
(b) In case total issue size including
green shoe option, if any, is above
Rs.1 billion, a fee of
200,000

[F. No. SM/Misc./05/2002]

(Abdul Rehman Qureshi)
Advisor/Secretary
Statutory Notifications (S.R.O.)
Government of Pakistan
NOTIFICATION
Islamabad, the 18
th
June, 2012
In exercise of powers conferred by section 505 of the Companies
Ordinance, 1984, (XLVII of 1984), read with clause (c) of section 43 of the Securities and Exchange
Commission of Pakistan Act, 1997 (XLII of 1997), the Securities and Exchange Commission of Pakistan
is pleased to make the following amendments in the First Schedule to the said Ordinance, namely: -
In First Schedule, in Table A, in clause (9),
(i) a heading "Form for Transfer of Shares (1st Schedule to the Companies
Ordinance, 1984)" shall be added;
(ii) for the alphabets "NIC" wherever appearing the alphabets "CNIC" shall be
substituted; and
(iii) at the end the following shall be inserted, namely,-
"DIVIDEND MANDATE [Optional] In case the transferee intends that the
cash dividend declared by the 'company, if any, is directly credited in his/her/its
bank account, instead of issue of dividend warrants, then please fill in the
following boxes:,
Transferee Detail
Title of Bank Account
Bank Account Number
Bank's Name
Branch Name and Address
Cell number of Transferee
Landline number of Transferee, if any
It is stated that the above-mentioned information is correct and that I will
intimate the changes in the above-mentioned information to the company and the
concerned Share Registrar as soon as these occur.
Signature of the Transferee(s)".
F. No. SMD/CIW/Misc.l19/2009
(Bushra Aslam)
Secretary to the Commission
PART II
Statutory Notifications (S.R.O)
NOTIFICATION
Islamabad, the 3F' October, 2012
S,R.O. 1354(l)/2012.--In exercise of the powers conferred by section 10 of the Securities
and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) read with section 20(4)(0)
thereof, and in supersession of its notifications S.R.O.666(I)/2009 dated 16
th
July, 2009 and
S.R.O.328(I)/2010 dated 14
th
May, 2010, the Securities and Exchange Commission of Pakistan
(the Commission), subject to such conditions and limitations as it may from time to time impose,
hereby delegates the powers and functions of the Commission listed below, to its Commissioner
and officers,
1. Commissioner (Insurance)
Relevant section
S. No. of the Nature of power/function
Companies
Ordinance, 1984
1. 84(1) & (2) To sanction issue of shares at discount and to extend the time
beyond sixtydays after the date on which the sanction is issued.
2. 84(5) To take cognizance on contravention of sub-section (4) of
section 84.
3. 85(2) To take cognizance of failure to comply with the provisions of
subsection (1) of section 85.
4. 86 To allow company to raise its further capital without issue of
right shares.
5. 178 A To direct a company to hold fresh election of directors in
accordance with the procedure laid down in section 178 in the
forthcoming annual general meeting ofthe company.
6. 206(2) To grant exemption from bar on appointment of managing
agents.
7. 206(3) To accord approval tor appointment of a sole purchase, sale or
distribution agent.
8. 207 To take cognizance for contravention of 207 (1)
9. 208(3) To take cognizance on default III complying with the
requirements of section 208 and the regulations made there
under.
Page I or 14
To direct the directors to jointly or severally reimburse to the
insurance company any loss sustained as result of such
contravention.
10. 231(1) To authorize an officer to inspect books of accounts of a
company.
11. 234A (1) To order s2ecial audit of a company and appoint auditor
12. 234A (2) To pass interim orders and issue directions during the course of
special audit
13. 234A (3) To issue directions for immediate compliance, on receipt of
special audit report
14. 246(1) To require companies to submit additional statements and
accounts.
15. 251(2) To allow the company to with-hold or defer payment of
dividend.
16. 252(6)&(8) To appoint auditors and to fix their remuneration in case they are
not appointed by the company and its directors within the
prescribed period.
17. 254(7) To appoint an auditor in case of the company where appointment
of any unqualified person or of a person who is subject to any
disqualification has been made by the company.
18. 263 & 265 To appoint inspectors to investigate into the affairs of the
companies.
19. 271 To apply to the Court for issue of an appropriate order against
management of the company, on the basis of findings of
Inspector.
20. 275 To cause making of an application to the Court for winding up
of a company and/or for an order under section 290.
21. 279 To impose restrictions on transfer of shares and debentures and
prohibition of transfer of shares or debentures in certain cases
22. 279(10) To take cognizance for issuance of shares in contravention of
restrictions imposed 'under sub-section (2) of section 279.
23. 289(5) & (6) To hear appeals against the order of registrar refusing to register
any circular regarding offer of a scheme of
merger/amalgamation etc. involving the transfer of shares of a
company and impose fine for issuing circular which has not been
registered.
24. 309 To perform all functions and exercise all powers of the
Commission under section 309, in the case of winding up ofa
company.
25. 319 To apply to Court to stay winding up of a company.
26. 326(5) To take cognizance of any lapse, delay or other irregularity on
the part of official liquidator and to report the matter to the court.
27. 432(6) To accord approval for payment of money kept under the
Insurance Companies Liquidation Account.
28. 434 To appoint auditors and fix their remuneration, if no such
appointment is made by the members or creditors on the
application of liquidator.
29. 439(9) To order r ~ s t o r t o n of the name of a defunct company.
Page 2 ofl4
30. 467 To accord special permission to take over or remove any original
document from custody of registrar.
31. 472(1) To make an order directing a company and its officers to make
good the default and undo the irregularities.
32. 476(1)(c) To impose a fine (other than fine in addition to, or in lieu of
imprisonment) as provided for any offence, contravention of, or
default in complying with provisions of the Companies
Ordinance, 1984 which fall within the jurisdiction of Executive
Director through delegation of powers.
33. 477(l)(b) To hear appeal/revision against the order of Registrar or of any
officer authorized by the Commission.
34. 478 To exercise the powers of a court under the Code of Civil
Procedure in matters specified in this section.
35. 479 To issue a directive to the chief executive or other officer of the
company to appear before him personally and answer the
charges.
36. 482 To order for payment of compensation in cases of frivolous or
vexatious prosecutions.
37. 483 To direct that the whole or any part of the fine imposed shall be
applied towards payment of cost of proceedings; rewarding the
person on whose information the fine recovered; and payment of
compensation to an aggrieved party.
38. 484(2) To review the order originally made by him.
39. 488 To grant relief in cases in which the powers have been delegated
by the Commission.
40. 492 To impose tine for making false statement.
41. 493 To make necessary orders and to impose penalty for wrongful
withholding of property of the company.
42. 495(1) To award punishment for non-compliance of the orders passed in
pursuance of the power delegated.
43. 498 To take cognizance of statutory provisions of the Ordinance
where no specific penalty is provided.
44. 499 To accord approval subject to conditions in cases where powers
of the Commission have been delegated.
Relevant rule of
the Companies
Share Capital
(Variation in Nature of power/function
Rights &
Privileges) rules,
2000
1. 5(1) To grant approval for issuance of further share capital carrying
different rights.
Page 3 of 14
Relevant
S.No. section of the
Insurance Nature of power/function
Ordinance,
2000
1. 6(1) To issue/sign certificate of registration to carry on insurance
business.
2. 7(6) To specify any class, classes or sub-classes of business, which
the insurer is not authorized to carryon.
3. 9(2) To revoke the registration of insurer to carryon insurance
business on a request in writing.
4. 12(1 ) To evaluate the insurer or applicant tor registration as an insurer
under the criteria for sound and prudent management.
5. 26(2) To disapprove the appointment of appointed actuary and require
the appointment of another actuary.
6. 27(4) To approve/disapprove the dismissal of appointed actuary.
7. 32(1)(d) To declare those assets as are to be admissible for the purposes
of Part- V of the Ordinance.
8. 32(9) To declare assets as not to be admissible assets of an insurer or a
life-insurance statutory fund maintained by an insurer, under
clause (w) of sub-section (2) of section 32.
9. 48(1) To approve the auditor as qualified to perform audits of
insurance companies.
10. 48(4) To take cognizance for contraventions committed by the auditor
11. 49( 1) To approve the auditor for special audit.
12. 49(5) To specify the fee for special auditor.
13. 56 To take action as per provisions (a) to (d) of section 56 for
inaccurate or defective submission of returns.
14. 57(1) To order an actuarial investigation into the financial condition of
the life insurer.
15. 57(2) Proviso To specify date for furnishing the report of the investigation.
16. 57(3) Proviso To specify date and manner for furnishing the investigation
report.
17. 59(3) To order the insurer to take such action in respect of any matter
arising out of the investigation.
18. 59A (1) Power to appoint inspector/s for conducting inspection/s
19. 59A (3) Power to call tor information documents and assistance in the
course of inspection.
20. 59 A (5) Power to give / dispense with written notice of inspection
21. 60(1) To give directions to the insurer.
22. 60(2) To modify or cancel any direction given under sub-section (1)
section 60.
23. 61(4) To authorize an officer of the Commission to observe the
manners in which affairs of the insurer or of any of its offices or
. branches are being conducted.
24. 62(1) To direct an insurer to prepare, present to its directors and to the
Page 4 of 14
Commission, a plan or action to rectify or to prevent an actual or
apprehended contravention by the insurer of the conditions of
registration set out in section 11.
25. 63(1) To give direction to the insurer to cease entering into new
contracts of insurance.
26. 63(2) To issue a direction to cease entering into new contracts of
insurance.
27. 63(5) To revoke the direction given under sub-section (1) of section
63.
28. 64(1) To order calling of meetings of directors, to allow any officer of
the Commission to attend and speak at any meeting of Board of
Directors.
29. 65(1) To refer the case of removal of chairman, director or officers of
the insurer to the Insurance Tribunal, with the approval of
Chairman.
30. 67(1) To grant approval for acquisition of a shareholding of more than
ten percent.
31. 76(5) To levy fine on the insurer.
32. 84 To allow the officers of the Commission to visit the offices and
branches of insurers and inspect books, record and papers.
33. 102(3) To issue an Insurance broking license
34. 102(6) To cancel or refuse to issue or renew a broking license.
35. 102(7) To apply for an order from the Tribunal that a person IS
disqualified from acting as an insurance broker.
36. 110 To inspect insurance agents and insurance broker
37. 112(1) To issue license to insurance surveyor.
38. 112(6) To cancel the license of insurance surveyor.
39. 114 To specify the classes of surveyors and surveying officers.
40. 126(3)(d) To appoint medical practitioner to disqualify the Insurance
Ombudsman on medical grounds.
41. 126(4) To appoint a secretariat of Insurance Ombudsman and to
determine costs of the secretariat.
42. 130(3) To take cognizance for not complying with the decision taken by
the Insurance Ombudsman or the Commission.
43. 135(1) To appoint an administrator of company, with the approval of
Chairman.
44. 135(2) To prescribe the remuneration of the administrator, cancel his
appointment and appoint another person as administrator, with
the approval of the Chairman.
45. 135(5) To issue direction to the Administrator.
46. 136(2) To take action on the reportofthe administrator.
47. 139 To terminate the appointment of an administrator.
48. 143(2)(c) To apply to the court for winding up of insurance company.
49. 147(1) To apply to Court for appointment of an actuary to investigate
the life insurance business of the insurer.
50. 149(1) To apply to the court for directions regarding any matter arising
in connection with or upon the winding up of an insurer.
51. 149(2)
To serve written notice on the liquidator and the special manager
Page 5 of 14
of the proposed application under sub-section (1).
52. 151(2) To grant further period to a liquidator or a special manager to
provide information for winding up of an insurer.
53. 156 To take cognizance for default in complying with, or acting in
contravention of any provision of the Insurance Ordinance
54. 157(1) To take cognizance for transacting insurance business III
contravention of sections 5, 6 and 29.
55. 157(2 ) To take cognizance of contravention of taking out a policy of
insurance with any insurer or a person guilty of an offence under
sub-section (l) of section 157.
56. 158 To take cognizance for false statement in document.
Relevant rule of
S.No. the Securities
and Exchange Nature of power/function
Commission
(Insurance)
Rules, 2002
1. 18 To determine the fee payable to the auditor appointed under
Section 49 of the Insurance Ordinance to conduct special audit
of a company.
2. 23 To authorize any person to make compliance visits under
Section 84 and 110 of the Ordinance
Relevant rule of
S. No: the Insurance
Rules, 2002 Nature of power/function
(Federal
Government)
1. 16(3) To grant a certificate of registration as an authorized surveying
officer under section 113 of the Ordinance that will specify the
class of insurance surveyors.
Relevant Rule
S. No. of the Takaful Nature of Power/Function
Rules, 2012
1 8(2) To refuse grant of authorization to an insurer.
2 8(4) To review the decision of refusal to grant authorization to an
insurer.
3 9(1) To grant authorization to an insurer.
4 9(2) To specify the conditions for authorization to be complied with
by the Takaful Operator or Window Takaful Operator.
5 12(1) To suspend or revoke the authorization of an Operator.
6 25(4) To assign any other responsibility to the Shariah Advisory Board.
7 26(2) To approve appointment of Shariah Advisor of an operator.
8 26(3) To require an Operator to change its Shariah Advisor.
9 26(4) To specify conditions on the advice of Shariah Advisory Board.
Page 6 of 14
28(2) ITo approve institutions and course outline to provide training.
S.No. SEep Act, 1997 Nature oCPower/Function
1. 40B Power to issue Directive
2. Director (Insurance)
Relevant section
S. No. of the
Companies
Nature of Power/Function
Ordinance, 1984
1. 46 To grant relief from the consequences of default in complying
with conditions constituting as aprivate company___
2. 53(3) To take cognizance on issue of prospectus in contravention of
the provisions of sub-section (1) or sub-section (2) of section 53.
3. 53(6) To take cognizance on issuance of application form not
accompanied by a prospectus in tenus of section 53(5).
4. 56 To take cognizance on issuance of prospectus in contravention
of section 54 Of 55.
5. 57(6 ) To take cognizance on issuance of prospectus, published or
circulated, in contravention of section 57.
6. 67(5) To take cognizance on contravention of sub-section (1) or sub-
section (2), or making an incorrect statement, declaration or
verification in the application of allotment of shares.
7. 71(2) To take cognizance on default in repayment of money for shares
not allotted.
8. 72(2) To take cognizance on contravention of sub-sections (1) and (2)
of section 72.
9. 72(3) To take cognizance on contravention of sub-section (3) of
section 72.
10. 74(2) To take cognizance on default in issue of share certificates in
compliance with sub-section (1) of section 74.
11. 75(4) To take cognizance on default in issue of duplicate share
certificates.
12. 76(7) To take cognizance on contravention of the provisions relating to
transfer of shares in the case of a company.
13. 78(A) To hear appeal against refusal for registration of transfer Of
transmission of shares of a company.
14. 78(2) To take cognizance on failure to observe section 77 and section
78.
15. 82(5) To take cognizance on contravention of the provisions relating to
payment of commission etc.
16. 88 (4) To take cognizance on violation of provisions regarding
invitation and acceptance of deposits.
17. 95(3) To take cognizance on contravention of sub-section (1) or sub-
Page 7 of 14
section (2) of section 95.
18. 131 To adjudicate and order rectification of register of mortgages or
extend time for registration.
19. 145 (2) To take cognizance for non-compliance of section 145.
20. 147(4) & (5) To take cognizance for non compliance of section 147.
21. 149 (4) To take cognizance for non compliance of section 149.
22. 150(3) To take cognizance of default in complying with sub-sections 1
& 2 of section 150
23. 157(11) To take cognizance on default in complying with the provisions
of section 157.
24. 158(1) To grant extension in period for holding AGM beyond the due
date.
25. 158(2) To allow a listed insurance company to hold a particular meeting
at a place other than the town in which the registered office of
the company is situated.
of section 158.
of section 159.
of section 160.
29. 161(10) To take cognizance on failure to issue timely notices and
violation of relevant provisions regarding calling of meetings in
the case of a company.
30. 164(3) To take cognizance on contravention of provisions relating to
issue of notice for passing a resolution in a meeting of a
company.
31. 170 To call or direct the calling of an over-due statutory meeting,
annual general meeting or an extra-ordinary general meeting.
32. 171 To take cognizance of default in complying with the directions
given under section 170.
33. 173(5) & (8) To take cognizance on default in complying with the provisions
of section 173.
34. 186 To take cognizance Ofcontravention of sections 174 to 185.
35. 189 Penalty for unqualified person acting as director, etc. in the case
ofa company.
proceedings of directors.
37. 195(1) To accord approval for the grant of a loan or give any guarantee
or provide any security in connection with a loan made by any
other person to a director of the company, for purposes specified
therein.
38. 196(4) To take cognizance on exercise of ultra-vires powers by
directors in the case of a company.
39. 197(2)(1) To take cognizance of default in complying with sub-section (l)
of section 197
40. 197A(2) To take cognizance of default in complying with sub-section (1)
of section 197A
Page 8 of 14
41. 204 To take cognizance on contravention of provisions of sections
198 to 203 in the case of a company.
42. 209(5)(b) To approve a scheduled bank or a financial institution in the
context of the provisions exempting a company from holding
investments in its own name.
43. 209(9) To take cognizance of default in complying with sub-sections (l)
to (8) of section 209
44. 209 (10) To direct the inspection of register maintained under subsection
(7) of section 209.
45. 214(6) To take cognizance on non-disclosure of interest by a director of
a company
46. 215(2) To take cognizance on contract by an interested officer of a
company without approval of directors.
47. 216(3) To take cognizance on participation of interested director of a
company in proceedings.
48. 218(6) To take cognizance on non-disclosure of directors interest in
contract appointing chief executive, managing agent or secretary
in the case of a company.
49. 219(6) To take cognizance on default in keeping the register of
contracts, arrangements and appointments in which directors,
etc. are interested.
50. 220(6) & (8) To require an insurance company to furnish copy of register of
director's shareholding and impose penalty for non-maintenance
and non-production of register of directors' shareholding, etc.
51. 229 To take cognizance on contravention of sections 226, 227 or 228
in the case a company.
52. 233(1) To grant extension in the period for laying the annual accounts
of a company in the AGM beyond the due date.
53. 234A (6) To defray expenses of special audit in the first instance and take
necessary action for recovery of the same from the company
treatment of surplus arising out of revaluation of fixed assets in
the case of a company.
55. 236(2)(b) To exempt the company from the disclosure in the directors'
report of the changes concerning the nature of the business of the
company during a financial year.
56. 237(8) To grant exemption from provisions relating to consolidated
financial statements.
57. 237(9) To take cognizance for contravention of section 237
58. 238(2) To extend financial year of a holding company with regard to a
subsidiary's financial year for companies and to exempt the
holding company or its subsidiary to hold AGM within the
relevant calendar year under specific circumstances.
59. 241(3) To take cognizance of default in proper authentication of balance
sheet.
60. 244 To take cognizance of improper issue, circulation or publication
of balance sheet or profit and loss account in the case of a
company.
Page 9 of 14
61. 245(3) To take cognizance for non-circulation of quarterly accounts as
specified in section 245.
62. 246(1) To require insurance companies to submit additional statements
and accounts.
63. 246(2) To take cognizance on default in complying with the order of the
Commission issued under sub-section (1) of section 246.
64. 251(2) To allow a listed insurance company to with-hold or defer
payment of dividend.
65. 254(6) To take cognizance of default on a person who being unqualified
or subject to n ~ disqualification act as auditor of a company
66. 255(7) To take cognizance on refusal or failure to provide any
information to the auditor or hindrance to auditors in the
performance of their duties, in the case of a company.
67. 259 To take cognizance on Default in complying with provisions of
sections 252 to 254 or 256 & 257, in the case of a com2any.
68. 260(1) To take cognizance on authentication of a document otherwise
than in conformity with section 157 or making of auditors'
report in contravention of section 255 or section 257, or failure
to bring out material facts about the company, in the case of a
company.
69. 264 To require the applicants requesting for investigation of
company to provide sufficient evidence and deposit security for
payment of the costs of investigation.
70. 269 To provide the investigation report as ~ e i f i e d in section 269.
71. 276 To initiate proceedings for recovery of damages or property
72. 277 To defray and reimburse expenses of investigation and to do all
acts incidental
73. 295(4) To approve termination of the contract or employment.
74. 326(5) To take cognizance of any lapse, delay or other irregularity on
the part of official liquidator
75. 432(6) To accord approval for payment of money kept under the
Companies Liquidation Account.
76. 434 To make appointment of auditors and fix their remuneration, if
no such appointment is made by the members or creditors.
77. 474 To make complaint to a competent forum against the alleged
offence of a company.
78. 476(1)(c) To impose a fine (other than fine in addition to, or in lieu of
imprisonment) as provided for any offence, contravention of or
default in complying with provisions of the Companies
Ordinance, 1984 which fall within the jurisdiction of Executive
Director through delegation of powers.
79. 478 To exercise the powers of a court under the Code of Civil
Procedure in matters specified in this section.
80. 479 To issue a directive to the chief executive or other officer of the
company to appear before him personally and answer the
charges.
81. 484(2) To review the order originally made by him.
82. 488 To grant relief in cases in which the powers have been delegated
Page 10 ofl4
by the Commission.
83. 492 To impose fine for making false statement.
84. 495(1) To award punishment for non-compliance of the orders passed in
pursuance of the power delegated.
85. 496 To take cognizance for carrying on ultra-vires business by a
company.
86. 498 To take cognizance of statutory provisions of the Ordinance
where no specific penalty is provided.
87. 499 To accord approval subject to conditions in cases where powers
of the Commission have been delegated.
Relevant rule of Nature of power/function
the Companies
(Issue of Capital)
Rules, 1996
1. 11 To impose fine for contravention of the rules.
Relevant section
S.No. of the Insurance
Nature of Power/Function
Ordinance, 2000
1. 10(1) To cause notification of grant or revocation of registration in the
official gazette.
2. 10(3) To issue duplicate certificate of registration.
3. 11 (l) To evaluate the conditions imposed on registered insurer.
4. 13(2) To direct the life insurer in writing to make changes in the
particulars and materials filed sub-section (6) or (8) of section 6
or any amendment to the documents filed under sub-section (9)
of section 6.
5. 14(8) To approve division or amalgamation of statutory funds.
6. 14(9) To order transfer or amalgamate a life statutory fund.
7. 22(9) To order the life insurer to make surplus adjustment if in case its
expenses exceed the limits prescribed by the Commission.
8. 23(9) To order the life insurer to make expense adjustment if in case
its expenses exceed the limits prescribed by the Commission for
investment linked contracts.
9. 29(2)(b) To abolish the requirement for deposits specified by section 29,
by reducing the required minimum amount to zero.
10. 31 To approve refund of deposit.
11. 36(4) To direct an insurer not to deal with any specified asset for any
specified period.
12. 41(4) To direct the insurer to make modification in his reinsurance
arrangement.
13. 41(5) Rule 7 ofF. To allow reinsuring facultative outside Pakistan any insurance
G. Insurance business or any part thereof underwritten by it in Pakistan.
Rules
14. 42(4) To impose fine on those who contravenes the provisions of
section 42.
Page II of 14
15. 43(3) To punish with fine to those who contravene provisions under
sub-section (1) or sub-section (2) of section 43.
16. 43(6) To punish with fine to the person who willfully obstructs the
companies or any person authorized by it in the exercise of its or
his power or performance of functions.
17. 45(5)(c) To approve, manner other than those mentioned in clauses (a)
and (b) of sub-section (5) of section 45.
18. 45(5)(Proviso) To approve that the matters recorded or stored are capable of
being reproduced in a written form.
19. 50(7) To order an actuarial investigation in respect of such class or
sub-class of non-life insurance business.
20. 51(1) Proviso To extend time, on application by an insurer, allowed by sub-
section (1) of section 51 for furnishing of returns.
21. 51(2)(Proviso) To extend the time allowed for furnishing returns on application
by an insurer by a further period not exceeding fifteen days.
22. 55(1) To supplies copies of documents
23. 56 To take action as per provisions (a) to (d) of section 56 for
inaccurate or defective submission of returns.
24. 59(1) To order investigation of the affairs of an insurer and wherever
necessary, employ an auditor or actuary or both for assisting it in
such investigation.
25. 61(1) To direct an insurer to supply the Commission with any
information relating to its insurance business.
26. 61(2) To direct that the information supplied may be certified by the
principal officer of the insurer.
27. 61(3) To direct the chief executive or principal officer of an insurer to
discuss with the Commission any matter pertaining to the
business or management of the insurer.
28. 62(2) To call for such information and opinions or certificates with the
plan of action under sub-section (1) of section 62.
29. 67(3) To require the applicant to submit further documents to make an
informed decision about the transaction in the interest of policy
holders and the shareholders.
30. 76(5) To levy fine on the insurer.
31. 85(1) To appoint another surveyor to conduct an independent survey.
32. 89(4) To direct insurer to make changes in the variation proposed by
the insurer in the basis of calculation of the surrender value,
referred in sub-section (3) of section 89.
33. 112(2) To renew the license for a term of not more than twelve months
on application made by the holder of license.
34. 112(7) To impose fine on any person who acts as the licensed insurance
surveyor
35. 113(1) To register a person as--.su;veying officer.
36. 113(2) To renew the license of an authorized surveying officer
37. 113(4) To prescribe the form and contents of reporting by the insurance
surveying officer.
38. 113(6) To cancel registration of surveying officer.
Page 12 of 14
39. 113(7) To impose fine on any person who acts as the authorized
surveying officer
40. 119 To prescribe the fee for supplying copies by the insurer to the
policyholder.
41. 130(2) To hear appeals against the orders of Insurance Ombudsman
42. 151(1) To request a liquidator or a special manager to provide such
information as the Commission may deem necessary.
43. 156 To take cognizance for default in complying with, or acting in
contravention of any provision of the Insurance Ordinance
44. 157(1) To take cognizance for transacting insurance business ill
contravention of sections 5, 6 and 29.
45. 157(2 ) To take cognizance of contravention of taking out a policy of
insurance with any insurer or a person guilty of an offenceunder
sub- section (1) of section 157.
46. 158 To take cognizance for false statement in document.
Relevant rule of
S. No. the Securities
and Exchange
Nature ofPowerlFunction
Commission
(Insurance)
Rules, 2002
1. 27(2) To approve a date other than the 31st December for reporting by
the insurance brokers.
2. 30 To require any person carrying on such activities in Pakistan to
withdraw any written, electronic or other material issued by it
for mass communication or communication with a policyholder
or prospective policyholder.
S.No. Relevant Rule of
the Insurance
Rules, 2002 Nature of Power/Function
(Federal
Government)
1. 16(2) To issue license under section 112 of the Insurance Ordinance
that will specify the class of insurance surveyors for which
certificate is granted.
2. 16(3)
To grant a certificate of registration as an authorized surveying
officer under section 113 of the Insurance Ordinance that will
specify the class of insurance surveyors.
Relevant Rule of
S.No. the Takaful Rules,
Nature of PowerlFunction
2012
1 5(1)
To specify application form along with documents and
information for authorization as Takaful Operator
2 5(2)
To require an applicant to furnish further information or
clarification on filing application for authorization as Takaful
Page IJ of 14
Operator.
3 6(1)
To specify application form along with documents and
information for authorization as Window Takaful Operator.
To require an applicant to furnish further information or
4 6(2) clarification on filing application for authorization as Window
Takaful Operator.
S 7(1)
To specify the requirements for transformation of a General
Insurer to a Takaful Operator.
6 9(4)
To direct an Operator to cease entering into new Takaful
Contracts.
7 lOG)
To specify the reserves to be carried by the Participant Takaful
Fund at all times.
8 11 (l)(c)
To specify such other condition on the Window Takaful
Operators
9 I 1(1)(d)
To specify the relevant experience and knowledge for Head of
window takaful operations
10 16 To specify the form of the register oftakaful contracts.
11 21(5) To specify the surplus distribution mechanism for general takaful
operators.
12 25(3) To put up issues before the Shariah Advisory Board.
In addition to above, powers of the Commission as per rules prescribed or regulations
made under a particular section of the Companies Ordinance 1984 and Insurance Ordinance
2000 are also delegated to the Commissioner or the officer concerned, if powers and functions of
the Commission provided in the section of the Ordinance relevant to the said rules or regulations
have been delegated to him;
In case of vacancy or unavailability of Director (Insurance), the powers and functions
delegated to him! her through this notification shall, as far as may be possible, be exercised by
the Commissioner (Insurance);
The Chairman shall have the authority to exercise all powers delegated above to the
Commissioners and officers, concurrently.
No. ID/ENF/Delegation
( BUSHRA ASLAM )
Page 14 of 14
REGISTERED No. ~ ~ ~
. o:>
cte.-'" U!) ef ~
b d
EXTRAORDINARY
PUBI,.ISHEO BYAUTHORITY .
ISLAMABAD, FRIDAY, FEBRUARY 27, :l013 .-
PART II
Statutory Notifications (S. R. 0.) .
NOTIFICATION
Islamabad, the 22nd February, 2013
S. R. O. 130 (1)12013.-1n exercise of the powers conferred under section
246(1) of the Companies Ordinance, 1984 (XLVII of 1984), the Securities and
Exchange Commission of Pakistan is pleased to direct that every listed company
shall, in the case where it raises a demand in terms ofsection 224(2) ofthe Companies
Ordinance; 1984 (XLVII of 1984) for recovery gain made inviolation of section
224(1) ofthe Companies Ordinance, 1984 (XLVII of 1984), provide a copy ofsuch
" d ~ a n d to tlj!l Commission simultaneously. .
[No. SMD/BO/I (2)2001.)
..
BUSHRA ASLA)\1,
Secretary.:
(479)
PRIJ:lTED BY THE MANAGER, PRINTING <;{)RPORATION OF PAKISTAN PRESS, ISLAMABAD.
PUBLISHED BYTHE DEPUTY CONTROLLER. STATIONERY ANDFORMS. UNIVERSITY ROAD. KARACHI.
[204(2013)/El\. Gaz.] Price: Rs. 2.00
REGISTERED No. M 302
L.-7646
\,) .

- . t 4 .
EXTRAORDINARY
PUBUSHED BY AUlHORITY
ISLAMABAD, FRIDAY, MARCH 8, 2013
PART II
Statutory NotlDcalions (S.R.O.)
OQVERNMENT OFPAKISTAN
SECUIPTIES AND EXCHANGE COMMISSIONOF PAKISTAN
NOTIFICATION
Islamabad; the 4th March. 2013
S. R. O. 182 (1)12013.-10 exercise of the powers conferred by section
505 of the Companies Ordinance. 1984 (XLVTI of 1984) read with clause (e) of
section 43 of the Securities and Exchange Commission of-Pakistan Act. 1997
(XLII of 1997) and S. R. O. 698 (1)186 dated 2nd July, 1986, the Securities and
Exchange Commissionof Pakistanis pleasedto make Ute following amendments
in the Fifth Schedule to the said Ordinance, namely:
1. . In Part L-
(a) for existing Clause I (A), the following shall be substituted,
-namely: "Non-listed companies that are not Medium-Sized
companiesor Small-Sizedcompaniesshall followthe International
Financial Reporting Standards notified by the Commission for the
listed companies under sub-section (3) of section 234.of the
Companies Ordinance. 1984 (XLVII of 1984) or any" such
standards as notified by the" Commission from time to time.
(649) .
[281 Oaz.J
Price: Rs. 05.00
650 THE GAZETTE OF PAKISTAN. EXTRA" MARCH 8. 2013 (PART II
Medium-Sized Entities and Small-Sized Entities shall follow
Accounting and Financial Reporting Standards for Medium- Sized
companies and small sizedcompanies respectively as issued by the
Instituteof Chartered Accountants of Pakistan. However. Medium-
Sized companies and SmaJl-Sized companies are encouraged to
follow Jnremational Financial Reporting Standards."
(b) the existingsub-elause (ii) of clause2 shall be deleted;
(c) in clause 2, sub-clause (vii)(b) shall be deleted;
(d) in sub-clause (ix) of clause the words "or Accounting and
Financial Reponing Standards for MediuIIJ-Sized Companies and
Small-Sized Companies issned by the Institute of Chartered
Accountants of Pakistan- or International Financial Reporting
Standards issued by International Accounting Standard Board':
shall be deleted and in sub-clause [ix} of clause 2 for the words
"generally accepted accounting principles" the words
"International Financial Reporting Standards"f'Accounting and
FiJulncial Reporting Standards" shall be snbstituted;
(e) in clause 3,-
(i) for the words 'The following shall be disclosed in 'the,
'financial statements, namely" the words "A company having
pajd-up capital of SOO million and above shall disclose the .
following" shall be substituted;
(ii) in sub-clause (i) for the words "All material infonnation
necessary to make the financial statements clear and
understandable" the words ''the capacity of an industrial unit,
actual production and reasons for shortfall."
(iii) the existing sub-clause (ii) shall be deleted:
(0 in clause 6 after the Words "this fact" the words "along with
reasons for the property or asset not being held in the name of or
possession or control of the company" shall be added;
2. In Part n,-
(a) in sub-clause (i) of Clause I, after sub-head (c) a new sub-head
(ca) shall be inserted, namely:
PARTD] THE GAZE'ITE OF PAKISTAN, EXTRA., MARCH 8, 2013 651

"(ca) Major spare parts and stand-by equipment qualifying es
Property, Plant and. Equipment;"
(b) in ciause S,
(i) in sub-clause (A), in sub-head (viii) comma appearing after
the word "above" shall be omitted;
(ii) in sub-clause (B),-
(I) in' sub-head (i) the word "and" appearing at the endshall
be omitted;
(Il) in sub-head (ii) at the endfor the full stop a semicolon
shall be substituted and thereafter the word "and" shall
be inserted; and
(ill) after the paragraph (ii) amended as aforesaid, the
following new paragraph shall he inserted
,
"(iii) trade debts receivable-from related parties that are
either past due or impaired along with their age
analysia shall be'disctosed separately."
(iii) in sub-clause C, for the brackets and number (lv),
brackets and number (viii) shall he substituted.
(e) in clause (8), sub-clause (A) after sub-head (iv) a new sub-head
(iva) shall he inserted, namely:
"redeemable capital which qualifies for recognition as a financial
liability;";
3. In part ill,-
(a) for the existing clause "I." the following shall be substituted.
namely: ,$"
. .
"I. The profit and loss account SJ(all present items of income and
expense recognized in profir or loss _using a classification
based oneither their nature or their function within theentity,
whichever provides infonnation that is reliable and more
relevanl" .,---' _._----
652
T1ffi GAZET1T! OF PAKISTAN, EXTRA. MARCH 8, 2013
(b) in clause 2(A),-
[pARTn
(i) for sub-clause (ii) the,following shall be substituted, namely:
"(ii) Expenses classified according to their nature or
function:
provided that an entity classifying expenses by function
shall also disclose additional information on the nature
of expenses."
(ii) in sub-clause (iii) the word "operating" shall be
omitted;,and
(iii) after sub-clause (e) following new sub-clause
shall be inserted, namely:
"(D) All unlisted companies including
Economically Significant Companies,
, Medium-Sized Companies and Small-Sized
Companies shall disclose number of persons
employed as on the year end and average
number of employees during the year by an
Economically Significant Company."
(c) in clause 4. the following new sub-clause shall be inserted:
. .
"(i). In the case of provident fund/provident fund trust:
(a) Disclosure with regards to provident fund/trust:
(i) size of the fund/trust;
(ii)
(iii)
cost of-investments made;
':.; .." 1:
percentage of investments made; and
(iv) faiNtaJue of investments.
(b) Break-Up of Investments (in terms of amount and
percentage of the size of the fundltrust) in categories as
provided in section 22' of the Ordinance and rules
formulated for this purpose.
THE GAZETtE OF PAKISTAN,EXTRA., MAR,CH8, 2013
653
(c) A statement that investments out of provident fund/trust
have been made. in accordance with the provisions of
section 227 of the Ordinance and the rules formulated
forthis purpose."
[FileNo. EMDIDIJIFifth Schedulel8l2Ol \.J
BUSI!RA ASLAM,
Secretary.
PRINTED BYTHE MANAGER. PRINTING CORPORATION OF PAKISTAN PRESS. ISLAMABAD

PUBLISHED BY11iE DEf'U1Y CON"ffiOLLER. STATIONERY ANDFORMS, UNIYERSm ROAD, KARACHI
REGISTERED No. M 302
L.-7646
:J
Cfle...UQIII ....,..
J E
EXTRAORDINARY
PUBUSHED BY AUTHORITY
ISLAMABAD, FRIDAY, MARCH 8, 2013
PART 11
NOTIFICATION
Islamabad, the 4th March, 2013
S. R. O. 183 (1)12013.-10 exercise of the powers conferred by section
5D5 of the Companies Ordinance" 1984 (XLVll of 1984) read with clause (c) of
section 43 of the Securities and Exchange Commission of Pakistan Act, 1997
(XLII of 1997) and S, R. O. 698 (1)186 dated 2nd July, 1986, the Securities and
Exchange Commission of Pakistan is pleased to make the following amendments
in the Fourth SChedule to the said Ordinance, namely:
AMENDMENTS
I. In Part L.-
(a) in clause 1 for the words "International Accounting Standards" the
words "International Financial Reporting Standards" shall be
substituted;
(b) in sub-clause (vii) of clause 2 for the words" generally accepted
accounting principles" the words "International Financial
Reporting Standards" shall be substituted;
(655)
[282 (2013)1Ex. Gaz.)
Price: Rs. 03.00

(c) in-clause 5 after the words "this fact" the words "alongwitb reasons
for the property or asset not being in the name of or possession or
control of the company" shall be added;
656
THE GAZETTE OFPAJ(ISTAN, EXTRA., MARCH 8, 2013
[PART II
2. In Part n,-
(a) in clause 1, sub-clause (i) after item (c) a new item (ca) shall be
inserted, namely:
"(ca) Major spare parts and stand-by equipment qualifying as
Property. Plant and Equipment;"
,
(b) in clause 5,
/
(i) in sub-clause (A), in sub-head (viii) comma appearing after

the word "above" shall be omitted;
(ii) in sub-clause (B),-
(I) in paragraph (i) the word "and" appearing at the end
shall be omitted;
(Il) in paragraph (ii) at the end for the full stop a semicolon
shall be subStituted and thereafter the word "and" sfiall
be inserted; and
(Ill) after the paragraph (ii) amended as aforesaid the
followingnewparagraph shan be inserted;
"(iii) trade debts receivable from related parties that are
either past due or impaired alongwith their age
amllysis shall be disclosed separately."
(iii) in sub-clause C, for the brackets and number (iii),
brackets and number (viii) shan be substituted.
(c) in clause (8), sub-clause (A) after sub-head (iv) a new sub-head
(iva) shan be inserted, namely:
''redeemable capital which qualifies for recognition as a financial
liability;"
3. In partIll,-
PART II] THE GAZE'ITE OF PAKISTAN. EXTRA. MARCH 8. 2013 657
(a) for the existing clause "I." the following shall be substituted.
namely:
"I. The profit and loss account shall present items of income and
expense recognized in profit or loss using a classification
based on either their nature or their function within the entity.
whichever provides information that is reliable and more
relevant."
(b) in clause (2),-
(i) for sub-clause (B) the following shall be substituted. namely:
"B Expenses classified according to their nature or'
function:
provided that an entity classifying expenses by function
shall also disclose additional information on the nature
of expenses."
(ii) in sub-clause (C) the word "operating" shall be
omitted; and
(iii) after sub-clause (0) following new sub-clause
shall be inserted. namely:
,
"(H) Number of persons employed as on the year
end and average number of employees during
the year."
(c) in clause 4. the following new sub-clause shall be inserted:
"(iii) In the case of provident fund/provident fund trust:
(a) Disclosure with regards to provident fund/trust:
(i) size of the fund/trust;
(ii) cost of investments made;
(iii) percentage of investments made; and
(iv) fair value of investments.
658
THE GAZEITE OHAKISTAN. EXTRA.. MARCH 8. 2013
[pART II
(b) Break-up of Investments (in terms of amount and
percentage of the size of the fund/trust) in categories as
provided in Section 227 of the Ordinance and rules
formulated for this purpose.
(c) A statement that investments out of provident fundltrust
have been made in accordance with the provisions of
section 227 of the Ordinance and the rules formulated
for this purpose."
[File No. EMDlMiscJDlIOlnOll.j
BUSHRA A.SLAM.
Secretary to the Commission.
PRINTED BYTIlE MANAGER, PRINTING CORPORATION OF PAKISTAN PRESS, ISLAMABAD

PUBLISHED BYTHE DEPUTYCONTROLLER. STATIONERY AND roRMS. UNIVERSITY ROAD.KARACHI
.
71 II ^
116%/w/42_01s
M
PART II
Statutory Notification (S,R,O)
Islamabad, March 11, 2013
NOTIFICATION
SRO 194 (1)12013.- In exercise of the powers conferred by section. 505 of the
Companies Ordinance, 1984 (XLVII of 1984), read with clause (c) of section 43 of the
Securities and Exchange Commission of PakistanAct, 1997 (XLII of 1997) and SRO 698 (I) 86
dated 2nd July, 1986, the Securities and Exchange Commission of Pakistan is pleased to
direct that the Tables A and C to the First Schedule of the said Ordinance, shall be amended
as follows, namely:-
AMENDMENTS
1. In Table A,-
( I)
in regulation 63, after the word "Dividends" the words and comma "in cash,
and/or in specie" shall be inserted;
(ii)in regulation 51,-
the words "It shall not be necessary to give notice of a meeting of
directors to any director for the time being absent from Pakistan" shall be
omitted; and
after the regulation 51, amended as aforesaid, the words "Notice sent to a
director through e-mail whether such director is in Pakistan or outside
Pakistan shall be a valid notice." shall be inserted;
(iii)after the regulation 51, amended as aforesaid, the following new regulation
51A shall be inserted, namely:-
Page 1 of 3
"51A. The directors may hold their meetings through tele/video
conferencing in emergent situation where it is not possible for them to be
physically present at the venue of the meeting, provided that the minutes of
such meeting are approved and signed subsequently by all directors who
participated in such meeting, requirements of the requisite quorum and other
legal formalities relating to holding of such meetings have been observed and
tele video recording of the proceedings of the meetings are kept for the
purpose of the record.";
(iv)after regulation 83 a new regulation 83A shall be inserted, namely:-
"DISPUTE RESOLUTION
83A.In the event that a dispute, claim or controversy arises between

the company, its management or its shareholders, or between the
shareholders inter-se, or the directors inter se, all steps shall be taken to settle
the dispute and resolve the issue through mediation by an accredited
mediator before taking recourse to formal dispute resolution such as
arbitration or litigation.".
2. In Table C,-
( i )
After regulation 22, a new regulation 22A shall be inserted, namely:-
"ELECTION OF DIRECTORS
22A. (1)The directors of the company shall be elected in accordance
with provisions of sub sections (1) to (4) of section 178 of the Ordinance, in
the following manner:
The directors of the company shall be elected by the members
of the company in general meeting;
A member shall have such number of votes as is equal to
number of directors to be elected;
A member may give all his votes to a single candidate or divide
them between more than one of the candidates in such a
manner as he may choose; and
The candidate who gets the highest number of votes shall be
declared elected as director and then the candidate who gets
the net highest number of votes shall be so declared and so on
until the total number of directors to be elected has been so
elected.
Page 2 of 3
( 2) If the numbers of persons who offer them to be elected are
not more than the number of directors fixed by the directors under sub-
section ( 1) of section 178, all persons who offer them shall be deemed to have
been elected as directors. ";
after reg ulation 24 a new reg ulation 24A shall be inserted, namely: -
"24A The directors may hold their meeting s throug h tele / video
conferencing in emerg ent situation where it is not possible for them to be
physically present at the venue of the meeting , provided that the minutes of
such meeting are approved and sig ned subsequently by all directors who
participated in such meeting , requirements of the requisite quorum and other
leg al formalities relating to holding of such meeting s have been observed and
tele / video recording of the proceeding s of the meeting s are kept for the
purpose of the record. ";
after reg ulation 28 a new reg ulation 28A shall be inserted, namely: -
"28A . Notice sent to the directors throug h e-mail whether such director is in
P akistan or outside P akistan shall be a valid notice. "; and
( iv) after reg ulation 3 0 a new reg ulation 3 0A shall be inserted, namely: -
"D IS P U TE R E S OL U TION
3 0A . In the event that a dispute, claim or controversy arises between the
company, its manag ement or its shareholders, or between the shareholders
inter-se, or the directors inter se, all steps may be taken to settle the dispute
and resolve the issue throug h mediation by an accredited mediator before
taking recourse to formal dispute resolution such as arbitration or litig ation. ".
No. CL D /R D /29/A mndi1 5 t S ch. /2004
y5 lsa/
( B U S H R A A S L A M )
S ecretary to the Commission
P ag e 3 of 3
PARTII
SlalUtory Notiflcatlon(S. R.O)
GOVERNMENT OFPAKISTA!'i"
SECURITIESAND EXCHANGE COMMISSION OF PAKISTAN
NOTIFICATIOX
Islamabad, the 13'"March. 2013
S.R.O. No.:}.l o (1)12013. In exercise of the powers conferred by sub-section (2) of
section 466 read with section S06A of the Companies Ordinance, 1984 (XLVII of 1984) and
clause (c) of section 43 of the Securities and Exchange Commission of PakistanAct, 1997 (XLII
of 1997), and Notification No. SRO 1139(1)/86, dared 30'" December 1986, the Seeuruies and
Exchange Commission of Pakistan is pleased 10 direct thaI the following amendments shall be
made in the Companies (Registration Offices) Regulations, 2003, namely:-
In the aforesaid Regulations, .
(a) In regulation (10), for the Table appearing for the first time, the following new table
shall besubstituted, namely,
"TABLE
S.No Period of delay Additional fee
(I) (2)
.
(3)
I. If a document is filed wi th a delay Additional fee equal 10 one half of
of not morethan six months. the usual fee specifi<d for the
document in the Sixth Schedule.
2. If a document is filed with a delay Addilional fee equal 10 the usual foe
of more than six months but nol specified for the document in the
more thanone year. S"th Schedule.
3. If a documenl is Illed with a delay Additional fee equal to one and half
of morethan One year but not more lime of the usual fee specified for the
than one and half years. document in the Sixth Schedule.
4. If a document is filed wit h a delay Additional fee equal to two times of
of more than one and half years but the usual fee specified for the
not morethantwo years. document in the Sixth Schedule.
5, If a document is filed with a delay Additional fee equal to three times of
of more thantwo years. the usual fee specified for the
document in lhe Sixth Schedule.".
No. CLD1RDI602(6)I2012
~
Secretary to the Corrunission
PART - II
Statutory Notification (S. R. 0 )
I,r/amabad. March 1J, 201J
GOVERNMENT OFPAKISTAN
SECURmES AND EXCHANGE COMMISSION OF PAKlSTAN
NOTI FICATION
d'l l
S.R.O/ (1}I2013, In exerc ise of the powers conferred under section 506B of
the Compani es Ordinance, 1984 (XLVII of 1984) road with rule 9D of the Companies
(General Provisions and Forms) Rules, 1985, and in continuation to S.R.O No.
509( 1)12008 dated 4 June 2008 and S.R.O No. 266(1)12012 dated IS March 20 12, the
Securities and Exchange Commission of Pakistan is hereby pleased to direct that
mandatory filingof documents, returns. accounts and applications througheSetVice with
the Co mmission or the registrar shall be applicable after two months of the date of this
notification, for the followingcategories of companies
t

(a) all listed companies; and
(b) companies which filed last document, return, accounts or an)' applicarlon
through eService or wi ll file any document, return, accounts orapplication
through eService from the date of applicabili ty of this notification.
The Commission or the Registrar of Companies, as the case may be, may, On an
application justifying the filing of documents or applications in physica l form, allow the
applicant to do so, subject to such condi tion, as deemed fit and the Incharge of any
Company Registration Office may allow applications for inspection of registers.
documents. returns, and accounts kept by the registrar or issuance of certified copies
thereof made in physical form.
Provided that this notification shall be appli cable for filing of documents, returns,
accounts and applications forwhicheService submission is available.
No.CLDfROf 602(22)2009

Bushra Aslam
Secretary tothe Commission
** NOTIFICATION **
14'" May, 2013
S.R.O. 387(1)/2013.- In exercise of the powers conferred by section 10 of the Securities and
Exchange Commission of Pakistan Act, 1997 (XLII of 1997) read with section 20(4)(0) thereof,
and in continuation of its notification SRO. 1354(1)/2012 dated 31'I October, 2012, the Securities
and Exchange Commission of Pakistan (the Commission), subject to such conditions and
limitations as it may from time to time impose, hereby delegates the powers and functions of the
Commission listed below, in addition to the powers and functions already delegated vide SRO.
1354(1)/2012 dated 31
st
October, 2012, to its Commissioner and officers.
The powers and functions of the Commission under the Companies Ordinance, 1984
("Ordinance") delegated hereby and through SRO. 1354(1)/2012 dated 31" October, 2012 shall
be exercised by the Commissioner and officers of the Commission to the extent of insurance
companies and insurance brokers only, whether listed or not.
1. Commissioner (Insurance)
Relevant section of
Nature of power/function S No.
the SECP Act, 1997
1 32(A) To issue such directions to give effect to the Commission's
orders or to prevent abuse of its process, including but not
limited to, seeking the assistance of the local
administration or Police.
2 40(8) To issue directives, circular and guidelines.
Relevant section of
S No. the Companies Nature of power/function
Ordinance, 1984
1 264 To require the applicants requesting for investigation of
company to provide sufficient evidence and deposit
security for payment of the costs of investigation.
2 269 To exercise the powers of the Commission as provided in
section 269.
Relevant section of
5 No. the Insurance Nature of power/function
Ordinance, 2000
1. 7(1) To register the insurer as authorized to carry on life
insurance business or authorized to carry on non-life
insurance business as the case may be.
2. 10(2) To issue to the insurer a written certificate of registration.
3 41(4) To direct the insurer to make modifications in his
reinsurance arrangements.
4 45(5)(c) To approve, manner other than those mentioned in clauses
(a) and (b) of sub-section (5) of section 45.
5 50(7) To order an actuarial investigation in respect of such class
or sub-class of non-life insurance business.
Relevant Rules of
5 No. the Insurance Nature of power/function
Rules, 2002
1 7 To allow reinsuring facultatively outside Pakistan, any
insurance business or any part thereof underwritten by it
in Pakistan.
Relevant rule of
SNo. the Takaful Rules, Nature of power/function
2012
1 7(1) To specify the requirements for transformation of a
General Insurer to a Takaful Operator.
2 9(4) To direct an Operator to cease entering into new Takaful
Contracts.
3 lO(l)(j) To specify the reserves to be carried by the Participant
Takaful Fund at all times.
4 l1(l)(c) To specify such other condition on the Window Takaful
Operators.
5 11(1)(d) TD specifythe relevant experience and knowledge for Head
of windowtakaful operations.
6 16 TD specifythe form of the register of takaful contracts.
7 21(5) TD specify the surplus distrlbutlon mechanism for general
takaful operators.
2. Director (Insurance)
Relevant section
SNo. of the Insurance Nature of power/function
Ordinance, 2000
1 63(1) TD issue direction to the insurer to cease entering into new
contracts of insurance.
2 63(2) To issue a direction to cease entering into new contracts of
Insurance.
3 112(1) To issue license to insurance surveyor.
4 112(6) To cancel the license of insurance surveyor.
3. Joint Director (Insurance)
Relevant section
SNo.
ofthe
Nature of power/function
Companies
Ordinance, 1984
1 158(1) To grant extension in period for holding AGM beyond
the due date.
2 158(2) To allow a listed insurance company to hold a particular
meeting at a place other than the town in which the
registered office of the company is situated.
3 195(1) To accord approval for the grant of a loan or give any
guarantee or provide any security in connection with a
loan made by any other person to a director of the
company, for purposes specified therein.
4 220(6) To require an insurance company to furnish copy of
register of director's shareholding.
5 233(1 ) To grant extension in the period for laying the annual
accounts of a listed company in the AGM beyond the due
date.
Relevant section
Ordinance, 2000
1 31 To approve refund of deposit.
2 51(1) (Proviso) To extend time, on application by an insurer, allowed by
sub-section (1) of section 51 for furnishing of returns.
3 51 (2)(Proviso) To extend the time allowed for furnishing returns on
application by an insurer by a further period not
exceeding fifteen days.
4 56 To take action as per provisions (a) to (d) of section 56
for inaccurate or defective submission of returns.
5 61(1) To direct an insurer to supply the Commission with any
information relating to its insurance business.
6 61(2) To direct that the information supplied may be certified
by the principal officer of the insurer.
7 61(3) To direct the chief executive or principal officer of an
insurer to discuss with the Commission any matter
pertaining to the business or management of the insurer.
8 62(2) To call for such information and opinions or certificates
with the plan of action under sub-section (1) of section
62.
9 67(3) To require the applicant to submit further documents to
make an informed decision about the transaction in the
interest of policy holders and the shareholders.
Relevant Rules
Rules, 2002
I 7 To allow reinsuring facultatively outside Pakistan, any
insurance business or any part thereof underwritten by it
in Pakistan.
Relevant rule of
the Securities
SNo.
and Exchange
Nature of power/function
Commission
(Insurance)
Rules, 2002
I 30 To require any person carrying on such activities in
Pakistan to withdraw any written, electronic or other
material issued by it for mass communi cation or
communication with a policyholder or prospective
policyholder.
Relevant rule of
SNo. the Takaful Nature of power/function
Rules, 2012
I 5(1) To specify application form along with documents and
information for authorization as Takaful Operator.
2 5(2) To require an applicant to furnish further information or
clarification on filing application for authorization as
Takaful Operator.
3 6(1) To specify application form along with documents and
information for authorization as Window Takaful
Operator.
4 6(2) To require an applicant to furnish further information or
clarification on filing application for authorization as
Window Takaful Operator.
In addition to above, powers of the Commission as per rules prescribed or regulations made
under a particular section of the Companies Ordinance, 1984 and Insurance Ordinance, 2000 are
also delegated to the Commissioner or the officer concerned, if powers and functions of the
Commission provided in the section of the Ordinance relevant to the said rules or regulations
have been delegated to him;
In case of vacancy or unavailability Director (Insurance) the powers and functions delegated to
him/her through this notification or through SRO. 1354(I)/2012 dated 31
51
October, 2012 shall, as
far as may be possible, be exercised by Commissioner (Insurance);
In case of vacancy or unavailability Joint Director (Insurance) the powers and functions
delegated to him/her through this notification shall, as far as may be possible, be exercised by
Director (Insurance);
The Chairman shall have the authority to exercise all powers delegated above to the
Commissioner and officers, concurrently.
1
[No. ....J
( BUSHRA ASLAM )
Secretaryto the Commission
NOTIFICATION
PART II
GOVERNMENT OFPAKISTAN
Islamabad, the 6
th
June, 2013
41-9(1)
S.R.O.//2013. In exercise of the powers conferred by section 506 of the Companies
Ordinance, 1984 (XLVII of 1984) read with clause (b) of section 43 of the Securities and
Commission of Pakistan, with the approval of the Federal Government, is pleased to make the
following amendment in the Public Sector Companies (Corporate Governance) Rules, 2013,
namely:-
In the aforesaid Rules, in rule I, in sub-rule (2), for the words "after ninety days of the
issuance of this notification" the words and figures "on 8
th
July, 2013" shall be substituted.
[CLDIRDIROC/CG12004-]
~ ~
( Bushra Aslam )
TO BE PUBLISH IN ART 1\ OFTHEGAZE7TEOFPAKISTAN
Statutory Notification (S.R.O.)
SECURITIES AND':XCHA"IGECOMM!SSION OFPAKISTAN
Islamabad, the June 12, 2013
NCTIFICATION
s .R.o.5 ;;l1/2013 ._ln exercise of t' re powe r conferred ::>y sub-sect ion(3) of section 234
of the Compa nies Ordi nance, 1984 (XLVII of 1984), t he Securities an d Exchange Commission
of Pakistan is pleased to direct that t he lslar-uc Financ ial Account ing Sta nda rd 3 "Prof it and
Loss Shar ing on Deposi ts" annexed to this notifi cat ion, issued by t he Inst itu te of Char te red
Accou itants of Pakist an, sha ll be followed for t he purpose of preparatio n of th e financial
statements by Compani es a nd Modarabas whil e accounting for transact ions relating to
"Profit and Loss Sharing on Deposits " as defined by th e said Standard.
Provided t hat the Cornrn ission may grant an exemptio n to any com pany or any
moda raba, if it is if" the public interest so t o do, from complia nce w" h all or any of the
requirements of the afor esaid Standard.
(Naz ir Ahmed Shaheen)
Exec utive Directo r
I "'t rrs'
'
January 2013
" ",
"- " .
, The 'Institute of Chartered Accountants
Of Pakistan

Islamic Financial
Accounting Standard ,
on Profit and Loss
\ Sharing on Deposits
-----l
STANDARDONPROFITANDLOSSSHARINGONDEPOSITS
Preface
This Standard aims at setting out accounting principles to be followed by Institutions offering
Islamic Financial Services (IIFS) for recognizing, rneasurinc. presenting and disclosing the
transactiors relating to equity ('furjs') of unrestricted investment I {Profit/Loss Sharing) PLS deposit
account holders and their aquivalents,
Statement of t he Standard
1. Scopeof the Standard
1.1 This Standard addresses two issues:
(a) First the accounting principles relath g to funds received by the IIFS for investment
in its capacity as a mudarib at the IIFS's discretion, in whatever manner the IIFS
deems appropriate (funds of unrestricted investment account holders I PLS
deposit account holders); and
(b) Second, the disclosure of bases for profit allocation be':ween owners' equity and
that of unrestricted investment I PLS deposit account holders as applicable to the
financial statements published by IIFS to meet the common ir formation needs of
the users of such statements.
Explanation: This Standard is also applicabie to funds received on profit and loss shari ng
basis, such as export refinance from SBP ur-restricted investment accounts IPLS deposit
accounts I funds obtained based on musharaka.
1.2 This Standard does not address t he following:
(a) The func's received by the IIFS 0:1 a basis other than the Mudaraba and I or
Musharaka contract, for example:
Funds received for investment on the basis of agency for a specified fee;
Non remunerative cash margins and their equivalent;
Non remunerative security deposits and their equivalent; and
Current accounts and their equivalent based on qard.
(b)
2. Definitions
Bases of calculation of Zakat on funds of unrestricted investment I PLS deposit
account holders.
2.1 Unrestricted investment accounts I PLS deposit accounts
2.1.1 Under this type of account, the investment account holder authorises the IIFS to
invest the account holder's funds on the basis of Mudaraba . or Musharaka
contract in a manner which the IIFS deems appropriate without laying down any
restrictions as to where, how and for what purpose ~ e funds should be invested.
Under this arrangement. the IIFS can cornrninqle the investment account holder's
funds with its own equity or with otherfunds the IIFS has the right to use with the
permission of Investment account holders (e.q. current accounts or any other
funds which the IlFS does not receive on the basis of Mudaraba or Musharaka
contract).
2.1.2 Funds of unrestricted investment i PLS deposit account holders and their equivalent
refer to the balance, at the date of the statement of financial position I balance
sheet, from the funds originally received by the IIFS from the account holders plus
(minus) their share in the profits (losses) and decreased by withdrawals or
transfers to other types of accounts. .
2.1.3 Certificates of investment, deposit receipts, redeemable capital and other
accounts Of similar nature are equivalent. to unrestricted investment I PLS deposit
accounts. These are issued by the IIFS in the names of those who subscribe to
them on the basis that the IIFS "'!itl use those funds to finance its investment
activnes .
2.1.4 Profits are allocated between holders of such instruments and the IIFS, based on
the relative amount of funds invested by each in the respective pool and preagreed
profit distribution weightages I ratios, after the I1FS has received its share of profits
as a Mudarib. Losses are allocated between the IIFS and holders of these
instruments based on the relative amount of funds investedby each.
2.1.5 Funds of unrestrictedinvestment! PLS deposit account holders and their equivalent
are to be considered as redeemable capital for the purpose of financial accounting
and reporting. This is because the IIFS is not obligated in case of loss to return the
original amount of funds received from the account holders unless the loss is due
to negligence, misconduct or breach of contract. Current accounts and other non-
investment accounts are guaranteed by owners' equity and not by the funds of
unrestricted investment I PLS deposit account holders or their equivalent.
2.2 Agency based contract for i nvest men':s
2.2.1 Holders of investment accounts appoint lIFS to invest their funds on the basis of
an agency contract in'return a specified fee or a specified fee and share of the
profit if the realised profit exceeds a certain level, the latter being an incentive for
the IIFS to achieve a return higher than expected.
2.3 Mudaraba
2.3.1 Mudaraba is a partnership in profit whereby one party provides capita! ( rab al maal)
and the other partyprovides labour (mudarib).
Explanation: Mudarib may also contributecapital with the consent of the rab al maal.
.-a -:
2.4 Musharaka
2.4.1 Relationship established under a contract by the mutual consent of the parties for
sharing of profits and losses arising from a joint enterprise or venture.
2.5 Return on unrestricted investment accou nts I PLS deposit accounts and their
eqUivalent
2.5.1 Return on unrestricted investment accounts I PLS deposit accounts and their
equivalent is the share allocated to the holders of those accounts out of investment
profits and losses as a result of participation jointly with the IIFS, in the
financing of investment transactions dUring the period covered by the income
statement.
2.6 Profit 11055 sh ar!ng peri od (til e period)
2.6.1 Profit 1loss sharing period (the period) of ' IFS shall be the period for which an IIFS
computes, distributes Jallocates profits Jlosses to its unrestricted investment JPLS
deposit account holders and the lIFS.
2.7. Redee mable Capital
2.7.1 The expression 'redeemable capital' for the purposes of this Standard means funds
or deposits received from investment account holders f PLS deposit
account holders by lIFS on profit f loss sharing basis and subject to such terms and
conditions as may mutually be agreed between the IIFS and such account J deposit
'rolders.
3. Accountin g t reat ment i n respect of unrestricted i nvestme nt account holders J PLS
deposi t account holders
.0
. ";;. .
"" .-
3.1
3.2
Fun ds of unrestri cted invest ment f PLS deposit account ho lders and t heir
equiv ale nt
3.1.1 Funds of unrestricted' investment I PLS deposi t account holders shallbe
recognised when received by the IIFS. IIFS may maintain more than one pool to
":lance its investments activities. In case the IIFS makes it a condition that the funds
will not be invested before a certain date, 'nen the funds received shall be recorded
in a current account until their date of investment is due.
3.1.2 Funds of unrestricted investment f PLS deposit account holders shall be measured
by the amount received by the IIFS at the time of contracting.
3.1.3 At the end of the period. funds of unrestricted investment f PLS deposit account
holders shall be computed as follows:
Balance of investment account at the beginning of the period
Add: Any fur ner deposits
Less: Any withdrawals
Add: Any share of profits allocated and reinvested
Less: Any share of losses allocated
Add Jless: Any other necessary adjustment.
All ocatio n and accounting tr eatment of profi t 1 1055
3.2.1 Profits of invest:nent(s) jointly financed by the IIFS and unrestricted investment I
PLS deposit account holders shall be allocated between them according to the
mutually agreed terms.
3.2.2 Allocated but unpaid profits which are not reinvested as per mutual agreement shall
be recognised and disclosed as a liability by the lIFS.
3.2.3 Loss result ing from transact ions i n a jointly fi nanced investment should, in the
first ' instance, be deducted from any unallocated profits I "Profit Equalization
Reserve on the investment, Any loss remaining should be deducted from
J Islamic Financia l Services Bmtrd (IFSB) I Gui ding Principles ofRisk Management fo r Institutions (Other (Iran Insurance Instituti ons}
offering only Islamic Financia l Services
Profit equalisatio n reserv e (PER) is the amount appropriated by the IIFS out of the Muc;Mraba income, before allocating the
Mu(jMb's share, in order to maintain a certain level ofreturn on investment for IAH and to increase Owners' equity.
provisions lor investment losses { 2investment Risk Reserve set asioe for thi s
purpose, The . remaini nq loss, if any , should be deducted from the respective
equity shares in the joint investment of the IIFS and the unrestrict ed investment I
;' LS deposit account holders, according to each party's investment for the period.
For the purposes of this paragraph, the amo unt of investment shall be determined
uy It;" liFS under its policy for allocation of profit /Ioss.
3.2.4 Loss due to negligence, misconduct or breach of contract on the part of til e il FS,
based 0 :1 the opinion of aut hority, as prescribed by applicable law/regulations,
sha! l be deducted from the IIFS's .snare in til e profits of the joint ly financed
investment. In ca se the loss exceeds the lIFS's share of profits, the difference
should be deoucteo from Its equity share in the joi nt investment, if any, or
recognized as due from the i1FS.
4. Pr esentation and di scl osu re i n fin ancial statements
11.1 Unrest ricted invest ment acco unt s i PLS depos it accounts
4 .1.1 Funds of unrestricted investment I PLS deposit accoun t holders shall be presented
as redeemable capital.
4. 1.2 The financial statement shall disclose in the not e on signi ficant policies of:
the bases applied by the IIFS in the allocation of profits between owners'
equity and unrestricted investment / PLS deposit account holders;
the bases applied by the IIFS for charging expenses to unrestricted
investment ! PLS depcsit accounts; and
the bases applied by the IIFS for charging provisions, such as provision
for non pe-Iorrninq accounts, provisions on impairment etc and the
parties to whom they revert once they are no longer required.
4.1.3 Disclosure should be made. in the notes on significant category of accounts and o'
the percentage thereof which the IIFS has agreed with them to invest in order te
produce returns for them. . .
4 .1A Disclosure should be made either in the not es to the financial statement s or co
separate statement forming part thereof:
of the total administrative expenses charged to unrestricted investment ,
PLS deposit accounts along with a brief description of their major
components;
minimum and maximum percentages I weightages for profit allocatior
between owner's equity and various unrestricted investment I PLS deposi
account holders which tile I:FS has applied in the current financial period
vvnen the ll FS has a number of di fferent types of unrestricted investment .
PLS deposit accounts involving different contractual conditions, thE
required disclosure applies to such type of accounts onl y when the tota
amount thereof is of mater ial sigl1iflcance;
2 Investment risk reserve is ~ h e amount appropriated bythe IlFSout of the income of IAH, after allocating the Murj. tlrib's share, j:
order to GUsr:i0i". a::} 3inst future investment ~ S : S tor !AH.
cf the percentage(s) of profit charged by the llFS as a Mudarib during the
flnancia!period;
whelher the profit if any! resulting from investment of current account funds
0 , nny airier funds not received by i1FS on the basis of Mudaraba I
Musharaka has been included or not , for determining al location of profit to
unrestricted investment i PLS deposi t raccount holders. In the event of
aliocauon, disclosure snoulc also be made of the bases for such al!ocation;
of whether the IIFS is ;;harirlg 'revenue from banking operations (e.q. fee
ano commission income etc.) with unrestr icted investment I PLS deposit
accounts . !f so, the types of such revenue and l ite bases appl ied should be
disclosed; and
in cases where the IIFS is unable to utili se all funds available for
investment, the twoparties (owners' equity or unrestricted inve stment I
PI..S depcstt ClCCOUll t holders) given priori ty ther ein.
4.2 Incenti v e profits, s uc h as Hib a
4.2.-1 Discl osures should he made of the bases and the aggregate amounts, where
applicable:
to: determini ng the incentive profits which .IlFS receives from the profi ts of
unrestricted I PLS deposit accounts; and
for dci ennining the incentive profi ts wh ich IIFS pays from its profits to
unr estricted investmentJ Pl.S deposit accounts.
4.3 Dia cl osure of concentration of sources of unrestricted i nvest ment I PLS d ep osit
accounts
4.3. 1 Disclosure should be made in the financial stat ements of the agg regate balances of
all unrestricted investment / PLS deposit accounts and thei r equivalent classified as
to type and also in terms of local and foreign cur rency.
4.4 Disclosure of mat urity prof ile
4A. 1 Disclosure should be made in the financial statemen ts of the aggregate unrestricted
investment ,I Pi_S deposit accounts and their equivalent and other accounts, by
type, in accordance wi th their co ntract ual periods of maturity remaining
unexpired as of the Balance Sheet dai e. Matur ity peri ods should be consistently
. used and chanqes in the maturity periods used by the ilFS shoul d be disclosed.
4.5 Classiffcati on of assets on the basi s of sources of fi nance
4.5.1 Disclosure should be made in the notes to the financial statements in respect of
sources of firml1cing of material classes of assets showi ng sepa rately those:
(2) exclusively financed by..ursestrictec investments I PLS deposit account
holders;
(0) exclusi vely fn anced by ii FS; and
(c) jcinlly fi nanced by IlFS and unrestricted investment s I PLS deposit account
holders.
4.5.2 The rights, conditions and obiigations of each class of unrestricted investment
accounts / Pl.S deposit accounts and their equivalent and other deposit accounts
shown in the statement of financial posmon r balance sheet should be disclosed.
4.5.3 Separate disclosures shall De made of all material items of revenues, expenses,
gains and losses classified under the headings appropriate to the IIFS
distinguishing those attributable to:
a ) unrestricted investments / PLSdeposit accounts;
b.) . ~ f i S ; and
c.) IIi=S and unrestricted investments / PLS deposit account holders jointly.
PART II
Islamabad, the 24
th
July 2013
NOTIFICATION
S.R.O. /2013. In exercise of the powers conferred by section 506 of the Companies
Ordinance, 1984 (XLVII of 1984) read with clause (b) of section 43 of the Securities and
Commission of Pakistan, with the approval of the Federal Government, is pleased to make the
following further amendment in the Public Sector Companies (Corporate Governance) Rules,
2013, namely:-
In the aforesaid Rules, in rule 1, in sub-rule (2), for the words and
figures "8
th
July 2013", the words and figures "8
t h
August 2013" shall be
substituted.
[CLD/RD/ROC/CG/2004-]
(Bushra Aslam )
Circular No. 8 Reference No. 602(117) RCP/2001
The Companies Regularization Scheme

Dec 31, 2001

The Companies Ordinance, 1984 provides for a number of statutory returns which the
companies are required to file with the Registrar of Companies within the specified
period together with payment of prescribed amount of filing fee. Section 469 of the
Ordinance particularly lays down that where any documents required or authorized by or
under this Ordinance to be filed with the Registrar within a specified period is presented
after the expiry of such period, the Registrar may, on payment of such additional fee not
exceeding three times the amount of specified fee, accept the same. And that the
acceptance of the document by the Registrar shall not absolve the defaulting company or
other person concerned of any liability arising from the default, delay in filing or other
failure to comply with the requirements of this Ordinance.
2. It has been noticed that a number of companies have defaulted in filing the statutory
returns within the prescribed period and apart from other penalties for violating the
specific provisions of the Ordinance, which include heavy amounts of fines and
prosecution of the management leading to imprisonment of the defaulting
directors/officers, are liable to pay additional fee three times the amount of normal
specified fee. It has been felt that most of the companies have become defaulters for fear
of payment of heavy amount of fee, apart from other penalties.
3. Keeping with the declared policy of the Commission to be friendly with the business
community and at the same time to be firm for safeguarding the interest of investors, it
has been decided to introduce a special scheme known as Companies Regularization
Scheme, the basic features of which are as under:-
(i) The scheme would be applicable to non-listed public companies and private
companies.
(ii) The scheme would be introduced w.e.f. 1
st
J anuary, 2002 and would remain
operative for a limited period of three months, upto 31
st
March, 2002 and shall
apply to defaults committed upto December 31, 2000.
(iii) The companies taking benefit of the scheme shall be entitled to get their
returns accepted on payment of additional fee equal to normal specified amount of
fee, against the three times additional fee and the management of the companies
would be absolved from the defaults in filing the statutory returns after the expiry
of the period prescribed in the Ordinance for respective returns.
4. All the non-listed public companies and private companies are advised in their own
interest to avail of the opportunity of complete absolution from their guilt for violating
the statutory provisions of the Companies Ordinance, by filing the overdue returns as
soon as possible but not later than 31
st
March, 2002. Take notice that strict legal action
will be taken against the companies which fail to make good their omissions, benefiting
from the liberalized policy of the Commission, in terms of the present Scheme.

(M. Zafar-ul-Haq Hijazi)
Commissioner (CL)
Distribution:
1. The President, Institute of Chartered Accountants of Pakistan
Chartered Accountants Avenue, Clifton, Karachi-75600.
2. The President, Institute of Cost & Management Accountants of Pakistan,
Gulshan-e-Iqbal, Karachi- 75300.
3. The President, Federation of Pakistan Chambers of Commerce and
Industry, Shahrah-e-Firdousi, Main Clifton, Karachi.
4. The President, All Chambers of Commerce & Industry.
5. All Companies Registration Offices.
Circular No. 1 Reference No. SECP/ICAP/EM/34/99
Adoption of International Accounting Standards 22, 36 and 39

Jan. 01, 2002

In continuation of Circular No. 5 of 2001 dated November 1, 2001, it is hereby clarified
that International Accounting Standard (IAS) 22 "Business Combinations", IAS 36
"Impairment of Assets" and IAS 39 "Financial Instruments: Recognition and
Measurement", adopted and notified by SEC vide SRO 525(I)/2001 dated J uly 18, 2001,
shall be followed by all listed companies with regard to the preparation of their balance
sheet and profit and loss account for accounting periods beginning on or after J uly 1,
2001. #9;
(Jaweria Ather)
J oint Director (Acct.)
Distribution
1. Chief Executives of all listed companies
2. Chief Executives of Stock Exchanges, Karachi/ Lahore/ Islamabad
4. The President, Institute of Cost and Management Accountants of Pakistan
5. The President, Institute of Corporate Secretaries of Pakistan
6. The Chairman, Leasing Association of Pakistan
7. The Chairman, Modaraba Association of Pakistan
8. The Chairman, Mutual Funds Association of Pakistan Limited
9. Press Information Department, Islamabad
10. Associated Press of Pakistan
11. All officers of Commission

Circular No. 2 Reference No. 602 (117) RCP/2001
Companies Regularization Scheme

Jan. 31, 2002

Please refer to Circular No.08 of 2001 issued vide letter No.602(117)RCP/2001 dated
December 31, 2001 on the subject noted above.
2. It is to inform that the "Companies Regularization Scheme" which, as per Circular
referred to above was applicable to the defaults of companies committed upto December
31, 2000, will now apply to an extended date i.e. December 31, 2001. Previous decision
has been revised to provide more relief to the companies.
M. Zafar-ul-Haq Hijazi)
Commissioner (CL)

Distribution:
1. The President, Institute of Chartered Accountants of Pakistan, Karachi.
2. The President, Institute of Cost & Management Accountants of Pakistan, Karachi.
3. The President, Federation of Pakistan Chamber of Commerce and Industry,
Karachi.
4. The Presidents, All Chambers of Commerce and Industry.
5. All Officers of SEC.
6. All Company Registration Offices.
Circular No. 4 Reference No. SECP/ICAP/EM/34/99
Adoption of International Accounting Standards 22, 36 and 39

Feb. 21, 2002

In continuation of Circular No. 5 of 2001 dated November 1, 2001 and Circular No. 1 of
2002 dated J anuary 10, 2002, it is clarified that listed companies may not follow
International Accounting Standard (IAS) 22 Business Combinations, IAS 36
Impairment of Assets and IAS 39 Financial Instruments: Recognition and
Measurement in preparation of their half-yearly accounts for the six months ended
December 31, 2001. However, adequate disclosure of the fact that the said IAS have not
been followed should be clearly made in these half-yearly accounts. #9;
(Jaweria Ather)
Distribution
6. The President, Institute of Chartered Secretaries and Managers

Circular No. 3 Reference No. SECP/ICAP/SCD/05/2001
Adoption of International Accounting Standards 40

Feb. 21, 2002

On recommendation of the Institute of Chartered Accountants of Pakistan, SEC has
adopted and notified International Accounting Standard (IAS) 40 Investment Property
vide SRO 57(I)/2002 dated J anuary 23, 2002. The listed companies are advised to follow
the requirements of the said IAS with regard to the accounts and preparation of their
balance sheet and profit and loss account, in pursuance of the provisions of sub-section
(3) of section 234 of the Companies Ordinance, 1984 for accounting periods beginning
on or after J anuary 1, 2002. #9;
(Jaweria Ather)
Distribution
Circular No. 15 Reference No. SC/NBFC-ED/557/2002
TRANSFER OF REGULATORY SUPERVISION OF NON-BANKING FINANCIAL
INSTITUTIONS AND SUBMISSION OF PERIODICAL RETURNS/STATEMENTS

Dec 02 , 2002

Pursuant to recent amendments in the Banking Companies Ordinance, 1962 and the
Companies Ordinance, 1984 the regulatory supervision of all non-banking financial institutions
(NBFIs) excluding development financial institutions (DFIs) has been brought under the
regulatory purview of the Securities and Exchange Commission of Pakistan (SEC). Therefore,
the NBFIs including investment banks, housing finance companies, discount houses, venture
capital companies, National Investment Trust (NIT) and Investment Corporation of Pakistan
(ICP) that were hitherto being regulated by the State Bank of Pakistan (SBP) would now be
supervised by SEC with effect from the date of issuance of this circular, i.e. December 02,
2002.
It is, however, clarified that the existing rules and regulations applicable to investment banks,
housing finance companies, discount houses, venture capital companies, NIT and ICP would
remain intact till the issuance of further notification by SEC in this regard. Further, the
aforementioned institutions are advised to submit all the required information, returns and
statements etc. to SEC with effect from December 02, 2002, in the same manner and format
as was previously prescribed by SBP.
All the investment banks, housing finance companies, discount houses, venture capital
companies, NIT and ICP are also advised to continue submission of required information to
Credit Information Bureau (CIB) and Statistics Department of SBP on the existing format.
(Saadia Khan)
Executive Director (SC)

Distribution
1. Chief Executives of all investment banks, housing finance companies, discount houses,
venture capital companies.
2. The Chairman, NIT and ICP
3. The Chairman, The Investment Banks Association of Pakistan
5. The Chairman, Mutual Funds Association of Pakistan
6. The Chairman, Modaraba association of Pakistan
7. Director, Banking Supervision Department, State Bank of Pakistan
8. Institute of chartered Accountants of Pakistan
9. All Divisions of SEC
10. All CROs

Circular No. 16 Reference No. EMD/D-II/31/2002
Submission of Quarterly Accounts by Listed Companies

December 11, 2002

Consequent upon the promulgation of the Companies (Amendment) Ordinance, 2002, certain clarifications
are being sought by certain quarters from the Commission relating to amendment made in Section 245 of
the Companies Ordinance, 1984 (the Ordinance) in the context of quarterly accounts. The queries have
been considered and are clarified as under:
(i) The listed companies are now required to ensure that cumulative figures for the half year,
presented in the 2
nd
Quarter accounts are subject to limited scope review by the statutory
auditors. This is consistent with sub-regulation (xxi) of Regulation 37 of the KSE Listing
Regulations. Such a review is not required for the 1
st
and 3
rd
Quarter accounts.
(ii) The listed companies finding it difficult to circulate quarterly accounts to their shareholders
may, in lieu thereof, publish quarterly accounts in two leading morning newspapers, one in
English and the other in Urdu language, having circulation in the Province in which stock
exchange on which the company is listed, is situate. Such publication of quarterly accounts
would be considered sufficient compliance with law as regards transmission of quarterly
accounts to the shareholders. Notwithstanding this option, the listed companies must file the
quarterly accounts with the Commission, the Registrar and transmit the same to the
concerned stock exchanges as required under Section 245 of the Ordinance as amended
through the Companies (Amendment) Ordinance, 2002. Further, they will also provide a
copy of quarterly reports free of cost to shareholders on demand, if any.
(iii) The listed companies are not required to circulate their 4
th
Quarter accounts. However, the
companies whose 4
th
Quarter closed before the promulgation of Companies (Amendment)
Ordinance, 2002 on October 26, 2002 and which had not circulated their 4
th
quarter
accounts within one month of their financial year, shall be required to circulate their annual
audited accounts within three months of the close of their financial year to avail the
exemption of non-circulation of their 4
th
Quarter accounts as was allowed through
Commissions press release dated January 03, 2002.
(iv) As regards authentication and contents of quarterly accounts, the provisions of sub-section
(1) and (2) of Section 241 of the Ordinance and IAS 34 as notified vide SRO 33 (I)/2000
dated January 27, 2000 shall apply to these quarterly accounts.
(Ashfaq Ahmed
Khan)
Director
(Enforcement)
Distribution
1. Chief Executives of all the Listed Companies.
2. Managing Directors of Stock Exchanges, Karachi/Lahore/Islamabad.
3. The Institute of Chartered Accountants of Pakistan, Karachi
4. The Institute of Cost and Management Accountants of Pakistan, Karachi
5. The Press Information Department, Islamabad.
6. Associated Press of Pakistan.
7. All Officers of the Commission.
8. The Media Coordinator, SEC, Islamabad.
9. All CROs.

Circular No. 17 Reference No. No. SC/NBFC-D/574/2002
INFORMATION ON CURRENT CREDIT RATING AND COIS/CODS BEING MAINTAINED BY
NBFCS

Dec 18 , 2002

In exercise of powers conferred by Section 282 G (1) of the Companies Ordinance, 1984 (as
amended through the Companies (Second Amendment) Ordinance, 2002), the Securities and
Exchange Commission of Pakistan (SEC) is pleased to advise all Non-Bank Finance Companies
(NBFCs) engaged in soliciting investments/deposits through issuance of Certificates of
Investment (COIs) or Certificates of Deposit (CODs) to furnish the following information:
1. The latest Credit Rating assigned by a Credit Rating Agency registered with the SEC,
along with the detailed credit rating report.
2. Details of COIs/CODs outstanding as at December 15, 2002, along with break-up of
maturity, i.e. less than 90 days, more than 90 days up to 180 days, more than 180 days up to
1 year, more than 1 year up to 2 years, and more than 2 years.
3. The rate(s) of return offered on the afore-mentioned COIs/CODs along with reasons
thereof in case different rates are being offered for COIs/CODs of the same maturity.
All concerned NBFCs are advised to furnish the afore-said information to SEC within three days
of the receipt of this circular. In case any NBFC has already furnished the afore-said
information or any part thereof, it may inform SEC accordingly.
(Iram W. Butt)
Director (NBFC)

Distribution
1. Chief Executives of all NBFCs
3. The Chairman, Investment Banks Association of Pakistan

Circular No. 18 Reference No. No.EMD/D-II/7/2002
SUBMISSION OF QUARTERLY ACCOUNTS BY THE LISTED COMPANIES

Dec 19 , 2002

Consequent upon an amendment in the Companies Ordinance, 1984 through the
Companies (Amendment) Ordinance, 2002, the listed companies are required to circulate
their 1st, 2nd and 3rd quarter accounts within one month of the close of the respective
quarter. Further, through this Commissions Circular No.16/2002 dated December 11,
2002 listed companies were directed to ensure that the cumulative figures for the half
year presented in the second quarter accounts are subject to limited scope review by the
statutory auditors.
2. The Commission has received communications from some of the listed companies
whose financial year closed on J une 30, 2002 that due to recent change in law they are
finding it difficult to circulate 2nd quarter accounts for the period ending on December
31, 2002 within one month of the close of the said quarter i.e. up to J anuary 31, 2003 as
they have already set mutually convenient dates for their Board Meeting for approval of
accounts for the period ended December 31, 2002, before the promulgation of the
Companies (Amendment) Ordinance, 2002. Certain other listed companies whose
financial year closed on September 30, 2002 and which have not circulated their 4th
quarter accounts have represented that they may also be allowed to circulate their annual
audited accounts within four months of the close of their financial year i.e. by J anuary 31,
2003.
3. In view of the practical difficulties being faced by the listed companies in
complying with the provisions of Section 245 as amended through the Companies
(Amendment) Ordinance, 2002 so far as they relate to the preparation and circulation of
2nd quarter accounts for the period ended December 31, 2002, the Commission is pleased
to grant a one time general relaxation to listed companies for circulation of their 2nd
quarter accounts which would end on December 31, 2002 within two months thereof.
Accordingly, such companies may circulate their 2nd quarter accounts for the period
ended December 31, 2002 by February 28, 2003.
4. For the listed companies whose financial year has ended on September 30, 2002
and which have not circulated their 4th quarter accounts, the Commission is further
pleased to allow such companies to circulate their annual audited accounts by J anuary 31,
2003. Such companies should, however, hold their Annual General Meetings by March
31, 2003 as required under Circular No. 13/2002 dated November 6, 2002.
5. The listed companies are advised to strictly follow all other statutory requirements
in respect of circulation of accounts and holding of their Annual General Meetings.
(Ashfaq Ahmed Khan)
Director (E&M)
Distribution
1. Chief Executives of all listed companies.
3. The Institute of Chartered Accountants of Pakistan, Karachi.
4. The Institute of Cost and Management Accountants of Pakistan, Karachi.
5. Press Information Department, Islamabad.
7. All officers of the Commission.
8. All CROs.

Circular No. 19 Reference No. No.EMD/D-II/31/2002
Appointment of External Auditors by the Listed Companies

Dec 27 , 2002

Attention of the listed companies is invited towards the Listing Regulation No.37
(xxxvii) of the Karachi Stock Exchange Listing Regulations whereby the said
companies are required to appoint as external auditor only those firms of auditors which
have been given a satisfactory rating under the Quality Control Review Programme of the
ICAP.
2. In this connection, the ICAP has issued a list of practicing firms of Chartered
Accountants with satisfactory Quality Control Review Ratings on the basis of audit
reports issued upto October 31, 2002. A copy of the list is attached as Annexure. This
list shall be updated by ICAP from time to time, a copy of which will be available on
ICAPs website (www.icap.org.pk).
3. The Audit Committees and Board of Directors of listed companies are advised
to take into account Quality Control Review Ratings of the auditors to ensure
compliance with Listing Regulation No. 37 (xxxvii), before recommending
appointment of auditors to the shareholders in the annual general meetings. An
appointment of auditor(s) which does not comply with this requirement would be a
violation of the Listing Regulations and would expose the companies to consequential
action..
4. It may further be noted that the SEC has penalized certain auditors under the
Companies Ordinance, 1984. The listed companies may also wish to consider this while
appointing statutory auditors.
(Ashfaq Ahmed Khan)
Director (E&M)
Distribution
8. All CROs.

Annexure to Circular No. 19 of 2002
* PRACTICING FIRMS OF CHARTERED ACCOUNTANTS WITH
SATISFACTORY QUALITY CONTROL REVIEW RATINGS BY ICAP (ON THE
BASIS OF REPORTS ISSUED UPTO 31 OCTOBER 2002)
Sr. No. Name of Firm Sr.
No.
Name of Firm
1 A.Aziz Chaudhury & Co. 29 M. Sikandar & Co.
2 A. F. Ferguson & Co. 30 M. Yousuf Adil Saleem &
Co.
3 A. M. Laliwala & Co. 31 Manzoor Hussain Mir & Co.
4 Abbas & Co. 32 Mehmood & Co.
5 Akber G. Merchant & Co. 33 Munaf Yusuf & Co.
6 Amir Alam Khan & Co. 34 Muniff Ziauddin & Co.
7 Anjum Asim Shahid Rahman 35 Mushtaq & Co.
8 Avais Hyder Zaman Rizwani 36 Nasir J avaid Maqsood & Co.
9 Coopers & Lybrand 37 Qavi & Co.
10 Ebrahim & Co. 38 Rafiq & Co.
11 Eshai & Co. 39 Rahim Iqbal Rafiq & Co.
12 F.R. Merchant & Co. 40 Rahman Sarfaraz & Co.
13 Faruq Ali & Co. 41 Rauf Ayoob & Co.
14 Fazal Mahmood & Co. 42 Riaz Ahmad & Co.
15 Feroze Sharif Tariq & Co. 43 Raiz Ahmed Saqib Gohar &
Co
16 Ford Rhodes Sidat Hyder 44 S. M. Masood & Co.
17 Gangat & Co. 45 S. M. Rehan & Co.
18 Gardezi & Co. 46 S. P. Amjad & Co.
19 Hameed Chaudhri & Co. 47 Saeed Kamran Patel & Co.
20 Hyder Bhimji & Co. 48 Salariya & Co.
21 Ijaz Tabussum & Co. 49 Sarwar Awan & Co.
22 Ilyas Saeed & Co. 50 Sher Muhammad Khan & Co.
23 Iqbal & Co. 51 Taher Moochhala & Co.
24 J aved & Co. 52 Tanzeem & Co.
25 Khalid Majid Husain Rehman 53 Taseer Hadi Khalid & Co.
26 M. Almas & Co. 54 Z. Lakhani & Co.
27 M. Ather & Co. 55 Zakaria Loya & Co.
28 M. Hussain Chaudhry & Co.
* Extract from ICAPs letter dated November 19, 2002

Circular No. 1 Reference No. SC/DA/Aud/2003/
APPOINTMENT OF SOLE PROPRIETOR CHARTERED ACCOUNTANTS AS
AUDITORS BY BUSINESS NAME.

January 23 , 2003

Whereas it has come to the attention of Securities and Exchange Commission of Pakistan (SEC) that sole
proprietor chartered accountants are being appointed as auditors under their respective business names by
certain companies pursuant to section 252 of the Companies Ordinance, 1984 (Ordinance). Moreover,
such sole proprietors are using the words Chartered Accountants instead of Chartered Accountant with
their business name.
2. In view of Sub-Section (2) of Section 254 of the Ordinance, which provides that auditors can be
appointed by their business name if they are practicing as a firm of chartered accountants, the SEC
therefore considers it expedient to clarify that sole proprietor chartered accountants cannot be appointed as
auditors by their business names, and shall be appointed in their personal names only.
3. Further, it is hereby directed that a sole proprietor shall not use the words Chartered Accountants
with his business name in any correspondence or report that relates to the audit of a company, and shall
instead use the designation Chartered Accountant with his name. Only firms of practicing chartered
accountants can use the words Chartered Accountants as this expression suggests that the firm consists of
more than one member of the Institute of Chartered Accountants of Pakistan.
4. All companies and their auditors are directed to ensure immediate compliance with this Circular,
with the exception that para 2 above shall apply to appointments of auditors made subsequent to the
issuance of this Circular.

(Jaweria Ather)
Director (Accounting)
Distribution
1. CROs for onward circulation to all companies
12. All officers of the Commission
Circular No. 2 Reference No. SECP/ICAP/SCD/05/2001
INTERNATIONAL ACCOUNTING STANDARD 40 INVESTMENT PROPERTY.

January 23 , 2003

Whereas vide SRO 57(I)/2002 dated J anuary 23, 2002, IAS 40 Investment Property was adopted and
notified by Securities and Exchange Commission of Pakistan. Therefore in pursuance of the provisions of
SRO 57(I)/2002 and Sub-Section (3) of Section 234 of the Companies Ordinance, 1984 as amended by the
Companies (Amendment) Ordinance, 2002, the accounting treatment laid down in IAS 40 is required to be
followed by all companies in respect of investment properties. Accordingly, an investment property,
subsequent to its initial recognition, is either to be measured under the Fair Value Model or Cost Model
specified in IAS 40.
2. At the time of first application of IAS 40, it would be necessary to reclassify any amount that was
held in revaluation surplus in respect of such investment property. It is pertinent to consider that the
provisions of Fourth Schedule to the Companies Ordinance, 1984 make a clear distinction between fixed
assets and investments (including investments in immovable properties). Accordingly, it is hereby clarified
that a reclassification of the amount held in revaluation surplus in respect of investment properties, at the
time of the first application of IAS 40, would not fall within the ambit of section 235 Treatment of surplus
arising out of revaluation of fixed assets of the Companies Ordinance, 1984.

(Jaweria Ather)
Director (Accounting)
Distribution
1. CROs for onward circulation to all companies

Circular No. 7 Reference No. 6(90)R.M/2000-117
Appointment of Director/Chief Executive in the Modaraba Companies.

February 27, 2003

The Chief Executives
of all Modaraba Companies.
In order to ensure compliance of the Code of Corporate Governance, it has been decided that the Modaraba
Companies while submitting the documents as prescribed vide this office Circular No. 7/2000 and 3/2003
for seeking approval for appointment of directors shall, also submit a Checklist on the enclosed prescribed
format, duly signed and verified by the Chief Executive/Company Secretary alongwith the other requisite
documents.
The Chief Executives of all the Modaraba Companies are hereby directed to comply with these
instructions.

(Umar Hayat Khan)
Registrar
Modaraba Companies and Modaraba
click here to Download Checklist for Appointment of Directors

Circular No. 8 Reference No. SC/NBFC-D/248/2003
Checklist for Appointment of Director.

February 28, 2003

All Non-Bank Finance Companies
All Non-Banking Finance Companies are hereby advised to ensure that the enclosed checklist is duly filled
in at the time of seeking the Commission's approval for appointment of directors and submitted to the
Commission along with other required documents.
(Iram W. Butt)
Director(NBFC)
click here to Download Checklist for Appointment of Directors

Circular No. 12 Reference No.SC/NBFC-ED/435/2003
FRESH LICENSE(S) TO BE OBTAINED BY EXISTING COMPANIES IN TERMS
OF SECTION 282 C OF THE COMPANIES ORDINANCE, 1984.

May 14, 2003

Further to Circular No. 10 of 2003 dated April 10, 2003 whereby this office had prescribed a Format for the
Application to be submitted by an existing company that is engaged in one or more forms of business as
mentioned in section 282A of the Companies Ordinance 1984.
According to clause (d) of paragraph 2 of the Application Format, such company has to furnish information
regarding directors interest in any other company. Certain companies have sought clarification regarding
directors interest in any other company since it has not been specified any where in the law or the rules.
It is therefore, clarified that directors interest in any other company as mentioned in clause (d) of the
Application Format attached with circular No. 10 of 2003, means:
i) the directorship/employment of the concerned director in any other company; and
ii) the shareholding of 5% or more in any other company held by the concerned director.

Yours truly,
(Sadia Khan)
Executive Director
Distribution
Chief Executives of all Non-Banking Finance Companies.
The Chairman, NIT and ICP
The Chairman, The Investment Banks Association of Pakistan
The Chairman, Leasing Association of Pakistan
The Chairman, Mutual Funds Association of Pakistan
Institute of Chartered Accountants of Pakistan
All Divisions of SEC
All CROs
PREPARATION AND TRANSMISSION OF SECOND QUARTER ACCOUNTS BY
THE LISTED COMPANIES.

March 19, 2003

Consequent upon an amendment in Section 245 of the Companies Ordinance, 1984 (the Ordinance)
through the Companies (Amendment) Ordinance, 2002, the listed companies are required to prepare and
transmit to the members and the Stock Exchange (s) their first, second and third quarter accounts within
one month of the close of the respective quarter. Further, Circular No.16 of 2002 dated December 11,
2002, issued by the Commission on the subject requires that cumulative figures for the half year presented
in the second quarter accounts shall be subject to limited scope review by the statutory auditors.
2. The Commission is, however, receiving a large number of representations from the listed
companies, APTMA, PSMA, ICAP and certain other professional bodies stating therein that it is
impracticable to prepare and transmit second quarter accounts with limited scope review by the statutory
auditors, within a period of one month of the close of that quarter.
3. Considering the practical difficulties expressed by the management and auditors of listed
companies, it has been decided by the Commission to grant a general relaxation of further one month
enabling the listed companies to circulate their second quarter accounts with limited scope review by the
statutory auditors within a period of two months of the close of second quarter.
4. The Commission expects timely compliance from the management of listed companies in respect of
filing of statutory returns.

(Ashfaq Ahmed Khan)
Director (E & M)
Distribution
2. Managing Directors of Stock Exchanges, Karachi/ Lahore/ Islamabad
4. The President, Institute of Cost and Management Accountants of
Pakistan
10. All CROs.
11. The Media Coordinator, SEC, Islamabad
FRESH LICENSE(S) TO BE OBTAINED IN TERMS OF SECTION 282 C OF THE
COMPANIES ORDINANCE, 1984 FOR BUSINESS (ES) BEING CARRIED OUT
BY EXISTING NON-BANKING FINANCE COMPANIES

April 10, 2003

As you are aware, through the Companies (Second Amendment) Ordinance 2002, a new Part VIII-A
(containing provisions of Sections 282A to 282M) has been inserted in the Companies Ordinance, 1984
(the Ordinance) regarding matters pertaining to the establishment and regulation of Non-Banking
Finance Companies (NBFCs). In terms of clause (a) of section 282 A, a NBFC would be able to partake
any or all of the following forms of business namely, -
i) Investment Finance Services
ii) Leasing
iii) Housing Finance Services
iv) Venture Capital Investment
v) Discounting Services
vi) Investment Advisory Services
vii) Asset Management Services
In addition to grant of license to the newly incorporated NBFCs, every company in existence that is
engaged in any one or more forms of business as specified above, before the expiry of six months from
coming into force of Section 282C of Part VIII-A of the Ordinance, i.e. on or before May 15, 2003 is
required to apply in writing to Securities and Exchange Commission of Pakistan ( the Commission) for
grant of a fresh license in terms of the said section.
Further, in terms of the powers conferred by Section 282B of the Ordinance, the Commission has recently
notified rules for the Non-Banking Finance Companies namely, Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003 (NBFC Rules) which prescribe criteria for grant of license to
NBFCs.
Therefore, in terms of sub-rule (6) of rule 5 of these Rules read with sub section (3) of section 282C of the
Ordinance, you are advised to furnish an application on the attached format alongwith non-refundable
processing fee of Rs.50,000/- (fifty thousand) for each form of business, and other necessary documents
including legible copy of the existing license/NOC, on or before May 15, 2003 to obtain a fresh license for
carrying out any one or more of the existing forms of business as mentioned in clause (a) of section 282A
ibid.

Yours truly,

(Sadia Khan)
Executive Director
Distribution:
1. Chief Executives of all Non-Banking Finance Companies.
2. The Chairman, NIT and ICP
3. The Chairman, The Investment Banks Association of Pakistan
6. Institute of Chartered Accountants of Pakistan
8. All CROs

APPLICATION FOR OBTAINING LICENCE TO 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 (6) of the Non-Banking Finance
Companies (Establishment and Regulation) Rules, 2003, to carry out __________* as a
Non-Banking Finance Company.
2. We hereby furnish the following information,
__

(a) date of incorporation as a limited company;
(b) authorised, subscribed and paid-up share capital of the company along
with total equity of the company as defined in sub-section (1) of Section 2
of NBFC Rules, 2003 (sponsors' equity 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 of
such interest;
(e) details of persons or group controlling the company including major
shareholders with number and value of shares held;
(f) names of holding, subsidiary and associated undertaking, if any;
3. Certified copies of the memorandum and articles of association, certificate of
incorporation and existing license/NOC are enclosed.
4. An affidavit as to the correctness of the above information by the chief
executive and two directors is also furnished herewith. We undertake to keep this
information upto date by communicating changes or modifications therein within
fourteen days of such change or modifications.
5. A receipt of rupees fifty thousand (Rs. 50,000/-) being the non-refundable
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 the
Companies Ordinance, 1984.

Maintenance of Website by the Listed Companies.

May 26, 2003

Sharing of information via Internet is the most convenient and cost effective medium
these days. This medium is being used by the government as well as by the
corporate sectors all over the world. Every listed company is, therefore, expected to
have its website, which could also be convenient for its investors, shareholders and
general public who can access the financial information to make investment
decisions. A proposal is also under consideration of the Commission to allow the
listed companies to place their quarterly accounts on their website instead of
transmitting the same to its shareholders by post.
2. In view of the above, the listed companies are advised to take
necessary steps for the maintenance of their website and the website address may
also be intimated to the Commission at the earliest.

(Ashfaq Ahmed Khan)
Director (E & M)
Distribution
3. The President, Institute of Chartered Accountants of Pakistan.
4. The President, Institute of Cost and Management Accountants of Pakistan.
5. All officers of Commission.
6. All CROs.

Circular No. 15 Reference No. CLD/CO/Amndt/2001
Appointment of Whole Time Company Secretary.

July 08, 2003

A new section 204A has been inserted in the Companies Ordinance, 1984 through the Companies
(Amendment) Ordinance, 2002 which provides that a listed company shall have a whole time secretary and
a single member company shall have a secretary possessing such qualifications as may be prescribed. It is
clarified for the information of all concerned that the words whole time secretary in relation to a public
listed company means a full time employee designated as secretary to perform this specific assignment.
The listed companies are required to appoint full time secretary and duties of secretary may not be assigned
to any other officer of the company in addition to his own duties and responsibilities. However, a whole
time secretrary can be assigned additional job if the management considers it appropriate.
2. The objective of mandatory appointment of a whole time company secretary is to ensure compliance
with statutory provisions of all corporate laws applicable to listed companies and to integrate the wide
ranging duties and responsibilities associated with this important position. It is hoped that the mandatory
provision about appointment of a whole time secretary will work as a driving force for good corporate
governance.
3. It may be noted that a single member company is also required to have a company secretary but such
company does not necessarily require a whole time secretary.
4. In order to achieve the purpose of present legislation and amendments in the Companies Ordinance,
1984 the qualification of company secretary is being prescribed and the single member company rules are
under process of issuance.
(Haroon Sharif)
Executive Director (CL)
Distribution
1. The President, Institute of Chartered Accountants of Pakistan, Karachi.
2. The President, Institute of Cost & Management Accountants of Pakistan, Karachi.
3. The President, Federation of Pakistan Chamber of Commerce and Industry,
Karachi.
4. The Presidents, All Chambers of Commerce and Industry.
5. All firms of Chartered Accountants / Cost and Management Accountants
6. All Officers of SEC.
Rules of Business for Non-Bank Financial Institutions (NBFIs) and
Submission of Periodic Returns/Statements.

July 31, 2003

As you are aware that pursuant to the amendments in the Banking Companies Ordinance, 1962 and the
Companies Ordinance, 1984, all the existing NBFIs with the exception of Modarabas and Development
Financial Institutions (DFIs) have been re-classified as Non-Banking Finance Companies (NBFCs) and are
being regulated by the Securities and Exchange Commission of Pakistan with effect from November 15,
2002. Prior to the said re-classification of NBFIs, operating activities of investment finance companies,
venture capital companies, housing finance companies, discount houses, National Investment Trust (NIT)
and Investment Corporation of Pakistan (ICP) were being regulated by the State Bank of Pakistan (SBP).
As SEC is in the process of finalizing the Rules of business and periodic statements for NBFCs to monitor
their business activities, it is hereby clarified that the Rules of business for NBFIs alongwith all
circulars/directions/clarifications pertaining to the said Rules, issued by SBP for investment banks, housing
finance companies, discount houses, venture capital companies, NIT and ICP shall continue to apply to
NIT, ICP and the NBFCs engaged in any one or more of the following forms of business till the issuance of
further instructions by SEC:
(i) investment finance services;
(ii) housing finance services;
(iii) venture capital investment; and
(iv) discounting services.
Furthermore, it is clarified that the NBFCs carrying out leasing are required to submit all the information,
returns and statements etc. to SEC in the same manner and format as previously prescribed by SEC vide its
Circular No. 21/2000 dated 26th December, 2000, issued in terms of Rule 19 of Leasing Companies
(Establishment and Regulation) Rules, 2000.

(Najam Ali)
Executive Director
Distribution
5. The Chairman, NIT
6. The Chairman, ICP
7. Director, Banking Supervision Department, State Bank of Pakistan
10. All CROs

Circular No. 19 -Reference No. SECP/ICAP/EM/34/2003/474
Applicability of IAS 39 and IAS 40 to Non-Banking Finance Companies
(NBFCs) providing investment finance services (Investment Banks),
discounting services and housing finance services.

August 13, 2003

Practical difficulties being faced by NBFCs in giving effect to the requirements of IAS 39
and IAS 40 in terms of rule 7 of Non-Banking Finance Companies (Establishment and Regulation) Rules,
2003 (NBFC Rules), as reported by Investment Banks Association of Pakistan and certain NBFCs, have
been appreciated by the Securities and Exchange Commission of Pakistan (the Commission). Therefore, by
virtue of powers conferred by rule 84 of NBFC Rules, the Commission has decided to grant relaxation to
the NBFCs providing Investment Finance Services, Discounting Services and Housing Finance Services
from the application of IAS 39 and IAS 40, with the direction that such companies shall continue observing
the State Bank of Pakistans BSD Circular Letter No.11 dated September 11, 2002 regarding the
application of said IASs, till further decision.
(Najam Ali)
Executive Director
Distribution
1. Chief Executive of all Investment Banks, Discount Houses and Housing Finance
Companies.
2. Chief Executives of Stock Exchanges, Karachi / Lahore / Islamabad
8. All Officers of the Commission

Circular No. 29 - Reference No. CLD/RD-660(1)2003
Corporate Agriculture Farming (CAF) Policy

November 13, 2003

The Cabinet decision dated J une 19
th
, 2002 on Corporate Agriculture Farming
(CAF) policy enunciate that such local and foreign companies would be entitled CAF legal
entity that are locally incorporated under the Companies Ordinance, 1984. In this
connection, it is pointed out for of the concerned registrars mention that in case of foreign
collaboration, 60% foreign equity is allowed with minimum investment of US$ 0.3 million.
Beside the following agriculture related activities are included in CAF under the approved
policy package, -
i. Land development/reclamation of batter land, desert and hilly areas for
agriculture purpose and Crop farming
ii Reclamation of water Front Areas/Creeks.
iii. Crops. Fruits, Vegetables, Flowers Farming/ Integrated Agriculture
(Cultivation and processing of Crops)
iv. Modernization and Development of Irrigation Facilities and Water
Management.
v. On farm construction of wheat/grain storage and construction of cold
storage for captive use (not on commercial basis)
2. All CROs are advised to ensure that the companies having Corporate Agriculture
Farming (CAF) objects should be allocated the appropriate sector in light of the objects
stated above and necessary data be furnished to the head office in future.
(Nazir Ahmad Shaheen)
Additional Registrar of
Companies (HQ)
Circular No. 25 - Reference No. CLAD/602/6/Circular/88
USE OF WORD BANK OR ANY OF ITS DERIVATIVES

October 07, 2003

Attention is invited to section 8 of the Banking Companies Ordinance, 1962, under which no
company other than a banking company is allowed to use the word bank, or any of its derivatives as part
of its name or any word calculated to indicate that it is a banking company. It has been observed that
promoters/sponsors of few companies, particularly the NBFCs are desirous to adopt the word bank as part
of the companies name and they approach to the Registrar of Companies for clearance without seeking
prior approval from the State Bank of Pakistan.
All CROs are, therefore, directed not to allow the word bank or any of its derivatives as a part of
companies name unless prior approval of the State Bank of Pakistan is produced as required under section 8
of the Banking Companies Ordinance, 1962.

(NAZIR AHMED SHAHEEN )
Additional Registrar of Companies
Distribution
All Company Registration Offices.
All Officers of SEC.
Copy to:
(i) The President, Institute of Chartered Accountants of Pakistan,
Karachi.
(ii) The President, Institute of Cost & Management Accountants of
Pakistan, Karachi.
(iii) The President, Federation of Pakistan Chamber of Commerce and
Industry, Karachi.
(iv) The Presidents, All Chambers of Commerce and Industry.
(v) All firms of Chartered Accountants / Cost and Management
Accountants

Circular No. 24 - Reference No. SC/NBFC-ED/792/2003
Assets provided on Lease/loan basis to the Employees (Excluding CEO &
Directors)

October 08, 2003

Attention is invited to Rule 7 (2) (b) of the Non-Banking Finance Companies (Establishment &
Regulation) Rules, 2003 which stipulates:
A NBFC shall not purchase anything from, or sell anything to any
director, officer, employee of NBFC or from or to a person who either
individually or in concert with close relatives beneficially owns ten
percent or more either of the equity or other securities with voting
rights, if any, issued by such NBFC without the prior approval in writing
of the Commission.
2. In view of the above-mentioned rule, it has been observed that despite having well defined policies,
companies face practical difficulties while providing vehicles and consumer goods on lease/loan basis to
their employees as prior approval of the Securities & Exchange Commission of Pakistan in each such case
is required.
3. Therefore, it is hereby clarified that prior approval of the Commission in respect of assets offered on
lease/loan basis to employees (excluding Chief Executive Officer and Directors) is not required by NBFCs
provided the service manuals of the concerned companies permit grant of such leases/loans. The
leases/loans to CEO and directors shall, however, require approval from the Board of Directors and the
Commission prior to the grant of such facilities

(Najam Ali)
Executive Director
Distribution
Copy to:
1. The Chief Executives of all NBFCs.
2. Leasing Association of Pakistan.
3. Investment Banks Association of Pakistan
SECURITIES AND EXCHANGECOMMISSION OF PAKISTAN
COMPANY LAW DIVISION
(REGISTRATION DEPARTMENT)
********

No. CLD/CO. 88/1/2002 Islamabad, October 15, 2003

CIRCULAR NO. 26 OF 2003

Attention is invited to SRO 954 (I)/2003 dated October 01, 2003 notifying the
amendments made in the Companies (Invitation and Acceptance of Deposit) Rules, 1987
that bring the advances taken by real estate companies, automobile or other companies
within the ambit of the Rules. Now, the real estate companies, automobile or other
companies that collect deposits through schemes advertised in the electronic or print
media or by any other means as an advance against the promise to supply the property or
commodity, at some future date, are directed to comply with the provisions of said Rules.
Some of the features of these Rules are enumerated below for guidance.

(1) A company cannot invite directly or through any other person any deposit
unless such deposits are invited in accordance with the Companies
(Invitation and Acceptance of Deposits) Rules, 1987.

(2) Banking companies or such other class of companies as specified by the
Commission is exempt from the provisions of section 88 and rules made
thereunder.

(3) The deposits accepted renewed or retained by a company under the
provisions of section 88 of the Ordinance and the rules shall not exceed
the limit of twenty five percent of the aggregate of the paid up capital and
free reserves of a company.

(4) No company shall utilize the deposits received for financial assistance to
any other person

(5) Any company that accepts deposits shall invest or deposit in prescribed
liquid assets of atleast ten percent of its deposits maturing during the next
calendar year.

(6) Every company intending to invite deposits shall issue an advertisement
including therein a statement showing the financial position of the
company on the authority and in the name of the board of directors of the
company.

(7) The provision of the Companies Ordinance, 1984 relating to prospectus
shall be applicable to such an advertisement issued by a company inviting
deposits.

(8) The advertisement issued in accordance with the rules shall be valid until
the expiry of six months from the date of closure of the financial year.

(9) The advertisement to be issued by a company requires prior approval of
the Commission. A company not making advertisement and intending to
invite deposits otherwise, in the manner permissible under these rules has
to file a statement in lieu of advertisement.

(10) A private company is allowed to invite and accept deposits from persons
not exceeding twenty persons with the prior approval of the Commission.

(11) The company shall send to every depositor a statement containing
specified particulars and information within six months of the close of the
accounting year.

(12) Every company, which has accepted or renewed the deposit, shall
maintain register(s) at its registered office regarding specified particulars
of each depositor seperately.

(13) No company shall employ an agent for soliciting or collecting deposits or
pay any commission of brokerage to any one on deposits received by it.

(14) The company shall file with the registrar and the Commission a return in
FormII every year.

(15) The Commission may exempt any company from the application of above
said Rules after consultation with the concerned Trade Association duly
licensed and registered under the Trade Organizations Ordinance, 1961.

(16) The schemes advertised by the companies to accept and retain deposits
under the rules encompass any marketing campaign launched by a
company itself, or by someone else on its behalf, through the print or
electronic media or by any other means inviting or soliciting the general
public or any section thereof through a notice, circular, advertisement or
other communication to apply for the purchase of a property or
commodity or any other product against payment in full or in part,
whether or not described as a deposit, if:-

(a) the property or commodity is not in possession of the company at
the time when the notice, circular, advertisement or
communication is issued; or

(b) it offer sale a product for which the company does not have
adequate production facility; or

(c) It contains a promise for a gift or reward or some unusual
incentive so as to prompt an early booking.

(17) A company which invites deposits in contravention to the law is
punishable with fine which may extent to twenty thousand rupees and a
company which accepts deposits in contravention to the law is punishable
with fine not less than the amount of deposit so accepted. Moreover, every
officer of the company, which is in default, shall be punishable with
imprisonment for a term which may exceed to two years and shall also be
liable to fine.

3. The real estate and automobile companies are directed to comply with the
provisions relating to prospectus and deposits contained in the Companies Ordinance,
1984 and the Companies (Invitation and Acceptance of Deposits) Rules, 1987 and not to
make advertisements in electronic or print media except with the prior approval of the
Commission for which application shall be furnished in the forms set out as Annexure-I
and Annexure-II respectively.

Sd/-
(NAZIR AHMAD SHAHEEN)
Additional Registrar of Companies

Distribution

1. Chief Executives of all listed automobile companies.
4. All Pakistan newspapers Association of Pakistan, Karachi.
5. Chairman, PTV Corporation, Islamabad.
6. All CROs.
8. Development authorities of major cities.

Annexure-I

APPLICATION FORM FOR REAL ESTATE COMPANIES SEEKING
APPROVAL OF THE COMMISSION TO MAKE ADVERTISEMENT
FOR INVITING DEPOSITS

1.1 Name of the company.
1.2 Date of incorporation.
1.3 Registered office address of the company.
1.4 Principal line of business of the company.
1.5 Name(s) of holding, subsidiary and
associated undertaking(s), if any.

1.6 Name(s) of person(s) controlling the
company.

2.1 Authorized share capital of the company.
2.2 Paid-up share capital of the company
(sponsors equity be indicated separately)

2.3 Name of persons holding ten percent or
more of paid up share capital of the
company.

2.4 Accumulated profit of the company.
2.5 Other reserves of the company.
3.1 Name of Schemes/colonies developed
previously, if any.

3.2 Date of the resolution passed by the board
of directors of the company approving the
text of the advertisement of which
issuance the Commissions approval is
sought. (Attach certified copy)

3.3 Main features of the scheme (Attach copy
of feasibility study and NOC obtained
from the relevant authority).

3.4 Sources of the investment for the purchase
of the land and for construction of the
houses / flats.

3.5 Names of the persons holding title deed of
the plot/property and their relation to the
company.

4.1 Name of the bankers of the company and
account number.

4.2 Amount of outstanding deposits in the
manner:
Outstanding for 30 days
Outstanding for 30-90 days
Outstanding for more than 120 days

4.3. Total amount of loan advanced to
company by directors/other persons.

4.4. Total amount collected from general
public for the sale / proposed sale of plots,
houses, flats etc.

4.5 Maximum maturity period of deposits.
4.6 Policy whether the entire deposit holder
will be entertained or balloting for
allotment will be made.

4.7 The procedure and time limit for
allotment and repayment of the deposits to
unsuccessful applicants in case of
balloting.

Attach the following statements:

Statement showing the names, addresses, relevant professional
qualification, relevant experience, shareholding of the chief executive and each
director of the company and their interest, direct or indirect, in any other
company(ies) with details of such interest.

2. Declaration as to the correctness of the above information by the chief
executive and two directors of the company.

3. Copy of the draft advertisement/pamphlet/brochure.

Signatures:
Dated: Designation (Chief Executive)
Place: Director(s)

Annexure-II

APPLICATION FORM FOR AUTOMOBILE COMPANIES SEEKING
APPROVAL OF THE COMMISSION TO MAKE ADVERTISEMENT
FOR INVITING DEPOSITS

1.3 Registered office address of the company.
1.4 Principal line of business of the company.
1.5 Name(s) of holding, subsidiary and
associated undertaking(s), if any.

1.6 Name(s) of person(s) controlling the
company.

2.1 Authorized share capital of the company.
2.2 Paid-up share capital of the company
(sponsors equity be indicated separately)

2.3 Name of persons holding ten percent or
more of paid up share capital of the
company.

2.4 Accumulated profit of the company.
2.5 Other reserves of the company.
3.1 Main features of schemes previously
launched, if any.

3.2 Date of the resolution passed by the board
of directors of the company approving the
text of the advertisement of which
issuance the Commissions approval is
sought. (Attach certified copy)

3.3 Has the manufacturing/assembling plant
installed, if not the stage thereof.

3.4 Main features of the scheme (Attach copy
of feasibility study and NOC from the
Ministry of Industries for importing,
assembling automobiles)

3.5 Sources of the investment for the purchase
of the land and for construction of the
houses / flats.

3.6 Specify that whether the company will
manufacture, assemble or import the
vehicles.

3.7 Installed capacity of the
manufacturing/assembling plant.

3.8 Capacity utilized in the current year and
last two years.

3.9 Specify the average period in which the
vehicle would be delivered.

3.9 Total number of vehicles booked but not
delivered or to be booked during next
year.

4.1 Name of the bankers of the company and
account number.

4.2 Amount of outstanding deposits in the
manner:

4.3. Total amount of loan advanced to
company by directors/other persons.

4.4. Total amount collected from general
public for the sale / proposed sale of plots,
houses, flats etc.

4.5 Maximum maturity period of deposits.
4.6 Policy whether the entire deposit holder
will be entertained or balloting for
allotment will be made.

4.7 The procedure and time limit for
allotment and repayment of the deposits to
unsuccessful applicants in case of
balloting.

Attach the following statements:

Statement showing the names, addresses, relevant professional
qualification, relevant experience, shareholding of the chief executive and each
director of the company and their interest, direct or indirect, in any other
company(ies) with details of such interest.

2. Declaration as to the correctness of the above information by the chief
executive and two directors of the company.

3. Copy of the draft advertisement/pamphlet/brochure.

Signatures:
Dated: Designation: (Chief Executive)
Place: Director(s)

Annexure-I

APPLICATION FORM FOR REAL ESTATE COMPANIES SEEKING APPROVAL OF
THE COMMISSION TO MAKE ADVERTISEMENT FOR INVITING DEPOSITS

Please complete in typescript or in bold block capitals.

1. 1 Name of the company.


PART I Information about the Scheme

2.1 Name of Schemes/colonies
developed previously, if any.

2.2 Scheme for which
advertisementisbeingmade.

2.3 Main features of the scheme
stating therein location, site
plan etc.

(Attach copy of feasibility study and NOC obtained from the
relevant authority)

2.4 Names of the persons
holding title deed of the
plot/property and their
position in the company.

2.5 Sources of the funds for
purchase of land and
construction of the houses/
flats.

2.6 Procedure and time
schedule for allotment of
plots/flats etc.

(Attach detailed schedule)

2.7 Mention the policy whether
the entire deposit holders
would be allocated plots/flats
or balloting for allotment
will be made.

2.8 The procedure and time
schedule for repayment of
the deposits received to
unsuccessful applicants in
case of balloting.

2.9 Total estimated amount that
would be collected from
general public by the sale of
plots/flats etc.

2.10 Date of the resolution of
board of directors approving
the advertisement to be
issued in the press.

(Attach certified copy)

PART-II Information about the Company

3.1
Authorized share capital.

3.2
Paid-up share capital.

(Sponsors equity be indicated separately)

3.3 Freereserves.

3.4 Accumulated profit/loss.

3.5
Other reserves/Surplus/profits.

3.6
Deposits.

3.7
Current liabilities and
provisions.

3.8 Fixed assets.

3.9 Investments.

3.10 Current assets.

3.11 Name of the bankers of the
company and account
number.

3.12 Outstanding deposits.

Outstanding for more than
120 days
Amount
No of depositors

3.13 Total amount of loan
advanced to company by
directors/other persons.

3.14 Name(s) of holding,
subsidiary and associated
undertaking(s), if any.

3.15 Name of persons holding ten
percent or more of paid up
share capital of the company.

(Listtobeattached)

Please enclose the following: -

(a) Statement showing the names, addresses, professional qualification, relevant
experience, shareholding of the chief executive and each director of the company.

(b) Copy of the draft advertisement/pamphlet/brochure.

Signatures:
Dated: Designation:
Place:

Annexure-II

APPLICATION FORM FOR AUTOMOBILE COMPANIES SEEKING APPROVAL OF
THE COMMISSION TO MAKE ADVERTISEMENT FOR INVITING DEPOSITS

Please complete in typescript or in bold block capitals.



PART I Information about the Scheme

2.1 Name of Schemes launched
previously, if any.

2.2 Scheme for which advertisement
isbeingmade.

2.3 Main features of the scheme
e.g. whether the company will
manufacture/import/ assemble
the vehicles etc.

(Attach copy of feasibility study and NOC obtained from Ministry
of Industries)

2.4 Specify whether the
manufacturing/assembling
plant has been installed, if not
the stage thereof.

2.5 Installed capacity of the
manufacturing/assembling
plant.

2.6 Capacity utilized in the current
year and last two years.

2.7 Total number of vehicles
booked but not delivered

2.8 Booking plan of the vehicles
for the next year.

2.9 Specify the average period in
which the vehicle would be
delivered.

2.10 Mention the policy whether the
entire deposit holders would be
entertained or balloting would
be made.

2.11 The procedure and time
schedule for repayment of the
deposits received to
unsuccessful applicants in case
of balloting.

2.12 Total estimated amount that
would be collected from
general public by the sale of
vehicles.

2.13 Date of the resolution of board
of directors approving the
advertisement to be issued in
the press.

(Attach certified copy)

PART-II Information about the Company

3.1 Authorized share capital.

3.2 Paid-up share capital.

(Sponsors equity be indicated separately)

3.3
Freereserves.

3.4
Accumulated profit/loss.

3.5 Other reserves/Surplus/profits.

3.6 Deposits.

3.7 Current liabilities and
provisions.

3.8 Fixed assets.

3.9 Investments.

3.10 Current assets.

3.11 Name of the bankers of the
company and account number.

3.12 Outstanding deposits.

Amount Noof
depositors

3.13 Total amount of loan advanced
to company by directors/other
persons.

3.14 Name(s) of holding, subsidiary
and associated undertaking(s),
if any.

3.15 Name of persons holding ten
percent or more of paid up
share capital of the company.

(Listtobeattached)

Please enclose the following:-

(a) Statement showing the names, addresses, professional qualification, relevant
experience, shareholding of the chief executive and each director of the company.

(b) Copy of the draft advertisement/pamphlet/brochure.

Signatures:
Dated: Designation:
Place:

Circular No. 30 - Reference No. CLD/ENF/D(A/C)/17/2003
Attendance of Directors in the Board Meetings through Video Conferencing

December 31, 2003

A few listed companies particularly the multinationals have approached this
Commission to allow holding of the Board of Directors meetings through video
conferencing as and when some members of their Board are not available in the country.
This Commission, in view of this practical problem, feels that holding of Board meetings
through video conferencing would facilitate the companies whose directors sometimes find
it difficult to travel to Pakistan for participating in the meetings due to their busy
schedules. This would also ease pressure on the directors of companies who have to attend
quarterly Boards meetings and audit committees meetings as per the requirements of the
Companies Ordinance, 1984 and the Code of Corporate Governance. Besides, the use of
modern technologies would also be cost effective and would ensure participation of almost
all the directors in such meetings. This would also help in achieving the objectives of good
Corporate Governance. It has, therefore, been decided to allow the listed companies to hold
their Boards meetings through video conferencing where it is not possible for the directors
to be physical present at the venue of the meeting. The listed companies are, however,
advised to avail this facility only in emergent situations and the requirements of the
requisite quorum and other legal formalities relating to holding of such meetings must be
observed strictly. It would also be the responsibility of the companys secretary to secure
the video recording of the proceedings of the meetings and keep it in his custody along
with the other relevant record.
(Imran Bashir)
Director (Enforcement)
Distribution:

NIC Building, Jinnah Avenue, Blue Area, Islamabad.
PABX: 9207091-4, Fax. No.: 9218590, E- mail: secphq@isb.paknet.com.pk
(Professional Services & Policy Division)
NIC Building, Jinnah Avenue, Islamabad
***

No.SECP/TP/DA/37/2004 January 30, 2004


Subject: APPOINTMENT OF SOLE PROPRIETOR CHARTERED
ACCOUNTANTS AS AUDITORS BY BUSINESS NAME

It is to inform that Circular No.1 dated January 23, 2003 of the
Commission, as per subject noted above, has been witdrawn with immediate effect.

(Javed Ghafoor)
Joint Director (PSPD)

Distribution:

2. The Managing Directors of Stock Exchanges, Karachi/ Lahore/ Islamabad

NIC Building, Jinnah Avenue, BlueArea, Islamabad. Tel: 9206306, 9207091-4; Fax: 9218591
Website: www.secp.gov.pk E-mail: secphq@isb.paknet.com.pk

REGISTRATION DEPARTMENT

No.CLD.602(180)RCP/2000- Islamabad, the 30
th
January, 2004

Circular No. 7/ 2004

Subject: Authentication of Statutory Returns

Keeping in view of the practical difficulties being faced by the companies
regarding filing of statutory returns prescribed under the Companies (General Provisions
and Forms) Rules, 1985 only under the signatures of the companys chief executive or
secretary, the issue has been examined in the light of the provisions of the Companies
Ordinance, 1984. It has been noticed that since Section 51 of the said Ordinance allows
authentication of a document by the chief executive or a director or secretary, the
documents/returns filed under the signature of a director of the company may be accepted
for registration in future.

( NAZIR AHMED SHAHEEN )
Additional Registrar (HQ)
Distribution
All Company Registration Offices.
All Officers of SEC.
Copy to:
(i) The President, Institute of Chartered Accountants of Pakistan, Karachi.
(ii) The President, Institute of Cost & Management Accountants of Pakistan,
Karachi.
(iii) The President, Federation of Pakistan Chamber of Commerce and
Industry, Karachi.
(iv) The Presidents, All Chambers of Commerce and Industry.
(v) All firms of Chartered Accountants / Cost and Management Accountants

PABX: 9207091-4 - Fax. No. 9218590, E-mail: secphq@isb.paknet.com.pk
SPECIALIZED COMPANIES DIVISION
NBFC DEPARTMENT

No. SC/NBFC (I)-JD/ 69 /2004
Islamabad, February 10, 2004.


Subject: COMPLIANCE WITH IAS 12 (REVISED).

Attention is invited to the Commissions Circular No. 16 of 1999 dated September
09, 1999 regarding compliance with the IAS 12 (Revised). Through the said circular,
leasing companies, to fully provide for the un-recognized deferred tax liability as at the
beginning of the financial year ending June 30, 1999 were granted a relaxation by way of
transfer of an amount to a capital reserve over a period of five years ending June 30, 2003.
The capital reserve so created was not to be utilized for any purpose other than to provide
for deferred tax liability.
Different quarters including Non-Banking Finance Companies undertaking the
business of leasing only (leasing companies) and their auditors have approached the
Commission regarding classification/disclosure of the said capital reserve for accounts for
the period ended December 31, 2003. It is hereby clarified that the above said capital
reserve represents deferred tax liability, which has been recognized over a period of five
years and such transfer was allowed to enable the company to have sufficient profits
available when the requirements of IAS-12 (Revised) become applicable on expiry of the
extended time period i.e. June 30, 2003. Accordingly, such amount cannot be treated as
reserve any longer and should be classified/disclosed as liability. In order to comply with
the requirements of IAS - 12 (Revised) with effect from 1 July 2003, the leasing companies
should record the deferred tax liability in accordance with the requirements of IAS - 8 Net
profit or loss for the period, Fundamental Errors and Changes in Accounting polices.

(Zulqarnain Hafeez Cheema)
Joint Director

Distribution:

1. Chief Executives of all NBFCs undertaking the business of leasing only.
2. Managing Directors of all Stock Exchanges.
4. The President, Institute of Cost & Management of Accountants.
6. Press Information Departments.

Securities and Exchange Commission of Pakistan
Professional Services and Policy Division

No.6(4)PSPD/PD/2004 May 10, 2005

CIRCULAR No. ____ 03 /2005

Sub: Holding of Election of Directors Pursuant to Companies (Amendment) Ordinance,
2002

The election of directors is held in general meetings of the companies on completion of
the term of office of directors after every three years, as enunciated in sections 178 and 180 of
the Companies Ordinance, 1984. Mostly, the companies used to hold election in their annual
general meetings (AGM) in December/June each year. However, consequent upon an
amendment in section 158 of the Ordinance through the Companies (Amendment ) Ordinance,
2002, the time period for holding of AGM has been reduced from six months to four months
following the close of financial year and the AGMs relating to the financial year closed on 30
th

June/31
st
December are required to be held upto 31
st
October/30
th
April. Certain companies have
enquired whether the election of directors can be held in October/April alongwith AGM instead
of December/June.

2. This is to clarify that election can be held prior to the expiry of 3 years tenure. The AGM
can be called even 2 or 3 months before the expiry of the 3 year period for the election of the
directors. The directors-elect can become effective directors and sit on the Board of Directors
after the 3 year tenure is completed by existing board. This will allow the directors-elect to
become familiarized with the company, inter-alia, the Memorandum & Articles of Association
and the Code of Corporate Governance.

3. The election of the directors in an AGM can take place in October/April instead of
December/June, however the director elect will take office after the 3 year tenure of the director
is completed.

4. This Circular supersedes Circular No.28/2004.

(Syed Fayyaz Mahmud)
Director

Distribution:-

1. Chief Executives of all listed Companies.
2. Chief Executives of Stock Exchanges, Karachi/Lahore/Islamabad.
3. The President, The Institute of Chartered Accountants of Pakistan.
4. The President, The Institute of Cost and Management Accountants of Pakistan.

_____________________________________________________________________________________
NIC Building, Jinnah Avenue, Blue Area, Islamabad
PABX: 9207091-4 Ext (314), Fax. No. 9218590, Email: secphq@isb.paknet.com.pk
SECURITIES & EXCHANGE COMMISSION OF PAKISTAN
SPECIALISED COMPANIES DIVISION
(NBFC DEPARTMENT)
*******
Circular No: 6 of 2005

No. SC/NBFC/M&I/2005- Islamabad, June 27, 2005

Subject: CONDITIONS FOR ISSUANCE OF FOREIGN CURRENCY
CERTIFICATE OF DEPOSITS (CODs) AND CERTIFICATE OF
INVESTMENT (COIs)

Certain NBFCs desirous of raising deposits in foreign currency have approached SEC for
issuance of No Objection Certificate (NOC). In this respect, it is clarified that the following
conditions in addition to other requirements/restrictions imposed by State Bank of Pakistan;
should be observed by NBFCs raising foreign currency deposits.

1. NBFCs raising foreign currency deposits shall maintain in the currency of deposit a minimum
of 5% of CRR (non-remunerative) and 15% (remunerative as prescribed by SBP for banks) of
SCRR of their total foreign currency deposits with State Bank of Pakistan. The subject
minimum requirements will change as and when SBP changes the same for commercial
banks.

2. NBFCs shall report its assets and liabilities (both on and off balance sheet) in foreign
currency on fortnightly basis to SEC as of first day and sixteenth day of every month. The
report should reach within three working days subsequent to the reporting period.

3. Foreign currency deposits (FCDs) so raised shall be utilized for permissible activities like
nostro placements, foreign currency loans, trade financing, SWAP transactions and matched
forward transactions.

4. Foreign currency deposits can also be invested in Bonds/Securities wit h minimum credit
rating of BBB (triple B).

5. NBFCs utilizing foreign currency deposits shall not carry any Net Open Position.

All NBFCs desirous of raising foreign currency deposits are advised to ensure compliance of the
above conditions.
Please acknowledge receipt.
(Zain ul Abidin)
Deputy Director
Distribution:
1. Chief Executives of all NBFCs.
3. The Chairman, Investment Banks Association of Pakistan.
4. The Chairman, Leasing Association of Pakistan.
5. The Chairman, Mutual Funds Association of Pakistan.
6. Director, Banking Supervision Department, State Bank of Pakistan.
7. Director, Exchange Policy Department, State Bank of Pakistan.
9. The President, Institut e of Cost & Management of Accountants.
11. Media Consultant, SEC.
12. All CROs.
xxn EXClL\:\{; E ("()\l:\lISS10 :\ or r ,-\h:l s TA'
Spcci.aliud Cumrui"

Grrn"'r ' n. 1I of 200;
I
1'0.ID-SECNPS'Olr.!OOS 15..:!OO5
Suhird: P"lk" undu Kulc 2"(.1 1and .... 1I "n t;" n I' ol;n
for Sd "cti"n h' Ihe I ndi\'idnall' n tid (! anl uUll n Kule H I." and 1-1(" , or
Ihe \' ulunlan' ren,i " n SHlem K" le" 2UU;
Further to the n" tifical;on of the V01l111t"ry Pension Rules. 2005. the
Commi ssion 1m, prescribed the investment policy under Rule 2"0, (enclosed as
Anncxure . I) and prescribed allocation policy (enc1"""d as Anoe'xure ' III uoder Rule'
14(3land 1"(4).
2. All po:-nsion fund manag<'TS advised to follow the aforesaid policies to r
m"'fKImeni a., .... ell as allocation of the contribution received from the
participants.employers under Voluntary Pension S)ste'fl'l ,
AU SHAIKI\)
Commis. ,i" ncr ( SC)
I. Chief Executives of all Pension Fund Managers
2. Chief Execul ives of all Assct I'Il :magcrncnt Companies
3, Chief Executives of allLife lnsuruncc Companies
4. The Chairman. Mutual Funds Association of Pakistan
NtC li nn"" ,o, ,'<nu<. H1u< Are>. I>I' mao.J.
PABX,os1_921l'70\l1 -l
PABX: 9207091-4 - Fax. No. 9218590, E-mail: secphq@isb.paknet.com.pk
NON-BANKING FINANCE COMPANIES DEPARTMENT

No. SCD/NBFCD-ED/604/2005
Islamabad, August 16, 2005

Circular No. 10 of 2005

Subject: Application(s) made under the Non-Banking Finance Companies (Establishment
and Regulation) Rules, 2003 and the Prudential Regulations for NBFCs

It has been observed that while making application(s) to the Securities and Exchange
Commission of Pakistan (the Commission) under the Non-Banking Finance Companies (Establishment
and Regulation) Rules, 2003 (the NBFC Rules, 2003) and the Prudential Regulation for NBFCs (the
Regulations), NBFCs and companies regulated under the NBFC Rules, 2003, do not follow the mode of
submission for such application(s) prescribed in Rule 30 of the Companies (General Provisions and
Forms) Rules, 1985 (the Companies Rules, 1985).

2. All NBFCs and companies regulated under the NBFC Rules, 2003 are, therefore, advised to
ensure that applications made to the Commission under the NBFC Rules, 2003 and the Regulations shall
comply with the requirements of the Rule 30 of the Companies Rules, 1985.

3. Please acknowledge receipt.

Sd/-
(Rashid Sadiq)
Executive Director (NBFCs)

2. Chief Executive of all Investment Companies
3. Chief Executive of all Venture Capital Funds
7. All CROs

PABX: 9207091-4 - Fax. No. 9218590, E- mail: secphq@isb.paknet.com.pk
(NBFC DEPARTMENT)
*******


No. SC/NBFC -1/R/2005 Islamabad, August 29, 2005

Subject: EXEMPTION FROM REQUIREMENTS OF CLAUSE 3 C OF PART II
OF THE FOURTH SCHEDULE TO THE COMPANIES ORDINANCE,
1984

The Commission has received requests from a few Non-Banking Finance Companies
(NBFCs) for exemption from disclosure requirements of Clause 3C of Part II of the
Fourth Schedule to the Companies Ordinance, 1984 (the Ordinance). Considering the
practical difficulties expressed by the NBFCs, the Commission in exercise of the powers
conferred under Section 234 of the Ordinance has decided to grant exemption to all the
NBFCs from compliance with the requirements of Clause 3C of Part II of the Fourth
Schedule to the Ordinance with effect from financial year ending on June 30, 2005 or
onwards.

(Salman Ali Shaikh)
Commissioner

Distribution:
i. Chief Executives of all NBFCs.
ii. The Chairman, Investment Banks Association of Pakistan.
iii. The Chairman, Leasing Association of Pakistan.
iv. The Chairman, Mutual Funds Association of Pakistan.
v. The President, Institute of Chartered Accountants of Pakistan.
vi. The President, Institute of Cost & Management of Accountants.
vii. All Divisions of SEC
viii. Media Consultant, SEC.
ix. All CROs.

_____________________________________________________________________________________
(NBFC DEPARTMENT)
*******


No. ID-SEC/NBFC-1/02/2005 Islamabad, September 19, 2005

Subject: Sale of Assets by Non-Banking Finance Companies (NBFCs) to its
Employees.

Attention is invited to Rule 7 (2) (b) of the Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003 and Circular 24 of 2003 dated October 8, 2003.

2. It has been observed that the NBFCs apply to the Commission for approval in case a
vehicle or some other assets are being sold to an employee as per the company policy of the
NBFC. It is hereby clarified that prior approval of the Commission in respect of assets sold to an
employee including the Chief Executive Officer is not required provided it is allowed under the
company policy / appointment letter / service manual of the NBFC which has been duly approved
by the Board of Directors of the NBFC. In case the assets are sold to an employee including the
Chief Executive Officer which are not part of the company policy / appointment letter / service
manual of an NBFC duly approved by the Board of Directors prior written approval of the
Commission is required.

3. Prior written approval of the Commission is, however, required in all instances where
assets are being sold to a Director of the NBFC.

(Salman Ali Shaikh)
Commissioner

Distribution:
8. All CROs.

Securities & Exchange Commission of Pakistan
(Registration Department)
********

No. CLD/602/59/RCP/92 Islamabad, September 29, 2005

Circular No. 17 of 2005.

Subject: VIOLATION OF SECTION 143 OF THE COMPANIES ORDINANCE,
1984 BY MENTIONING INCOMPLETE NAME.

Various instances have been reported whereby companies make advertisements in
print and electronic media by publishing their logos bearing their trade names only. In
this context, it is to clarify that a company is required to have its name mentioned in inter
alia all documents, notices and other official publications in terms of provisions of clause
(c) of section 143 of the Companies Ordinance,1984 (the Ordinances). The term
advertisement falls within the scope of notice as well as official publications as
contained in the aforesaid clause (c). Therefore, every company is required to mention its
name in each advertisement and failure to mention complete name therein is violation of
the said provision of the Ordinance. All companies are advised to ensure compliance of the
provisions of the Ordinance and mention full names while making advertisements in print
and electronic media.

(Nazir Ahmad Shaheen)
Registrar of Companies

Distribution:

2. The Institute of Cost & Management Accountants of Pakistan, Karachi.
8. Director (IT) for placing on website.
7
th
Floor, NIC Building, Jinnah Avenue, Blue Area, Islamabad
PABX: 9207091-4, Fax No. 9218592 & 9204915, Email: webmaster@secp.gov.pk Website: www.secp.gov.pk

Company Law Division
Enforcement Department

No. EMD/D(A/C)/17/03 Islamabad, October 17, 2005

CIRCULAR NO. 18 /2005

Sub: Attendance of Directors in the Board Meetings through Tele/Video Conferencing

In pursuance of the Commissions decision, listed companies were permitted to hold their Board of
Directors meeting through video conferencing when the directors of a company are not available in
Pakistan. Circular No. 30 of 2003, dated 31.12.2003, was issued by the Commission in this regard.

In partial modification of the above mentioned circular, the revised circular should now be read as
follows:-

A few listed companies particularly the multinationals have approached this Commission to allow
holding of the Board of Directors meetings through tele/video conferencing as and when some
members of their Board are not available in the country. This Commission, in view of this practical
problem, feels that holding of Board meetings through tele/video conferencing would facilitate the
companies whose directors sometimes find it difficult to travel to Pakistan for participating in the
meetings due to their busy schedules. This would also ease pressure on the directors of companies
who have to attend quarterly Boards meetings and audit committees meetings as per the
requirements of the Companies Ordinance, 1984 and the Code of Corporate Governance. Besides, the
use of modern technologies would also be cost effective and would ensure participation of almost all
the directors in such meetings. This would also help in achieving the objectives of good Corporate
Governance. It has, therefore, been decided to allow the listed companies to hold their Boards
meetings through tele/video conferencing where it is not possible for the directors to be physical
present at the venue of the meeting. Moreover, such meeting shall be valid if the minutes of such
meeting has been approved and signed subsequently by all directors of the Board who participated in
such meeting. The listed companies are, however, advised to avail this facility only in emergent
situations and the requirements of the requisite quorum and other legal formalities relating to holding
of such meetings must be observed strictly. It would also be the responsibility of the companys
7
th
Floor, NIC Building, Jinnah Avenue, Blue Area, Islamabad
PABX: 9207091-4, Fax No. 9218592 & 9204915, Email: webmaster@secp.gov.pk Website: www.secp.gov.pk

secretary to secure the tele/video recording of the proceedings of the meetings and keep it in his
custody along with the other relevant record.

This Circular supersedes Circular No. 30 dated December 31, 2003.

(Ali Azeem)
Director (Enforcement-III)

Distribution:
_____________________________________________________________________________________
(NBFC DEPARTMENT)
*******


No. SC/NBFC -1/R/2005 Islamabad, October 27, 2005

Subject: Regulation for Housing Finance Applicable to Individual Borrowers

In order to create an enabling regulatory requirement and to facilitate the Non-Banking
Finance Companies (NBFCs), the Commission in exercise of the powers conferred under Section
282D of the Companies Ordinance, 1984 has decided to replace the Regulation 8 of Section B of
Part II of the Prudential Regulations for NBFCs with the following:

Regulation 8 of Section B of Part II of the Prudential Regulations for NBFCs

1. The maximum per party limit in respect of housing finance by the NBFCs will be Rs.20
million.

2. The total monthly amortization payments of all consumer loans inclusive of housing loan,
should not exceed 60% of the net disposable income of the prospective borrower.

3. Facilities can be advanced for the purchase of new piece of land, construction of houses
or renovation of an existing house against the security of land / plot already owned by the
customer.

4. The housing finance facility shall be provided at a maximum debt-equity ratio of 85:15.

5. NBFCs are free to extend mortgage loans for housing up to a period of twenty years.

6. The house financed by the NBFCs shall be mortgaged in NBFCs favour by way of
equitable or registered mortgage.

7. NBFCs shall either engage professional expertise or arrange sufficient training for their
concerned officials to evaluate the property, assess the genuineness and integrity of the
title documents, etc.

_____________________________________________________________________________________
8. NBFCs management should put in place a mechanism to monitor conditions in the real
estate market (or other relevant product market) at least on a quarterly basis to ensure
that its policies are aligned to current market conditions.

9. NBFCs are encouraged to develop floating rate products for extending housing finance,
thereby managing interest rate risk to avoid its adverse effects. NBFCs are also
encouraged to develop in-house systems to stress test their housing portfolio against
adverse movements in interest rates and also maturity mismatches.

The above directives will come into force with immediate effect.

(Salman Ali Shaikh)
Commissioner

Distribution:
8. All CROs.
Insurance Department, 4th Floor, NIC Building, 63-Jinnah Avenue, Islamabad
Phone: 051-9205721 Fax: 051-9208955 E-mail: shoaib.soofi@secp.gov.pk


Ref: ID-SECP/03/2005 December 19, 2005

Sub: Rotation of External Auditors by Insurance Organizations

This has been decided by the SECP that from the accounting year 2006, all the insurance
organizations (both listed and unlisted) shall be required to change their external auditors
after every five years.

An auditor who has already audited the accounts of an insurance organization for five
years shall not be treated as approved by the SECP to perform the audit of the same
insurance organization as per section 48(1)(a) of the Insurance Ordinance, 2000. In such
case, the insurance organization shall be required to appoint another auditor form the list
of approved auditors provided through the SECP circular reference #
SECP/SCD/INS/AUDITORS/2005 dated June 28, 2005.

This may be noted that the five years period shall be commenced from the first audit
performed by the auditor. For example if an auditor has been performing the audit of an
insurance organization since the accounting year 2001 or earlier, he shall not be qualified
to perform the audit of the same organization for the accounting year 2006. Similarly if
an auditor has been performing the audit of an insurance organization since the
accounting year 2002, he shall not be qualified to perform the audit of the same
organization for the accounting year 2007 and so on.

Sd/-
( Shoaib Soofi )
Director

Distribution:

Chief Executives (All Insurance Organizations),
Managing Directors (All Stock Exchanges),
Chairman (Insurance Association of Pakistan),
President (Institute of Chartered Accountants of Pakistan),
President (Institute of Cost and Management Accountants of Pakistan),
President (Pakistan Society of Actuaries).
Professional Services & Policy Division
(Policy Department)

No. 6(4)/PSPD/PD/2005- February 10, 2006

Circular No. 03 /2006

Sub: Holding of Election of Directors

The Commission, through its earlier Circular No.03/2005, allowed the
companies to hold election of directors in the annual general meetings even
before expiry of the term of their office. Election of directors on a date prior to
the expiry of fixed term of three years in terms of section 180 of the Companies
Ordinance, 1984, has caused certain administrative and legal implications for the
companies.

2. The issue was, therefore, reviewed and it has been decided that the
companies should, as per section 177 of the Companies Ordinance, 1984, take
immediate steps to hold election of directors on due dates and in case of any
impediment report the circumstances of the case to the Registrar of Companies
within fifteen days of the expiry of the term laid down in section 180.

3. Therefore, the Circular No.03/2005 dated 10
th
May, 2005 is, hereby
withdrawn and the companies are directed to hold the election of directors
immediately on expiry of the fixed term of three years in an annual or extra
ordinary general meeting as the circumstances may warrant.

(Syed Fayyaz Mahmud)
Director
Distribution:
2. Chief Executives of the Stock Exchanges, Karachi/Lahore/Islamabad.
4. The President, Institute of Cost and Management Accountants of Pakistan.
______________________________________________________
M-Floor, NIC Building, Jinnah Avenue, Blue Area, Islamabad.
Tel: 9207648 Ext. 294 Fax 92-51- 9206015
Website: www.secp.gov.pk

SECURITIES AND EXCHANGECOMMISSION OF PAKISTAN
(REGISTRATION DEPARTMENT)
********

NO/CLD/RD/Co.158 & 233 (1) 2007/ Islamabad, January 07, 2008


Subject :- PUBLICATION OF NOTICES ETC IN URDU NEWSPAPER

Attention is invited to the following provisions of the Companies
Ordinance, 1984 and the Rules made thereunder that inter-alia, requires
companies to publish the notices, prospectuses, etc at least in one English
language and one Urdu language daily newspaper having circulation in the
province in which, in case of a listed company the stock exchange on which the
company is listed and in case of other company where the registered office of the
company, is situated:

Section 50 (3); Service of notice on members, etc;
Section 53; Publication of abridged prospectus;
Section 151; Power to close register of members;
Section 158 (3); Notice of Annual General meeting;
Section 178 (4); Notice for election of directors;
Section 253 (2); Notice for resolution relating to appointment
and removal of the auditors;
Section 282L; Notice of meeting for the amalgamation of the
NBFCs;
Section 361; Notice to wind up voluntarily;
Section 458(1)b; Notice intimating to cease place of business;
Section 465; Notice of liquidation
Rule 6 of the Companies (Invitation and Acceptance of Deposits)
Rules, 1987 and
Rules 19, 52, 126 and 166 of the Companies (Court) Rules, 1997

2. It has been observed that in most cases the material in English
language is published in Urdu newspapers, which does not serve the purpose of
publication thereof, in both languages. It is pertinent to mention here that
publication of said material in Urdu newspaper is required to be published in
Urdu language which is meant for encouraging dissemination of information in
local language, for the better comprehensibility of various stakeholders, investors
and general public at large.

3. All companies are, therefore, directed to publish the material in the
national English and Urdu newspapers in English and Urdu languages
respectively, having wide circulation, so as to meet the purpose of publication of
the material.

4. Any deviation from the aforesaid direction will be treated as
contravention to the relevant provisions of the Ordinance and Rules made
thereunder.

(NAZIR AHMAD SHAHEEN)
Distribution

1. The Institute of Chartered Accountants of Pakistan, Karachi;
2. The Institute of Cost and Management Accountants of Pakistan, Karachi;
3. Institute of Corporate Governance;
4. Karachi Stock Exchange;
5. Lahore Stock Exchange;
6. Islamabad Stock Exchange;
7. Federation of Pakistan Chambers of Commerce and Industry;
8. All CROs/Departments of SECP.

NICL Building, 63-J innah Avenue, Islamabad
PABX: +92-51-9207648
Fax: +92-51-9205692
fayyaz..mahmud@secp.gov.pk
CHAIRMANS SECRETARIAT

No.DDCS/116/SECP/2008. June 13, 2008


Subject: Revision of Fourth and Fifth Schedules to the Companies
Ordinance, 1984

The undersigned is directed to refer to the Commissions circular
No.1 of 2005, whereby the listed companies and their subsidiaries were by way of
a special dispensation allowed to follow the requirements of the 4
th
schedule
applicable to such companies before revision of the said 4
th
Schedule and in the
meantime 5
th
Schedule was also amended.
2. The special dispensation expired on 30
th
Sept, 2007. It has been
represented by IPPs both listed companies and their subsidiaries and non-listed
IPPs including those which are private companies that they are not in a position to
treat foreign exchange losses after 30.09.07 as period costs. The matter has been
considered in consultation with ICAP.
3. In view of the difficulties explained by listed, unlisted and/or private
IPP companies that have executed Implementation Agreements with Government
of Pakistan, it has been decided that the concession to capitalize exchange loss on
foreign currency loans contracted by IPPs and outstanding on the date of revision
of the said 4
th
and 5
th
Schedules is allowed till the termination date of
Implementation Agreements in question.
4. This shall not, however, be available to other IPPs and companies.

Syed Fayyaz Mahmud
Director (CS)
NICL Building, 63-J innah Avenue, Islamabad
PABX: +92-51-9207648
Fax: +92-51-9205692
fayyaz..mahmud@secp.gov.pk

Distribution:
1. Chief Executives of Stock Exchanges,
Karachi/Lahore/Islamabad.
3. The President, Institute of Cost and management Accountants of
Pakistan.
4. ROUSCH (Pakistan) Power Limited, 39-C/IV, Block-6, P.E.C.H.S,
Karachi.
5. HUBCO, Islamic Chamber Building, Block 9, Clifton, Karachi.
6. Uch Power (Pvt) Ltd, 48, Khayaban-e-Iqbal, Main Margalla Road,
F-7/2, Islamabad.
7. Southern Electric Power Company Limited.
8. Mr. Safeer Ahmed, Senior Financial Analyst, Ministry of Water &
Power, Islamabad.

.
Sm.'URITIES ANn EXCHA.. 'GECO:\l Ml SS ION
OF PAKISTAN
L" '" 0' .", "'_'.
'" Floo.-, s,.,," Li re Nn. >, w "I1," ',- K""H,h;
Td"!"","",!,, - 922 ' 92' 1 27]
Karachi , 16 Fehmary
Available for Sale Immme,Jl u,
IT " h 'rrh;' clarified th' l tor purpose. of application of Regulations 10 (l)(il) of Part
' and Pal' Ill) th e AnllCXU"" II, "State me nts requi red to be filed by Life Hod In,,, ,,-e , , "
,fthe Seemit'e' >Inc! h,'h"n!\e Commi"";n!l (T"'ll mll ('e) 2002, wh...... the "'arket nine of
"''" a"3,lahk ' or ' ale inw.tment a, at Dcccmbcr ]1, is less than the t'ost, the fall in ,-"
nay be lrenk j as temporary and the inwstment \'ahled "I ,,,,,I. '\ "} i"'Um11<'e "llkh
,i, he_III l he fidl in wlue as other than lempon,r" . in whole or itt \W1 . rna} do .,<),
'1"""',<1 ...1 h, SKO Fehru'H} "O"'l of this Commission, thc dccline in
or tor sale investments as at [)c{,cmb"r :11, shall be l'on,idered as
han tcmpora')' a nd shall be deducted fcom profit for the purpose "f di,tributiuu "f
It j, f, rthe r , tated rhat " ny ""0'I''''' YI r., II i" ";, 1",, of al"Hla hk
" ,",I. '" tempo ra ry, then I",rrem of the differe nce at the cnd of qu"rtt'r
,el\>'ccn tht' ( ,,,t and thc market ,,,Iuc as at Dece mber :l'. for
dL '1",otW', ., h"l1 1,.. dLl'i t\!', eo"h r.,k"d," quarter of
th,' P ofi t ond Loss .'\Cl'ount. For the of cla rity, fall in "aluc of a'"ail"blc for
I eld b:'>-- an)' insuranec company as at .1\, 2008, ol""ng "e,,,
O()'l . 'h,,11 b' Ire"k ,l '" "Ihet Ihall I",ta,,--,
li MributiOl' -
CEO, of all i l>ura nl'e/ ta kaful
I, ,""ranee Asso('ialion of Paki,tan
Pre,,,leno, Ir _t il llie of Cha rtett'd Ac,...,unlanl, of 1'"ki"t an
Mr ,l,li .-\zer'" Ikrom. Direelo r (Enlo=ment & Insurance), SEep
Mr ,'\ l>dul R, h"',11' Q"mi'hi, to Co m" ,i" i" "
Mr _\r,hati.1 Minho', Illre<'tm{lS&11, SECP
II 'i;ion (NoI;tb & South). SEep
INSURANCE DIVISION
Karachi, July 5, 2010
Circular No. 14/2010
United Nations 1267 Committee's Consolidated List of Individuals and Entities
regarding Freezing of Funds and Other Resources
This Circular aims to prevent criminal misuse of the insurance industry by the
money launderers for the purposes of money laundering and terrorist financing. It also
sets out the Securities and Exchange Commission of Pakistan's ("Commission")
expectation of the internal policies and procedures of authorized insurers, reinsurers,
insurance agents and insurance brokers carrying on or advising on long term business
(hereinafter referred to as "insurance institutions") to safeguard against money laundering
and terrorist financing.
2. This is in continuation of Circular Ref.No.38/2009 whereby all insurance
institutions are required to comply with the requirement of freezing of funds and deny
business to such listed individuals, groups, undertakings and entities as means to support
terrorism. This entails that no funds, financial assets and economic resources, wherein of
any kind, are available to such individuals and entities, as long as they remain subject to
the sanction measures.
3. The Ministry of Foreign Affairs, Government of Pakistan has forwarded the
Commission, a copy of the updated Gazette of Pakistan Statutory Notification
S.R.O.No.585(1)/2010 dated 28 June, 2010 (attached) advising the implementation of the
sanction measures (funds freeze) in its jurisdiction against the individuals and entities
placed on the UN Security Council, Al-Qaida and Taliban Sanctions Committee
Consolidated List. The Consolidated List of such individuals and entities is regularly
maintained, updated and is readily available at the intemet by accessing the URL
http://www.un.orglsc/commi ttees!1267Iconsol ist.shtml
4. Whereas, all insurance institutions are required to regularly check the
Consolidated List of such individuals and entities, while ensuring no business
relationship is established with them. Moreover that, if an existing business relationship
is found to be on the Consolidated list, the insurance institutions are required to freeze
their funds, financial assets and economic resources to the maximum extent possible.
Whereas, the insurance institutions are required to release the funds, financial assets and
economic resources of the individuals and entities whose names are deletedl removed
from the Consolidated List.
INSURANCE DIVISION
Karac hi, 6 J uly 2010
Circular NO.lS!ZOlO
Related Pa rty Assets
Accord ing to Sect ion 32(Z)(g) of the Insurance Ordin ance 2000, "balances with, shares in, loans to or ot her
alllounts duef rom allY body t hat is related to the insurer or to any director of the insurer" are inadmissible for the
pur pose of solvency requirements.
Section 32(7) defines t he rel ated party as "two or more persons who are unde r common control or ifihey
are connected by an owne rship interest of more than 49%or if they are natural persons, they are members afthe
samefamily". Section 32( 1)(d) empowers SECP to declare any of the assets provided under Section 3Z(Z)(g) as
admissible for the purpose of solvency requirement .
As a result of recommendations of a commi ttee formed by the Commission to reviewthe solvency
regulat ions and afte r consu ltation with the insurance compa nies, it has been decided as follows:
0) Two companies will be deemed to be "under common controrfor the pu rpose ofthe defi nition of
related parties contained in Section 32(7) if the majority of the Boards of Directors of the two
companies are common. This provision shall not, however, apply to dir ectors who are nominees of the
Government ofPakistan.
b) If the related party ofWI insurer is a scheduled bank regist ered under Banking Companies Ordinance,
then cash deposited in current accounts, savings account s and term depos its of that bank shall not be
inadmissible only because the bank is a related pa rty of the insurer. Other provisions ofthe Insurance
Ordinance 2 0 0 0 and Securities and Excha nge Commission (I nsurance) Rules, 2 0 0 2 shall, however.
app ly.
c) Ifan insurer has some outsta nding premiu m which is receivablefrom a related party, the same shall
not be inadmissible only because it is receivablefrom a related party provided the premium has been
due and payable to the insurerf or less thou or equal to three months. Similarly if an insurer has any
balances duefrom 0 related pa rtl) in the normal course of bus iness (incl uding a mo unts receivable
under coinsu rance/ reinsu r a nce ol'1'Qngemellts) these will not be inadmissible only because sucre
amounts are receivablefrom a related part/).
d) Investments in listed securities ofa company tvhich is a related party shall not become inadmissible
only because the company is a related party but will be subject to other prov isions relating to
admissibility under the Insurance Ordinance 2 000 and the Securities and Exchanqe Commission
(I nsurance) Rules, 2002.
e) Investment s in mutualfunds managed by QTI asset management company which is a related pa rty
shall not become inadmissible only becaus e the company is a related party but will be subject to other
provisions relating to admissibility under the InSllrance Ordinance 2000 and the Securities and
Exchange Commission {Insurance] Rules, 2002.
All oth er assets as pr ovided in section 32(2)(g) shall remain inadmissible for the purpose of solvency requirement .
~
Nasree n Rashid
Executi ve Direct or (Insura nce)
Distribution:
Chief Executives of Insura nce Comp anies I Takaful Operators
Chairman (Insur ance Associat ion of Pakistan)
President (Inst itute of Chartered Accountants of Pakistan)
President (Inst itute of Cost & Management Accountants of Pakistan)
President (Pakistan Society of Actuar ies)
President , Inst it ute of Corporate Secreta ries of Pakistan
sc: Finn! Circular R!'Jnted rorty
4th Floor, State Life Building No.2, Wallace Road, off 1. 1. Chundrigar Road, Karachi.
Tel : 021-32414204, 021-32410651 Fax: 021-32423248 Website: www.secp.gov.pk

.. '
"
l' .
-
NON BANKING FINANCE COMPANIES DEPARTMENT
No. NBFCD/MF ICIRCULARJ538/2010 July 07, 2010
Circular No. 16 oflOIO
SUBJECT: CATEGORIZAnoN OF OPEN-END COLLECTIVE INVESTMENT SCHEMES
1. This Circular is in continuation of Circular 7 of 2009 dated March 6, 2009 requiring all
Asset Management Companies ("AMC") to assign an appropriate category to open-end
collective investment schemes (vschemes") under their management and to align the underlying
investment portfolio accordingly.
2. It has been highlighted by certain AMes as well as Mutual Funds Association of Pakistan
("MUFAP") that due to adverse market conditions the portfolio of a significant number of
Schemes could not be aligned as per the investment criteria of the assigned category.
3. In view of the difficulties faced by AMCs, the Commission has decided to prescribe
specific disclosure requirements for the schemes which hold investments that are non-compliant
either with the minimum investment criteria specified for the category assigned to such schemes
or with the investment requirements of their constitutive documents. Therefore, in order to
enable the investors to make a well informed decision, the Commission in exercise of the powers
conferred under Section 2828 (3) ofthe Companies Ordinance, 1984, hereby directs all AMCs to
make the following minimum disclosures for open-end schemes which hold non-compliant
investments.
(a). Disclosure in the Offering Documents (risk section)
"There may be times when a portion of the investment portfolio of the Scheme is not
compliant either with the investment policy or the minimum investment criteria 0/ the
assigned 'Category '. This non-compliance may be due to various reasons including,
adverse market conditions, liquidity constraints or investment -specific issues. Investors
are advised to study the latest Fund Manager Report specially portfolio composition and
Financial Statements of the Scheme to determine what percentage of the assets of the
Scheme, ifany, is not in compliance with the minimum investment criteria ofthe assigned
Nrc Avenue, Blue.c\rea, !Slamabad.-Jp
PABX: 9207091-4 - Fax. No. 9218590
Page 1 of3
. ~ ~ ..,
. '
'.to> ~ :'
"""'"
SPECIALIZED COMPANIES DNISION
Category. The latest monthly Fund Manager Report as per the format prescribed by
Mutual Funds Association of Pakistan (MUFAP) is available on the website a/the Asset
Management Company (AMC) and can be obtained by calling /writing to the AMC "
(b) Disclosure in Advertisement
The following disclosure shall be made separately from the standard risk disclosure
prescribed for Schemes>
"The XYZ Scheme holds certain non-compliant investments. Before making any
investment decision, investors should review the latest monthly Fund Manager Report
and financial statements 0/ the Scheme particularly the details of non-compliant
investments and Risk Factors. "
(c) Disclosure in the Fund Manager Report, Quarterly, Half-Yearly & Annual Financial
Statements
Details ofnon compliant investments with the investment criteria ofaHigned category -
"
Name of Type of Value of Provision held Value of %ofNet %of
non- investment investment ifany investment Assets Gross
compliant before after provision Assets
investment provision
4. AMes shall:
I. ensure that a copy of latest monthly Fund Manager Report ('''FMR'') of the
scheme containing the above stated minimum disclosures is available at its
website and a copy of said FMR shall be submitted to the Commission
simultaneously.
II. disclose the credit quality/asset quality of portfolio of the Scheme in monthly
FMR if the portfolio of the scheme contains any debt securities or other credit
exposure.
NIC HuilJing,jinnah Avenue, HIue /\rca, Islamabad.
PABX. 92070914 - Fax. No. 9218590
Page 2 on
~ - ~
. ' ..
'.'
. '.
Ill. ensure that a scheme which presently does not maintain the requisite cash and
near cash investments as specified for the relevant category, complies with the
said requirement by December 31, 20ID. However, any fresh liquidity in the
scheme shall first be utilized to meet the minimum cash requirements instead of
making any other fresh investments. Notwithstanding the above, the Trustee of
such scheme shall not hold redemption(s) if usage of such cash for redemptions
results in the cash balance falling below the minimum requirement. However, the
AMC shall ensure that other assets are sold in due course of time (if possible
without impacting investors' interests) or cash is generated through new
subscriptions to comply with the minimum cash and near cash requirements. For
the purpose of this circular the minimum cash and near cash requirements shall be
calculated on the basis of the average for each calendar month.
5. For the purpose of peer group analysis or return comparison of the schemes within the
same category, the basis should be underlying portfolio and not merely the assigned category.
6. Trustees of the schemes shall monitor compliance with the requirements of this circular
on an ongoing basis and shall report to the Commission on a timely basis, in case there is any
non-compliance or deviation.
7. This Circular shall come into force with immediate effect. In case of any clarification,
AMCs, Trustees and MUFAP are advised to approach the Commission.
SALMAN ALI SHAIKH
Commissioner (SeD)
Distribution
I. Chief Executives of all Asset Management Companies
II. Mutual Funds Association of Pakistan
III. Trustees of Collective Investment Schemes
NIC Ruikling, jmnah Avenue, Hlue Area, Islamabad.
PABX: 9207091-4 - Fax. No. 9218590
Page 3 of3
(Registration Department)
*****
I
No. CLDIRD1602(1)2004- \\
CIRCULAR NO. \ 7
Islamabad, the July 8, 2010
12010
Subject: Notice period for holding Extraordinary General Meeting to pass
resolution for filing application under Companies Easy Exit Scheme
(CEES)
The Securities and Exchange Commission of Pakistan, vide Circular 12/2010
dated 1.7.2010 has re-launched Companies Easy Exit Scheme (CEES). One of the
requirements to make application under the said scheme is that the application shall be
supported with a resolution of the shareholders of the company. As the scheme has
already commenced since July 1, 2010, the shareholders might face difficulty in holding
Extraordinary General Meeting.
2. In order to facilitate the companies, I, in exercise of the powers conferred under
sub-section (7) of Section 159 of the Companies Ordinance, 1984, hereby authorize that
Extraordinary General Meeting of the companies to pass resolution to file application
under the Companies Easy Exit Scheme (CEES) may be held at a shorter notice of at
least three (3) days.

Distribution:
1. The President, Institute of Chartered Accountants of Pakistan, Chartered Accountants
Avenue, Clifton, Karachi-75600.
2. The President, Institute of Cost & Management Accountants of Pakistan, Gulshan-e-
Iqbal, Karachi- 75300.
3. The President, Institute of Corporate Secretaries of Pakistan, 683-C, Allama Iqbal
Road, Off: Tariq Road, Block 2, PECHS, Karachi.
4. The President, Federation of Pakistan Chambers of Commerce and Industry, Shahrah-e-
Firdousi, Main Clifton, Karachi.
5. The President, All Chambers of Commerce & Industry.
6. All Pakistan Newspapers Society, 32, Farid Chamber Abdullah Haroon Road, Karachi.
7. All Company Registration Offices,
8. Official Website for information.
NIC Building, J innah Avenue, Blue Area, Islamabad.

PABX: 9207091-4 Ext. 311 - Fax. No. 9218590, E-mail: umar.hayat@secp.gov.pk
(MODARABA WING)

No. SC/M/RW/Addl. Condition/2010- J uly 16, 2010


Subject: Additional Condition to the Modaraba Authorization Certificate

A common condition to the Modaraba Authorization Certificate of all Modarabas provides that:
No change shall be made in the directors of the Modaraba Company or management of the
Modaraba except with the prior approval of the Registrar.
2. In this context, it has been observed that Chief Executive Officers (CEO) of Modaraba
Companies soon after approval of their resignations by the Board of Directors are allowed to relinquish
charge of their office without seeking the approval for the change of management from the Registrar
(Modarabas) as required under the above quoted condition of the Modaraba Authorization Certificate. In
such a situation it has also been observed that some of the Modaraba Companies make interim
arrangement by designating an officer of the Modaraba to act as CEO on temporary charge basis with the
plea of searching a suitable person for the position of CEO. This practice creates a vacuum of operational
management in the Modaraba Company which remains without proper CEO for an indefinite time
adversely affecting the operations of the Modaraba which is detrimental to the interest of the Certificate
holders of the Modaraba.
3. It is, therefore, clarified that there is no provision in the Modaraba regulatory framework for such
an interim arrangement and a full time CEO duly approved by the Registrar (Modarabas) has to be
appointed within the stipulated time period as prescribed in the Companies Ordinance, 1984.
4. In order to ensure that necessary arrangements for appointment of new CEO against the casual
vacancy of outgoing CEO are made well in time and the post of CEO does not remain vacant, the
following new condition to the Modaraba Authorization Certificate issued by the Registrar (Modaraba) to
the Modaraba Company under section 11 of the Modaraba Companies and Modaraba (Floatation and

Control) Ordinance, 1980 (the Ordinance) read with rule 3(2)(e) of the Modaraba Companies and
Modaraba Rules, 1981 (the Rules) is hereby imposed with immediate effect and until further order.
Paragraph 1 of the Authorization Certificate prescribed under the Rules empowers the Registrar
(Modarabas) to prescribe or impose any condition in the Modaraba Authorization Certificate from time to
time:
In the case of removal of its chief executive before the expiration of his/her term or
where the chief executive decided to tender his resignation, the Modaraba Company shall
inform the Registrar (Modarabas) at least one month before the change upon receipt of
advance notice for resignation from the CEO. The Modaraba Company shall appoint a
new chief executive within fourteen days of the office of chief executive has fallen vacant.
In the ordinary course of business, the Modaraba Company shall not relieve the outgoing
Chief Executive unless a new chief executive is appointed to takeover charge from
him/her. However, in the case of removal of the chief executive before the expiration of
his/her term, the Modaraba Company shall also furnish reasons for such
removal/termination to the Registrar (Modarabas) while conveying the information of
change in the management.
5. Violation of the above condition shall be punishable under section 32 of the Ordinance.

Sd/-

(Umar Hayat Khan)
Registrar (Modarabas)

Distribution:

1. Chief Executives of all Modaraba Companies.
2. Modaraba Association of Pakistan.
3. Central Depository Company of Pakistan Limited.
5. Institute of Chartered Accountants of Pakistan.
6. Institute of Cost of Management Accountants of Pakistan.
7. Director (IS & T), SECP.

8. Office Copy.

Tel: 9207091-4 Ext. 311, Fax. No. 9218590, E-mail: umar.hayat@secp.gov.pk

(MODARABA WING)

No. SC/M/RW/Cir/2010- August 10, 2010


Subject: Clarification on clause 3(ii) of Part II of the 3
rd
Schedule of the Modaraba
Companies and Modaraba Rules, 1981

Certain Modaraba Companies have sought clarification on the applicability of clause
3(ii) of Part-II (Requirement as to Profit & Loss Account) of the 3
rd
Schedule to the
Modaraba Companies and Modaraba Rules, 1981 to Ijarah (lease) assets.

2. In this connection, it is clarified that disclosure requirements as prescribed under
clause 3(ii) of Part-II of the 3
rd
Schedule to the Modaraba Rules, 1981 do not apply to sale or
transfer of Ijarah (lease) assets by a Modaraba in normal course of business.

Sd/-

(Umar Hayat Khan)
Registrar (Modarabas)

Distribution:

2. The Modaraba Association of Pakistan.
5. Institute of Cost of Management Accountants of Pakistan.
6. Executive Director (M&I) (South) SECP.
8. Office Copy.

SECl'lUTIES ANI> EXCI IANGE or PAKI STAN
SI' ECIALI ZEI> I>I VISION
(MOI>ARAIl A WIN{;)
\10. SCavtlRW/ivIR/ 2010- ";.7"
August ..L 20\ 0
Subject: Rc\ 'ised 2
11 d
Schedule to th e Modarah:l Companies ,md 1\lodara ha
Rules, 1981
Please li nd attached SRO. No. 826(1 )/20IO dated .2 1.08.2010 recardinu the
revised 2
ml
Schedule La the Modaraba Co mpanies and Modaraba Rule; . 1981 for
information and compliance with effect from 21.8.2010.
{ Umar 100y K han)
Regi stra r ( t\ odarubas )
Histrihution:
I. Chief Executives of all Modaraba Companies.
-i The Modaraba Associat ion of Pakistan.
J. P.S. to Chairman. SEep.
-J. . P.S. to Commission ers. SEep.
5. Director (IS & r i . SECP.
6. Olliee Copy.
NIC Building. Jinnah Avenue. Blue Area. lslamubad.
PABX: <)::! 0709 I-..J E.\I. 3 11- Fa\.. No. 92 18:WO. fi-mail: U.!!PI" .I'b
REGISTERED No. M - 302
L.-7646
EXTRAORDINARY
PUBLISHED BY AUTHORITY
ISLAMABAD, SATURDAY, AUGUST 21,2010
PART II
Statutory Notifications (S. R. 0.)
NOTIFICATION
Islamabad; the 18th August. 2010
S. R. O. 826 (1)/2010.- In exercise of the powers conferred by section
41 of the Modaraba Companies and Modaraba (Floatation and Control)
Ord inance , 1980 (XXXI of 1980), read with clause (b) of sect ion 43 of the
Securities and Exchange Commission of Pakistan Act, 1997 (XU I of 1997),
the Securities and Exchange Commission of Paki stan with approval of the
Federa l Government, is pleased to di rect , after having published previously in
the Official Gazette vide Notificatio n No. S.R.O. 335(1)/2010, dated the 17th
May. 2010, that in the Modaraba Companies and Modaraba Rules. 198 1, for
the Second Schedule, the foll owing shall be substituted, namely :-
(2445)
Price : Rs. 2:00
[2784(20 IO)iEx. Gaz.]
2446 THE GAZETTE OF PAKISTAN. EXTRA., AUGUST 21,2010 [PARr II
"TilE SECOND SCHEDULE
[Set rul e 3(18)]
SCALE OF FEES
I . For regist ration of a rncdaraba company ( non-refundable fee):
( i) at the time of regist ration .
( ii ) renewal annually in the month of January.
Rs. 2S0,000/
Rs. 25,000/-
Up 10 five
"'"
(3)
More than
five years
(2)
Rs.40,OOO/- Rs. 30.000/
(I)
Perpetu al
(a) eurhoriza rlou 10 floal modaraba
( non-refundable fee ):
(i ) Where the nominal amount does not Rs. 50,000/-
exceed Rs. 2. S mill ion
2. Application for:
(i i) Where the nomina l amount ex ceeds Rs. 100.000/- RS.60,000/ Rs .40. 00 01-
Rs. 2. 5 mi llion but does not exceed
Rs. 5 mill ion
(i i i ) Where the nomina l amount exceeds
Rs.S million
Rs, 100.000/-
plus
Rs, 10,0001-
for every
additional
ns . I million.
Rs.60,000/-
plus
as. 6,000/-
for every
add itional
Rs . I million.
Rs . 40, 000/ -
plus
Rs. 4,0001-
for eve ry
add itional
as.r milli on
(b) renewal annua lly in the month of
January (t o be charged to the Modaraba)
Rs. 100.0001
3.
4.
,.
6
7.
s.
9.
For filing, recording or registering
any fact or document or fact required
to be filed with. recorded by or registered
with Registr ar.
For fil ing, registering and recording
doc ument relating to a mortgage or
charge required under the Ordi nance.
For app lica tion for enquiry.
For claim aga inst modaraba company
by mcdaraba certifi cate bclders referred
to t be Tribunal.
For any othcr appli cation before the
Tribunal, other than an application
by Registrar, or before the Registrar
by any person.
For inspection crreccrds.
For cert ified copy of any document
or extract thereof.
Rs. ] ,000'- for each doc ument
Rs. 2,000/.
Rs. 2,000/
Rs. 2,000'-
Rs. 200/
1\1 the rate of RS.20' - per page or pan
!hereof subject to a minimum of Rs. IOOI-.".
INo. SC/M/ RW/MRl20 1O. ]
ABDUL REHMAN QURESHI .
Advisor/Secretary.
PRl toE> BY THE MANAGER. PRINTING CORPORATION OF PAKISTAN PRESS. ISLAMABAD.
PUBLISHED BY 11fE DEPlTrY CONTROLLER. STATIONERY AND FORMS. UNIVERSITY ROAD.KARACHI.
4. Application for refund offees is available at: http://www.secQ.gQ-Y..;.cl<.L
~~ AhmedSh:~ee:;==+---"'---
Executive Director (Regi~~ratiOn) \
!
SECURITIES ANDEXCHANGE COMMISSION OF PAKISTAN
REGISTRATION DEPARTMENT
NIC BUILDING, BLUE AREA, ISLAMABAD
No.CLD/RD/602/97/200~ Islamabad,November16,2010
..'j/ CIRCULAR NO.~1'2010
SubjectApplication for Refund of Fees received under Sixth Schedule to the Companies
Ordinance, 1984
In order to streamline process of refund of fees received under the Sixth Schedule to the
Companies Ordinance, 1984, a standardized Application Formfor refund of fees has been developed.
All concerned are therefore advised to make application for refund of fees to the registrar or
Commission on the enclosed format.
2. Further, details of documents required with the Application Form, are as under:
Sr. No. In case of Documents required Payee
I Existing

Original paid challan Company
companies
2 Companies

Original paid challan Person authorized by
proposed to be

CNIC copy of the person to whom the
the
registered, and
refund is to bemade
promoters/sponsors
documents have

Authority letter in favor of the payee
been filed
fromall promoters
" Companies

Original and depositor's copy of paid Applicant
.J
proposed to be challan
registered, and

CNIC copy of the person to whomthe
documents have
refund isto be made
not been filed
3. Please note that the authority letter mentioned above shall be submitted on a duly witnessed
and notarized stamp paper of requisite value.
Distribution:
I. President, Institute of Charted Accountants of Pakistan, Charted Accountants Avenue,
Clifton, Karachi-75600
2. President, Institute of Cost & Management Accountants of Pakistan, Gulshan-e-Iqbal,
Karachi - 75300
3. President, Institute of Corporate Secretaries of Pakistan, 683-C, Allama Iqbal Road, Off:
Tariq Road, Block 2, PECHS, Karachi.
4. The President, Federation of Pakistan Chambers of Commerce and Industry, Shahrah-e-
Firdousi, Main Clifton, Karachi.
5. The President, All Chambers of Commerce &Industry.
6. The President, Pakistan Tax Bar Association.
8. Official Website for information.
Nature ofFee:
Reason for Refund/withdrawal:
Rs.
(Attach OriginalChallan &Depositor's Copy)
Fee de osited:
Amount ofRefund Rs.
Payee: (Provide authority letter infavour ofpayee ifother than applicantor company)
Payee's CNIC No.: (Provide copy ofCNIC)
Applicant's Name:
Applicant's relationship with Company:
Applicant's Address:
I/We affirm thatthe above information istrue according to my/our bestofknowledge and belief.
Verified that:(a)the above stated particulars are correct; (b)fee isrefundable; and (c)amount ofRs, _
isrecommended for refund.
RecommendedlNot Recommended (please provide reason)
Date: Signature ofconcerned CRO Incharge: CRO :
Recommendation ofRegistrar of
Companies:
Date:
111111Ilslig.n.altiur.e.ofConfirming Authority.:
DO (Finance)/
Bank ReceiptConfirmation:
DC No.&Date
Head ofAccount
AmountAdmissible for refund
Approving Authority:
Cheque No.
~--~--~--~--------------------------------------~Reason:
Date:
Not Paid
Paying Authority:
Date: Signature ofPaying Authority.:
Paid
EOlDirector (Finance)
Enclosures: 1.Original Chailan &Depositir's Copy 2.Authority letter 3.Copy ofCNIC (in case ofpayment inthe name ofaperson) 4. _
Specialized Companies Division
No. SCD/PW/IP(R-24)
CIRCULAR NO. 5 Of 2011
January 20, 20 II
Subj ect: Amendment in Circular 36 of 2009 dated December 10,2009 - Investment
and Allocation Policies for Pension Funds Authorized Under the
Voluntary Pension System Rules, 2005
Consi dering the re-composmon of sectors by the Karachi Stock Exchange and
availability of limited investment avenues for Shariah Compliant pension funds, the
following amendments are hereby incorporated in pursuance of rule 24(3) of Voluntary
Pension System Rules, 2005 (the ' VI' S Rules') in Circular 36 of 2009 dated December
10,2009, on the captioned subj ect:-
I) Para 15 on page 3 shall be read as under:
"Investment in securities issued by companies of anyone sector (sector shall be
same as classified by Karachi Stock Exchange) shall not exceed twenty five
percent (25%) or the index weight, whichever is higher. subject to maximum of
thirty percent (30%) of the net assets of a pension fund unless specified otherwise
in the investment policy."
2) Clause (I) on page 4, under the heading "Equity sub-fund" shall be read as under;
"A pension fund manager may invest up to thirty percent (30%) or the index
weight, whichever is higher, subject to maximum of thirty fi ve (35%) of net assets
of a Shariah compliant Equity sub-fund in equity securities of companies
belonging to a single sector as classified by Karachi Stock Exchange."
3) Clause (a) on page 7, under the heading "Money Market sub-fund" shall be read
as under;
"The weighted average time to maturity of assets of a Money Market suh-fund
shall not exceed ninety (90) days, except lor assets of Shariah compliant Money
Market sub-fund, where time to maturity may be upto one year."
NICL Bu ilding, .Jin na h Avenue, Blu e Area, Islamabad.
1 01'2
._.. ~
Securities and Exchange Commission of .istan
Special ized Companies Division
4) Clause (b) on page 7, under the heading "Money Market sub-lund" shall be read
as under;
"Time to maturity of any security in the portfolio of Money Market sub-fund shal l
not exceed six (6) months, except in the case of Shariah compliant Money Market
sub-fund, where the timc to maturity of Shariah compliant Government securities
such as Government ljarah Sukuks may be upto three (3) years"
5) This Circular shall come into force with immedi ate effect.
Distribution:
1. Chief Executive, all Pension Fund Managers
11. Trustees of Pension Funds
111 . Mutual Fund Association of Paki stan
NICL Building, Jinnah Avenue, Blue Area , I slamabad.
201' 2
NBFC DEPARTMENT
No. NBFCD/MF/CIRCULARI/2//2011
Circular No. 04of2011
March 10,2011
Categorization of open-end Collective Investment Schemes
This is further to Circular No. 7 of 2009 dated March 6, 2009 on "Categorization of
open-end Collecti ve Investment Schemes".
Pursuant to the promulgation of Securities (Leveraged Markets and Pledging) Rules,
2011 (the "Rules, 2011") whereby a new leverage product namely, Margin Trading has
been introduced and considering that "Continuous Funding System (CFS)" has been
discontinued, the Securities and Exchange Commission of Pakistan (the
"Commission") in exercise of powers conferred under Section 282 B (3) of Companies
Ordinance, 1984 read with Regulation 55 (2) of the Non- Banking Finance Companies
and Notified Entiti es Regulations, 2008 hereby replaces the term "CFS" wherever
appearing in Circular 7 of 2009 with the term "Margin Trading (MT)".
Accordingly, the open-end collective investment schemes which are allowed to take
exposure in CFS in terms of Circular No. 7 of 2009 and their constitutive documents
also permit to do so, may invest in MT in terms of the Rules, 2011.
This Circular shall come into force with immediate effect.
(Asif Jalal Bhatti)lo\2>\(\
Executive Director (SCD)
Distr ibution:
1. Chief Executives, Asset Management Companies
2. Mutual Funds Associationof Pakistan
3. Trustees of Collective Investment Schemes.
NIC Building, Ji nnah Avenue, Blue Area, Islamabad.
PABX: 0519207091-4, Direct: 051-9218597 Fax. No. 051- 9218590
PABX: 9207091-4 Ext-162 Fax. No. 9218590, E-mail: imran.hussain@secp.gov.pk
1

(MODARABA WING)

No. SC/M/CIRCULAR/R.B./2011/ Islamabad, March 11, 2011

Circular No. 5/2011

Appointment of a Member of the Religious Board by the Federal Government
under Section 9 of the Modaraba Companies and Modaraba (Floatation and
Control) Ordinance, 1980

In pursuance of Section 9 of the Modaraba Companies and Modaraba (Floatation and
Control) Ordinance, 1980 read with Rule 6 of the Modaraba Companies and
Modaraba Rules 1981, the Federal Government has issued a notification for the
appointment of renowned religious scholar Professor Mufti Munib ur Rehman as a
member of the Religious Board for Modarabas (Islamic Financial Institutions) on
March 9, 2011 (Copy of the Notification is attached).

The position of the Member Religious Board was vacant due to the resignation of Mr.
Imran Ahsan Nyazee. The appointment of Professor Mufti Munib ur Rehman has
been made on the vacant position for the un-expired term.

____________________
(Imran Hussain Minhas)
Joint Registrar (Modarabas)
Distribution:

2. NBFI and Modaraba Association of Pakistan.
3. Central Depository Company of Pakistan Limited.
5. P.S. to Commissioner (SCD), SECP.
6. P.S. to Commissioner (Enforcement), SECP.
8. Office Copy.

Encl: As Above

INSURANCE DIVISION
Karachi, 17 March 2011
Circular Ref. 6 of 2011
Withdrawal of Circular 20/2010 dated 30 July 2010
Giving due consideration to the practical difficulties being faced by the insurance brokers, the
Securities and Exchange Commission of Pakistan the apex regulator of the Insurance Industry hereby
withdraws Circular Ref. 20/2010 dated 30 July 2010 on the subject "Clarification regarding the term
Paid up Capital for Insurance Brakers Registered in Pakistan".
Accordingly, the cited circular stands withdrawn.
-;
Shahid rm
Exe ive Director (Insurance)
Distribution:
All registered insurance brokers
Chairman, Insurance Association of Pakistan
President, Institute of Chartered Accountants of Pakistan, Karachi
President, Pakistan Society of Actuaries
President, Institute of Cost & Management Accountants of Pakistan
sc: Circular -withdrawal
4th Floor, State Life Building No.2, Wallace Road, off 1.1. Chundrigar Road, Karachi.
Tel: 021-32414204, 021-32410651 Fax: 021-32423248 Website: www.secp.gov.pl<
SECURITIES AND EXCHANGE COMMISSION Of PAKISTAN
INSURANCE DIVISION
Circular No. 07 of2011
March 18, 2011
Subject: Maximum Management Expense Limits for Life Insurers
under S.22(9) & S.23(9) of Insurance Ordinance 2000.
In view of certain operational difficulties being faced by a few life insurance
companies, Securities and Exchange Commission of Pakistan (SECP) is pleased to
amend its Circular No.6 of 2006 dated April 28, 2006, for the Insurance Companies
having more than 10 years of business in Pakistan, in respect of First year premium
and Renewal years premium for the year 2011 & 2012, other than Single Premium
Policies, Group Insurance Policies and Annuities, as under, with immediate effect:
ITEMS Limits as per Circular # 6 Amended
of2006 Maximum Limits
2011 2012 2011 2012
First year premium 98% 90% 104% 100%
Renewal years' premium 17% 15% 19% 18%
2. All other terms of Circular No.6 of2006, shall remain the same.
3. The expense limits for the years after 2012 may be prescribed by the Commission
of time, to reach the optimum level a/aged in the earlier
L';-:-

Executive Director - Insurance
Distribution:
Chief Executives, all Life Insurance Companies
Chief Executives, Family Takaful Operators
President, Institute of Chartered Accountants of Pakistan
President, Institute of Cost & Management Accountants of Pakistan
Deputy Secretary, Ministry Of Commerce,
Tel: 021-32414204, 021-32410651 Fax: 021-32423248 Website: www.secp.gov.pk
(MODARABA WING)
No. SC/M/RW/M.T./2011- ~ t
July 19,2011
SUBJECT: CONSTITUTION OF MODARABA TRIBUNAL-D, KARACm UNDER THE
MODARABA COMPANIES AND MODARABA (FLOATATION AND
CONTROL) ORDINANCE, 1980
In view of the practical difficulties, being faced by the Modaraba Sector due to overburdening of
the Modaraba Tribunal-I (Banking Court-I), Karachi resulting in the inordinate delays in the disposal of
cases and as requested by the NBFI & Modaraba Association of Pakistan, the Securities and Exchange
Commission of Pakistan had taken init iatives for the constitution of another Modaraba Tribunal in
Karachi for the speedy disposal of the Modarabas' cases .
2. The request has been acceded to by the Federal Government and in exercise of the powers
conferred by Section 24 of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance,
1980 (the Ordinance), the Federal Government, in addition to the Modaraba Tribunal-I (Banking Court
No. I), Karachi, has constituted another Tribunal namely Modaraba Tribunal-II, for a period of three
years, consisting of the Judge, Banking Court-II, Karachi, to try all class of cases under the Ordinance
within the Province ofSindh. A copy ofthe notification No. F. 48(7)/80-A.II(Vol-II) dated July 11,201 1,
issued by the Mi nistry of Law, Justice and Parliamentary Affairs is attached.
. awed Hussain)
Registrar
Distribution:
2. The NBFIs & Modaraba Association of Pakistan.
3. Executive Director (IS & T), SECP.
4. Office Copy.
NIC Buil ding, Jinnah Avenue, Blue Area, Islamab ad.
PABX: 051-9207091-4 Ext. 385 - Fax. No. 051-9218590, E-mai l: jawed.hussain@secp.gov.pk
INSURANCE DIVISION
Karachi, 1
st
of August 2011
Circular NQ,l1/2Qll
SHARING OF COSTS OF INSURANCE OMBUDSMAN'S
SECRETARIAT BY INSURANCE I TAKAFUL COMPANIES
As provided in sub-secti on 4 of Section 126 of the Insurance Ordinance 2000 ("t he Ordinance"),
the costs of maintaining the Insurance Ombudsman's Secretariat should be shared by the insurance
companies in such proportions, as may be determined by the Secur ities & Exchange Commission of
Pakistan ("the Commission"). Accordingly, vide Circular 5 of 2008 dat ed 14 April 2008, Circular 19 of
2009 dated 8 June, 2009, Circular 33 of 2009 dated 28 October 2009, and Circular 19/2010 dat ed 30
Jul y 2010, respectively, the insurance and takaful companies were directed by the Commission to
contribute their share for the total expenses incurred in respect of the Insurance Ombudsman's
Secretari at up to the period ending 30 June, 2011.
2. For the purpose of sharing of costs of Insurance Ombudsman' s Secretariat for the period from 1
July 2010 to 30 June 2011, the Commission had det ermined the following formula:
"greatest of RS.250,000 and Rs. 0.09 per mille of 2009'S
- gross direct premium written or contribution received in Pakistan in case ofinsurance
company or takaful operator, respectively"
3. The total recovery made from insurance and takaful companies during the aforesaid period
amounted to Rs.14.91.4m.
4. Now, for the purpose of sharing the costs of the Insurance Ombudsman's Secretariat for the
period from 1July 2011to 30 June 2012, the Commission has determined the following formul a:
"greatest ojRs.250,000 and Rs. 0.10 per mille of 2010'S
- gross direct premium written or contribution received in Pakistan in case ofinsurance
company or takaful operator, respectively"
5. Please note that the calculation of costs sharing should be on the basis of gross direct premium
written relating to the period from 1January 2010 to 31 December 2010.
6. All insurance and takaful companies (registered up to the dat e of issuance of this circular ) are
advised to ensure that their share of the Insurance Ombudsman's Secretariat costs for the period from 1
July 2011 to 30 June 2012 is directly deposited in the Federal Insurance Ombudsman's bank account
(no.0311363031000153) being main tained at MCB Bank Limited, Main Branch, Adamjee House, 1.I
Chundrigar Road, Karachi on or before 15 August 2011, positively and e bank deposit slip thereof
should be sent to the Insurance Division, Karachi.
Shahid rm
Executive D" ctor (Insurance)
Distribution
CEO's of all insurance/ takaful companies
Chairman, Stat e Life Insurance Corporation
Chairman, National Insurance Company Limited
Secretary, Ministry of Commerce
Federal Insura nce Ombudsman
4th Floor , State Life Building No.2, Wallace Road, off 1.1. Chundrigar Road, Karachi.
Company Law Division
Registration Department
****
No. CLD/RD/Co.42117/2005- t\ 1 Islamabad, the 19
th
August, 2011
Circular No.JJt.. /2011
Subject: CONDITIONS FOR GRANT OF LICENCE TO ASSOCIATIONS NOT FOR
PROFIT UNDER SECTION 42 OF THE COMPANIES ORDINANCE, 1984
'J
The Securities and Exchange Commission of Pakistan has partiall y modified its
Circular No.29/2008 dated December 24, 2008 and Circular NoA/2009 dated February 27,
2009, pertaining to the conditions and requirements for grant of licence under section 42 of the
Companies Ordinance, 1984, in the following manner:-
(a) Sub para (i) of para 4 of the Circular No.29/2008 is deleted.
(b) Sub para (iii) of para 4 of the Circular No.29/2008 (as amended vide para (a) of
Circular No.4/2009) is substituted as under:
The promoters shall provide an undertaking to the effect that they have
sufficient skills, expertise and resources for the attainment of object of the
proposed association and they shall contribute a reasonable amount as start up
donation having regard to the circumstances of the case.
(c) Para 6 of Circular No.29/2008 is substituted as under:
The association shall be incorporated as a company under the provisions of the
Companies Ordinance, 1984 within a period of three months from the date of the
licence unless otherwise extended by the licencing authority in special
circumstances on an application made for grant of such extension in time.
(d) It has been decided that while processing a case for grant of licence to an
association, CIB Reports of promoters shall be caned from the State Bank of
Pakistan and the persons whose CIB Reports show total overdue amounts
exceeding Rs.300,000, shall not be allowed to act as promoters of the
association.
C\JL-
Executive Director (Registration)
I
Distribution:
1. Chief Executi ves of all Associati ons
2. The Institute of Chartered Accountants of Pakistan, Karachi
3. The Institute of Cost and Management of Pakistan, Karachi
4. The Institute of Corporate Secretaries of Pakistan
5. All Chambers of Commerce and Industries
6. All CROs
_-------'L-
CompallY Law Dioision
Enforcement Department
Islamabad, November 10, 20 II
CIRCULAR No.lf /2011
Subject: MEETI NGS OF BOARD OF DIRECTORS (ABROAD)
It has been noticed that some listed companies are holding meetings of their Boards of Directors
(the " Board") outside Pakistan. Thi s practice on pari of such companies leads to undue wastage of
resources of companies.
2. The Securities and Exchange Commission of Pakistan (the "Commission") hereby directs that all
listed companies incorporated in Paki stan, if required, can hold board meetings abroad, in a financial
year, as per the thresholds prescribed below:
! i.
F ompanies having more than 50% foreign shareholding Maximum 4 Board meetings
Iii. p OIIIPanies having 1II0re than 40% but not greater than 50% foreign shareholding Maximum3 Board meetings
i ..
Companies having more than 30% but not greater than 40% foreign shareholding Maximum2 Board meetings
I III.
. .
\ iv, F ompanies having nil or upto 300/0 foreign shareholding Maximum 1Board meeting
3. All listed companies shall ensure compliance with the above menti oned-tl
their board meetings subsequent to the date of this circular.
Tahir a mood
Commissioner (Comp ny Law Division)
Distribution:
1. Chairman of Stock Exchanges, Karachi/ Lahore/ Islamabad
2. The President, Inst itute of Chariercd Accountants of Paki stan
4. The Institute of Corporate Secretaries of Paki stan
S. All officers of the Commission
POLICY, REGULATION AND DEVELOPMENT DEPARTMENT
MODARABA WING
No. SC/M/Policy/2011-
November 30, 2011

Subject:Additional condition to the Modaraba Authorization Certificate
This is with reference to Circular No.1 of 1995 (bearing reference No.
6(63)R.M./92-362) dated February 2, 1995, imposing a restriction that the
management fee can only be paid out of net profit of the Modaraba after wiping off
the accumulated losses as laid under section 18 of the Modaraba Companies &
Modaraba (Floatation & Control) Ordinance, 1980, (the Ordinance) read with rule 16
of the Modaraba Companies and Modaraba Rules, 1981 (the Rules).
NBFIs & Modaraba Association of Pakistan (the Association) has highlighted
the practical problem arising out of the above said restriction i.e. a Modaraba
company cannot charge the management fee even if there is net profit in the current
year. The said restriction has been reviewed in the light of the submissions made by
the Association.
In order to bring the matters relating to management fee in line with the
concept of Modaraba as well as the provisions of sections 18 and 37 of the Ordinance,
the restriction imposed vide circular referred to above is hereby replaced with the
following additional condition to the Modaraba Authorization Certificate issued to
the Modaraba companies under section 11 of the said Ordinance, read with rule 3(2)
(e) of the Rules:
PABX: 051-9207091-4 Ext. 385 - Fax. No. 051-9218590, E-mail: mailto:jawed.hussainPsecp.gov.pk
Jawed Hussain)
Registrar
"The Modaraba company may charge the prescribed management fee out of
the net annual profit of the Modaraba on the basis of annual audited accounts
provided that 90% of the profit available for appropriation is also distributed
to the certificate holders of the Modaraba after setting aside out of the profit of
the Modaraba such sums as it thinks proper as reserve in accordance with
regulatory framework applicable for Modarabas. The management fee shall be
charged only once on the profit of a Modaraba i.e. the portion of profit carried
forward should not again be subject to deduction of management fee".
4.This supersedes the Circular No.1 of 1995 bearing reference No. 6(63)R.M./ 92-
362) dated February 2, 1995.
Distribution:
Chief Executives of all Modaraba Companies.
NBFI and Modaraba Association of Pakistan, Karachi.
President, Institute of Chartered of Pakistan, Karachi.
President, Institute of Cost and Management of Pakistan, Karachi.
President, Pakistan Tax Bar Association, Karachi.
Executive Director (IS & T), SECP.
7. Office Copy.
PABX: 051-9207091-4 Ext. 385 - Fax. No. 051-9218590, E-mail: mailto:iawed.hussain@secp.gov.pk
SECURUTIES AND EXCHANGE COMMISSION OF PAKI STAN
INSURANCE DIVISI ON
Sub:
Circular # 11 of 2011
ANNUAL SUPERVISION FEE FOR THE YEAR 2012
Karachi December 23, 2011
Attention is drawn towards the 'Condit ions Imposed on Registered Insurers' vide Sub-section (3) of Section 11 of
the Insurance Ordinance - 2000, which states that:
(3) An insurer registered under this Ordinance shall pay to the Commission, on or before the f ifteenth day of
January in every calendar year, an annual supervision fee of the greatest of:
(a) Rs.l00,OOO; and
(c) Such amount as may be prescribed.
2. The amount against Sub-section ( c ) above was prescribed through the insertion of Rule-7-A in the
Securities & Exchange Commission [Insurance] Rules - 2002 vide SRO Notification 1123 (1) / 2009 dated
December 18, 2009, whereby the Annual Supervision Feewould be:
Every insurer registered under the Ordinance shall pay to the Commission, on or before the fifteenth day of
January in every calendar year, an annual supervision fee:
(b) At the expiry of one year, at the rate of RS.2.00 per thousand of gross direct premium written in
Pakistan during the calendar year, subject to a maximum of rupees fifty million.
3. Pursuant to the insertion of Rule 7A, the rate prescribed for the payment of annual supervision fee for the
year 2012 will be, the greatest of RS.l00,000 or Rs.2.00 per thousand of the gross direct premium written in
Pakistan during the year 2010, subject to a maximum of Rupees Fifty Million.
4. Accordingly, you are advised to deposit the Annual Supervision Fee in the Commission's Bank Account
against Code No. 30-05 in the authorized branch of MCB Bank Limited and the original chal lan t hereof,
along with the figures of direct gross written premiums reconciled from the Audited Annual-accounts -
2010, should be furnished to the Insurance Division, Karachi, on or before 15
t h
January 2012, positive I .
~
// . '
~ asim
Executiv Director,
Insurance Division
Distribution:
Chief Executives All Life and Non-life Insurance Companies
Chief Executives All General and Family Takaful Operators
Chairman, State Life Insurance Corporat ion of Pakistan
Chairman, National Insurance Company Limited
President, Institute of Chartered Accountants of Pakistan
President , Institute of Cost & Management Accountan ts of Pakistan
4th Floor, State Li fe Building No .2, Wallace Road, off 1. 1. Chundrigar Road, Karachi.
Tel: 021-32414204, 02 1-32410651 Fax: 021-32 423248 Websit e: www.secp.gov.p k
t-
--. -- -"_._- - - - - - - ~ . _ - _ .
- - ' - ---_. - ... - ..-
. --- ------ - --- - - . .. _.. . .- .. ---._-_. .
- - - - . _ - - - ~ ._- -- -". - . ...._._-_._-- --------._---
INSURANCE DIVISION
Ref: ID/PRD/COS/01
Subject:
Product Information on websites
Date: December, 30, 2011
It has been observed that many insurance policyholders do not have the requisite i nf ormat ion
about the policies before and after they sign off the proposal forms. The lack of information
about the product causes a number of difficulties for policyholders in case they want to renew,
or surrender their contracts, take loans thereupon, approach for claims or maturity etc.
2. Therefore the managements of all the insurance companies are hereby advised to
exhibit the necessary information regarding all their products on the company websites
in an easy-to-follow manner and in both the English and Urdu languages.
3. The information material, in case of life insurance products, should include the benefit
structure of the products, death benefit, surrender cash values and maturity value, pian
terms, eligible ages and claim filing instructions etc.
4. The information material related to claim/grievance handling mechanism/procedure in
detail.
S. All the requir ed material should be readily exhibited on the websites by 15 January,
2012 and this must get a priority focus of the managements.
~ H ~ ~
(Tariq Hussain)
Director
Distribution:
Chief Executives, all life and non-life insurers/re-insurer/Takaful operators
President, Inst itute of Chartered Accountants of Pakistan
President, Institute of Cost & Management Accountant of Pakistan
President , Institute of Corporate Secretaries of Pakistan
Deputy Secretary (Ins.), fed eral Ministry of Commerce
4th Floor, St ate Lif e Building No. 2, Wallace Road , off 1.1. Chundrigar Road, Kar achi.
._- -_._- ... .._--_. ._--.. ---_. _. . - ---- _.- ------ - -- -- -
- - --- ' --' - . _' --_.. _- --- - -- ._ --"'- - "-'
INSURANCE DIVISION
Ref: ID/PRD/COS/01
Subject:
Legal duties of Agents
Date: December 30, 2011
It has been observed that many agents appointed by 't he insurance companies do not perform
services as laid out in their contracts of agency / appointment. Some of the agents are found to
be deviating from the actual spirit of Sections 95 & 101 of the Insurance Ordinance - 2000.
2. It has also come into the notice of the Commission that agents sometimes act over and
above of the actual level of authority given under the law, like preparing their own
illustration reports and issuing policy documents at their own. Such acts create
compl ications, mislead the prospective policyholders and fall under market misconduct.
3. The managements of all insurance companies aret herefore advised to keep a vigi lant
eye upon their marketing personnel/agents and make sure they strictly adhere to their
statutory role as per aforementioned section of the Insurance Ordinance 2000, which
clearly state the Liability of Insurer for act or omissions of Agent. Any contractual lapses
on part of the agents may be deemed to be on the part of insurers as per the dictates of
agent-principal relation.
\ II "

(Tariq Hussain)
Director
Distri bution:
Chief Executives, all life and non -life insurers/re-insurer/Takaful operators
President, Inst it ut e of Chartered Accountants of Pakistan
President, Institute of Cost & Management Accountant of Pakistan
President, Inst itute of Corporate Secretaries of Pakistan
Deputy Secretary (Ins.), federal Ministry of Commerce
4th Floor, State Life Building No. 2, Wallace Road, off 1.1. Chundrigar Road, Karachi.
SPECIALISED COMPANI ES DIVISION
REGUAITONS AND DEVELOPMENT DEPARTMENT
No.NBFCD/CIRCULAR/2012
Circular No j Of 2012
Januaryl.2,2012
Reporting of Suspicious Transaction Reports (STRsVCurrency Transacti on Reports
(CTRs) to Financial Monitoring Unit (FMU) Under AML ACt, 2010
In exercise of the powers conferred under section 282B(3) of the Companies Ordinance,
1984, read with Regulation 9 of Non Banking Finance Companies Notified Entities
Regulation 2008, the Securities and Exchange Commission of Pakis tan hereby issues the
following instructions to NBFCs:-
a) NBFCs, being "Financial Institutions" under the Anti-Money Laundering Act 2010,
are required to submit Suspicious Transaction Reports (STRs) and Currency
Transaction Reports (CTRs), as per Section 7 of the AML Act, 2010, to the Financial
Monitoring Unit (FMU). The standard templates for STRs & CTRs are part of the
AML Regulations 2008, issued under the AML Or dinance 2007 and protected under
the AML Act, 2010.
b) In this respect, NBFCs are advised to meticul ously follow the requirements of the
law, and report STRs and CTRs manually or electronically, as per Section 7 of AML
Act, 2010, directly to the Financial Monitoring Unit (FMU).
c) It may be noted that Section 33 of the AML Act 2010, inter alia specifically provides
for criminal sanctions on failure to file above mentioned reports and for providing
false information. Furthermore, in case any NBFC is found to be in violation of above
legal requirements, the regulatory authority may also revoke its license or
registration or take such other administrative action as it may deemappropriate.
i
Distribution
1. Chief Executives of all Non-Banking Finance Companies
II. Leasing Association of Pakistan
III. Investment Banking and Modaraba Association of Pakistan
IV. Mutual Fund Association of Pakistan
Page 1 of1
PABX: 9207091-4 - Fax. No. 9218590
tclo}

Securities and Exchange Commi ssion of Paki st an

Company l aw Division
Corpmati7.ation & Cornp lbncc Depart ment
....
:\0. CUlRIYCo,42it71200S- Islamabad. the 16"' January, 20 12

Circu lar .'\ 0. ;Z 12012
Suhj ccl : CO'i m Tl o:\ FOR C; RA:\T OF U CE:\CE TO ASSOCIATlO:\ S :'lOOT },OR
I'KOFIT V'i IWR SFTTIO,\, n OF TlU: CO' I PA" IF.S 1911 -1
The Securities and Exchange Commission of Pakistan has partially modified its
Circular :-!(),2"1i2() I) S dated December 24. 2008 pertaining \0 the conditions and Tl'quin>mcnH
for grunt of licence under Section 42 of the Companies Ordinance. 1984 by substit uting para
-It \' ) "I' the said Circular. as under:-
"The Association shall make no investment. whal"",v"r. in any- of its associated
companies except with thl' prior approval of the Commission and subject to such
conditions a, il may deem iiI ro impose:'
(:"ui r .... hm.d
F.x,'<:ulhc Director (C&CO)
IIi>Iri hUli"n:
1. Chief Executives of all Associations
2. The Institute of Chartered Accountants of Pakislan. Karachi.
3. The Institute of Casl and \ 13nag,-ment Accountants of Pakistan, Karachi.
4. The In,l itute of Corporate Secretar ies of Pakistan.
5. All Chambers of Commerce and InUllst ,ics
6. All CROs
INSURANCE DIVISION
Karachi, zo" January 2012
Circular Ref: 04/2012
SRO 16(1)/2012 dated 9 January 2012
Amendments in the Securities and Exchange Commission [Insurance) Rules 2002
New Solvency Related Requirements for Insurance/Takaful Companies
The Securit ies and Exchange Commission is pleased t o announce that the new
Solvency Regime have been noti f ied vide SRO 16(1)/2012 dated 9 January 2012; t hereby
mod ifyi ng the SEC [Insurance] Rules 2002. Barri ng certa in phase-wi se enhancement i n limit s,
the changes take ef fect, immediately.
2. Highli ght s of the amendment s are ment ioned bel ow:
Rat ionalizati on of admissibility limit s for cert ain assets;
Enhancing Mi nimum Sol vency Requi rement for Non-life i nsurers and Sharehold ers'
Fund for Life Insurer s; and
Enhancing Statutory Fund requirement by int roducing Risk Based Margin above t he
current Poli cyholders Liabiliti es.
3. Whilst t he Gazette Not ifi cat ion is under publicat ion; the afore-stat ed SRO is available
at our website (URL: hltp:/Iwww.secp.gov.pk/notifi cation/pdf/2012/Amendments-
Requi rements-Solvency-Rules 2012.pdf).
0;
Shahid rm
Ex tive Director -Insurance
-CEOs of all i nsurance & Takaf ul Companies
-Chairman, Insurance Associat ion of Pakist an
-President, Institute of Chart ered Accountants of Pakist an
-President, Pakistan Society of Actuaries
-President, Pakist an Banks' Associati on
-President, Instit ut e of Cost & Management Accounta nt s of Pakistan
sc:Ctrsolr eq
INSURANCE DIVISION
Karachi, zo" January 2012
Ci rcul ar Ref : OS/2012
SRO 29( 1)/2012 dat ed 13
t h
January 2012 - Takaful Rul es 2012
The Securit ies and Exchange Commission is pleased to inform that th e draft "Takaful
Rules 2012" have been notifi ed vide SRO Notifi cat ion Ref. 29(1)/ 2012 dat ed 13
t h
January
2012 for eliciti ng public opinion t hereon and t hereby giving a noti ce th at comment s, if any,
received withi n 30 days of t he date of thi s notifi cat ion, shall be t aken into considerat ion.
2. Your opinions/ comment s may be sent lat est by 11
t h
February 2012, t o t he following:
Mr Muhammad Kashif Siddiqee
Join t Direct or - Insurance
Securiti es and Exchange Commission of Pakist an
s" Floor, Stat e Life Building No. 2
Wallace Road, Off I I Chundrigar Road
Karachi
2. Pending it s publicat ion in t he Offi cial Gazett e, th e Notificat ion is available at t he
websit e of the Commission [URL: http: //www. secp.gov.pk! notifi cation! pdf! 2012! Takaful -
Rules-2012.pdf] .
. --
h h i d ~ s ~
ExewUve Di rector - Insurance
-CEOs of all Insurance & Takaf ul Companies
-Chairman, Insurance Associat ion of Pakistan
-President , Institut e of Chartered Accountant s of Pa kistan
SC: TR2012
Tel: 021-32414204, D21-3241 0651 Fax: 02132423248 Website: www.secp.gov.pk
I
SECURITIES & EXCHANGE COMMISSION Of PAKISTAN
INSURANCE DIVISION
Circular No. 7/2012
Karachi, n t h January 2012
ENLISTMENT/CATEGORISATION OF AUDITORS ON THEAPPROVEDLIST
PURSUANT TO SECTION 48(1) OF THE INSURANCEORDINANCE, 2000
Considering it expedient t o have in place a criteria for Enlistment/Categorisat ion of Auditors
t o undertake audit of insurance / takaful / reinsurance entities ('insurers'), to ensure compli ance with
t he various laws thereby promoting poli cyholders' confidence and prot ect ing t hei r interests which is
one of the key ingredient s in t he development of the insurance sector. Pursuant to powers conferred
under sub-sect ion (l )(a) of Section 48 of t he Insurance Ordinance, 2000 which states tha t "Every
insurer shall appoint an auditor who shall be approved by the Commission as qualified to perform
audits of insuronce companies"; t he Securiti es and Exchange Commission of Pakistan ("the
Commission" ) is in t he course of developing a list whereby auditors wou ld be enlisted/catego rised.
2. In due course, all insurers shall appoint only such audit ors as approved by th e Commission.
All int er est ed audit ing fir ms are hereby required t o fil e their applicat ions as per Annexure A on or
bef ore February IS, 2012 along with all document ary evidences to support t he informat ion provided
t herein. Annexure Bcontains t he Eva luat ion Criteria.
3. The Commission shall review the applications received and issue the li st of approved audi to rs
to be appoint ed as an external auditor t o conduct t he st at ut ory audit for the year-ended December
31, 2012. The Commission shall place such approved list of audit or s on it s web-site, as well.
\;.
. ~
a h i d ~ i
Exec!,l1iVe Director - Insurance
Copy to :
President, Insti tut e of Charte red Accountants of Pakistan
President, Pakistan Society f or Act uaries
President, Institute of Cost & Management Accounta nt s of Pakistan
Chairman, Insurance Associati on of Pakist an
MKS/ SC: Circular us48 of 10 2000
Tel: 021-32414204, 021-32410651 Fax: 021 -32423248
1

In the name of Allah the most beneficent, the most compassionate

POLICY AND REGULATION DEVELOPMENT DEPARTMENT
(MODARABA WING)

No. SCD/M/SCSAM/2012- Islamabad, 3
rd
February, 2012
10
th
Rabi-ul-Awwal, 1433 AH
Circular No.8 of 2012

Shariah Compliance and Shariah Audit Mechanism (SCSAM) for Modarabas

Section 10 of the Modaraba Companies and Modaraba (Floatation and Control)
Ordinance, 1980 (the Modaraba Ordinance) provides that no Modaraba shall be a business
which is opposed to the injunctions of Islam and the Registrar shall not permit the floatation of
a Modaraba unless the Religious Board has certified in writing that the modaraba is not a
business opposed to the injunctions of Islam.

2. The Registrar, on the basis of the business stated in the prospectus, after obtaining
from the Religious Board a certificate to the effect mentioned in section 10 and on being
satisfied that it is in the public interest so to do, grant a certificate in the prescribed form
authorizing the floatation of modaraba on such conditions as he may deem fit. However, no
mechanism is in place to ensure and verify that the business affairs of a Modaraba (after
floatation) are being managed in accordance with the principles of Shariah.

3. The Religious Board in its meetings held on December 9, 2010 and June 13, 2011
deliberated upon this situation and directed to introduce a system to ensure and verify that
the business transactions of Modarabas are being carried out in accordance with the
injunctions of Islam.

4. In compliance with the directions of Religious Board and in consultation with the NBFI
& Modaraba Association of Pakistan (the Association) a formal mechanism namely Shariah
Compliance and Shariah Audit Mechanism (SCSAM) has been prepared and is being
implemented to eliminate the risk or possibility of any violation of Shariah principles by the
Modarabas.

5. The SCSAM aimed to achieve the following objectives:

(i) to ensure that the inflows and outflows of resources of Modarabas are free from
the following:

a. Riba (interest, usury or any other form)
2

b. Qimar (Gambling)
c. Gharar (Speculation)
d. Support from Business Prohibited by Shariah (e.g. Drugs and Alcohol,
Tobacco, Pork Related Items, etc.)

(ii) to introduce a mechanism which will strengthen the Shariah compliance by the
Modarabas in letter and spirit and ensure that the systems, procedures and
policies adopted by the Modaraba are in line with the Shariah principles;

(iii) to mitigate the reputational and operational risk and enhance the image and
operational framework of Modaraba as Islamic Financial Institution and to
ensure that the financial products or services being offered by Modarabas are in
accordance with the Shariah;

(iv) to ensure that the agreements entered into by the Modaraba are Shariah
compliant, all the financing agreements are executed on the formats as
approved by the Religious Board and all the related conditions are met;

(v) to prescribe the screening process for the investments in shares and other
securities;

(vi) to provide for the process for purifications of dividend income;

(vii) to introduce the mechanism for the management of charity;

(viii) to identify the avenues for the investment of surplus funds;

(ix) to prescribe procedure for appointment of Shariah Advisor;

(x) to introduce internal Shariah audit of the business transactions of Modarabas to
ensure that the goals and objectives of Islamic Law i.e. Maqasad Al-Shariah are
achieved and the financial products, instruments and transactions employed,
are based on Shariah norms and principles; and

(xi) to prescribe any other ancillary matter that may be required for Shariah
compliance and Shariah audit.

6. Now, therefore, in order to ensure effective Shariah compliance and to maintain the
trust of the stakeholders on the Islamic Financial System, in terms of the certificate granted for
authorization to float a Modaraba read with Section 11 of the Ordinance and rule 3 (2) (e) of
Modaraba Companies and Modaraba Rules, 1981, the following Shariah Compliance and
Shariah Audit Mechanism (SCASM) is hereby issued as an additional condition to the
Modaraba Authorization Certificate:
3

Shariah Compliance and Shariah Audit Mechanism

Part I - Shariah Compliance

I. Responsibilities of the modaraba company:- Every modaraba company shall
ensure that:

(i) the business of the Modaraba managed by it, is carried out strictly in
accordance with the Prospectus approved by the Religious Board and
the model Islamic financing agreements and the investment products
approved by the Religious Board from time to time are followed;

(ii) major changes in any of the existing product structures, financing
agreements, terms and conditions have a prior written approval from
the Religious Board;

(iii) all material changes in the existing product structures, agreements, terms
and conditions are properly communicated to the concerned stakeholders,
clients/customers;

(iv) monitoring and review system of Shariah compliance is introduced
covering all activities and products of the Modarabas;

(v) proper training is provided in the area of Shariah compliance to the
relevant staff, responsible for the monitoring and review; and

(vi) irregularities, if any, recorded and reported by internal Shariah Auditor
are rectified under the guidance of the Shariah Advisor.

II. Investment in shares and other securities:- The investment by the Modaraba in
the shares and securities shall only be made in the companies screened by the Shariah
Advisor of the Association in accordance with screening procedure contained in clause
III of this SCSAM and subject to the following conditions:

(i) the purchase and sale of the same scrip on the same day shall not be
made; and

(ii) the shares shall not be sold before settlement i.e. their title and
possession has been transferred to the Modaraba, in accordance with the
settlement schedule of the Stock Exchange.

4

III. Screening Procedure: (1) The screening test of the selected Investee Company
(IC) for the purpose of investment in its shares or other securities shall be conducted by
the Shariah Advisor of the Association who shall observe the following criteria before
placement of the scrip in the list of Shariah compliant securities:

(i) the business of the IC is Halal and in line with the Shariah;

(ii) debt to asset ratio of the IC is less than 40%. Debt in this case is classified
as any interest bearing debts. Zero coupon bonds and preference shares
shall be considered as part of the debt;

(iii) the ratio of non-compliant investments to total assets of the IC is less
than 33%;

(iv) the ratio of non-compliant income of the IC to total income is less than
5%. The income includes gross income plus any other income earned by
the IC;

(v) the ratio of illiquid assets to total assets is at least 25%;

Explanation: Illiquid asset means any asset that Shariah permits to be
traded at value other than the par.

(vi) The market price per share is greater than the net liquid assets per share
calculated as: (Total Assets Illiquid Assets Total Liabilities)/No. of
outstanding shares.

Provided that the investment in the Modaraba certificates of a Modaraba,
shares of Islamic Banks and Takuful Companies and the units of Islamic mutual
funds shall not be subject to screening process.

(2) The screening for each IC shall be performed on half yearly basis. The list of
screened listed companies alongwith charity rate of the respective company shall be
placed on the website of the Association and a printed copy duly signed by the
authorized person of the Association with a confirmation of its placement on the
website, shall be sent to the Registrar Modarabas on half yearly basis.

Explanation: Charity Rate means the ratio of non-compliant income of the IC to
total income.

(3) The screening of unlisted companies shall be carried out by the Shariah
Advisor of the Association on the requests made by Modarabas on case-to-case basis.

5

(4) The existing non-compliant investments in terms of clause III shall be divested
within the period of one year from the date of this circular.

IV. Dividend Purification Process: The dividend income shall be purified by
deducting the amount equivalent to charity rate for the respective IC from the total
dividend income received by a Modaraba.

V. Non-Shariah Compliant income not to form part of Modarabas income:- (1)
The income received by a Modaraba from non-Shariah compliant sources shall not be
accounted for as part of income of a Modaraba, inter-alia the following:

(i) late payment penalty or surcharge received from any client;

(ii) the part of dividend income pertains to non-Shariah compliant business
activities of IC as calculated in terms of clause IV; and

(iii) any other income received by a Modaraba from any transaction which
was not carried out in accordance with the principles of Shariah.

(2) All non-Shariah compliant income received by a Modaraba shall be deemed as
a liability of the Modaraba and shall be transferred by the Modaraba Company to a
separate account namely Charity Account.

VI. Management of Charity:- The amount credited in the charity account shall be
used in the manner and subject to the conditions stated hereunder:

(i) all contributions or donation from the charity account shall only be
made to the approved charitable organizations registered under
Pakistani law as charitable organization (trusts, Hospitals etc). The
Income tax exemption certificate issued by the Government of Pakistan
to that effect shall be considered as an approval for the purposes. Any
exception shall be submitted for approval to the Shariah Advisor of the
Association;

(ii) the purpose of the donation shall be identified; and

(iii) the amount available in charity account shall ideally be distributed
within three months of its transfer. A summary of operations of the
charity account shall be published in the Annual Accounts of the
Modaraba.

VII. Investment of surplus funds of Modaraba:- The surplus funds of the
Modaraba shall only be placed in the accounts to be opened in the Islamic banks or
Islamic branches of conventional banks or Islamic Mutual Funds or products offered
by a Modaraba or any other Shariah compliant investment schemes.
6

Part II Shariah Advisor

VIII. Shariah Advisor: (1) Every Modaraba company shall have a Shariah Advisor
of the Modaraba appointed on the terms and conditions as it may deem fit, having the
qualification and experience and to perform the functions as specified hereunder. The
term of office of the Shariah Advisor shall be three years, which shall be renewable by
the Modaraba Company. The first Shariah Advisor shall be appointed on or before
March 31, 2012. The Modaraba Company shall intimate to the Registrar Modaraba
about the appointment of Shariah Advisor and submit his particulars supported with
his relevant documents within 7 days from the date of his appointment.

(2) The casual vacancy caused by the resignation or termination of the Shariah
Advisor shall be filled by the Modaraba Company within 30 days of the resignation or
termination as the case may be and the intimation thereof shall be made to the
Registrar Modaraba in the manner prescribed above.

IX. Qualification of Shariah Advisor.- (1) No person shall be appointed as
Shariah Advisor unless he is deemed to be a person of acceptable reputation, character
and integrity and has:

a. Educational Qualification:
Shahadat ul Aalmia Degree (Dars e Nizami) from any recognized Board
of Madaris with minimum 70% marks and Bachelors Degree with a
minimum of 2nd Class and sufficient understanding of banking and
finance.
OR
Post Graduate Degree in Islamic Jurisprudence/Usooluddin, L.L.M.
(Shariah), etc. with a minimum GPA of 3.0 or equivalent from any
recognized University with exposure to banking and finance.

b. Experience and Exposure:
Must have at least 4 years experience of giving Shariah rulings
including the period of Takhasus fil Ifta; or at least 5 years post
qualification experience in teaching or Research and Development in
Islamic Banking and Finance.

c. good knowledge to understand English and make out the required
reports;

d. exposure in the areas of business or finance specially Islamic Finance;

e. has not been terminated from any organization in any capacity; and
7

f. does not hold any executive or non-executive position in any Modaraba
or Modaraba company except as Shariah Advisor.

(2) The Registrar Modaraba may relax the requirement of educational qualification
and experience in exceptional cases where the person is otherwise qualified for giving
Shariah rulings on banking and financial matters.

X. Functions and responsibilities of the Shariah Advisor:- (1) The Shariah
Advisor shall generally perform the following duties and functions in the Modaraba:

i. to introduce a mechanism which will strengthen the Shariah
compliance by the Modaraba, in letter and spirit and ensure that the
systems, procedures and policies adopted by the Modaraba are in
line with the Shariah principles;

ii. to advise the Modaraba company so as to ensure that the inflows
and outflows of resources of Modaraba are free from the following:

a. Riba (interest, usury or any other form)
b. Qimar (Gambling)
c. Gharar (Speculation)
d. Support from Business Prohibited by Shariah (e.g. Drugs and
Alcohol, Tobacco, Pork Related Items, etc.)

iii. to review on regular basis that the business conducted, the
transactions carried out and the investments made by the Modaraba
are in accordance with the Prospectus of the Modaraba, Islamic
Financial Accounting Standards notified by the Securities and
Exchange Commission of Pakistan, the principles of Shariah and
goals and objectives of Islamic Law i.e. Maqasad Al-Shariah are
achieved i.e. the financial products, services, related policies and the
instruments are based on Shariah norms and principles;

iv. to vet the new products and services before its submission to the
Registrar for its final approval from the Religious Board;

v. to make recommendations to the Modaraba company for potential
improvements and the formulation of polices in line with the
Shariah principles and to advise about the process of rectification of
irregularities pointed out by him;

vi. to advise on any matter referred to him by the chief executive or the
board of directors of the Modaraba Company;
8

vii. to conduct and arrange Shariah training programs for the board of
directors/officers and the staff of the Modaraba; and

viii. to determine the non-Shariah compliant income and ensure its
transfer to the charity account.

(2) The Shariah Advisor shall prepare a report on the Modarabas affairs, to be
called as the Annual Shariah Advisors Report which shall cover the overall Shariah
compliance position of the Modaraba for the whole year and be prepared on the format
attached as Annexure-A. The same shall be annexed by the Modaraba Company just
after the statutory auditors report of the annual audited accounts of the Modaraba, to
be disseminated to the certificate holders.

(3) Notwithstanding the above, the first report of the Shariah Advisor shall be
prepared and annexed with the half yearly accounts ending on December 31, 2012 and
thereafter on annual basis starting from the annual accounts of the Modaraba ending
on June 30, 2013.

XI. Powers of Shariah Advisor (1) Every Shariah Advisor shall have a right of
access at all times to the books, papers, accounts, vouchers, record, information,
agreements and reports of the Modaraba, whether kept at the registered office of the
Modaraba company or elsewhere and shall be entitled to require from the directors
and other officers of the Modaraba company, such information and explanation as he
may require for the performance of his duties and the board of directors and all the
employees of the Modaraba Company as well as the Modaraba shall be bound to
provide the requisite access to the record and information to the Shariah Advisor.

(2) The Shariah Advisor shall have direct and regular communications with all
levels of management.

(3) The fatwa and ruling of the Shariah Advisor in all business transactions, not
being inconsistent with the ruling of the Religious Board, shall be binding on the
Modaraba companies.

XII. Reporting of Shariah Advisor:- (1) The Shariah Advisor shall report to the
Board of Directors of the Modaraba.

XIII. Dispute Resolution:-In case of any dispute or difference of opinion arises
between Modaraba Company and the internal Shariah auditor on the matters relating
to Shariah interpretation, the same shall be referred to the Shariah Advisor for the
decision. In case of difference of opinion between the Shariah Advisor of the Modaraba
and the Registrar Modaraba on any matter came to his knowledge, the mater shall be
9

referred by the Registrar Modaraba to the Religious Board, whose decision shall be
final.

XIV. Performance review of the Shariah Advisor :- (1) The performance of Shariah
Advisor shall be reviewed by the Registrar Modaraba from time-to-time.

(2) The Registrar Modaraba, after being satisfied that the Shariah Advisor is not
performing his duties as required under this mechanism may direct the Modaraba
Company to terminate the services of the Shariah Advisor before expiry of three years.

Part III - Internal Shariah Audit

XV. Internal Shariah Audit: (1) Every modaraba shall strengthen its existing
Internal Audit Department established in terms of regulation No. 1 of Part IV of the
Prudential Regulations for Modarabas, either by appointing a trained internal Shariah
auditor having relevant qualification and experience of the Shariah audit or train at
least one of its existing employees in the internal audit department for the purpose of
internal Shariah audit, on or before March 31, 2012 so that internal Shariah audit
functions becomes fully operational with effect from first day of April 2012.

(2) The training of the internal Shariah auditor shall be arranged from a well
known Shariah training institute.

XVI. Duties of Internal Shariah Auditor:- (1) The internal Shariah auditor shall
follow the same reporting norms, as are applicable on the internal auditor under the
PRs and the Code of Corporate Governance implemented by the Stock Exchanges.

(2) The minimum required duties of the internal Shariah auditor shall be to verify
on day to basis that the:

(i) business transactions of the Modaraba are Shariah compliant;

(ii) agreements entered into by the Modaraba are Shariah compliant and
financing agreements executed on the formats as approved by the
Religious Board, without any major change, and all the related
conditions are met;

(iii) investments of the Modaraba in the shares and other securities are as
per list of the companies screened by the Shariah Advisor of the
Association;

10

(iv) process for purifications of dividend income has been carried out by the
modaraba company;
(v) non-Shariah compliant income has been transferred in Charity Account
and distributed in accordance with the manner prescribed in this
circular;

(vi) surplus funds have been invested in the avenues prescribed in this
circular; and

(vii) to share his findings with the Chief Executive and Shariah Advisor in
respect of all the above items including irregularities, inadequacy in risk
management, governance and internal controls which are necessary to
avoid non-Shariah compliant business transactions in the Modaraba.

(3) The Internal Shariah auditor shall submit his report on quarterly basis to the
board of directors with a copy of the Report to the Shariah Advisor of the Modaraba.

(4) The Internal Shariah auditor shall maintain a liaison with the Shariah Advisor
and seek his guidance and help in case of any difficulty in ensuring Shariah
compliance of any particular transaction.

XVII. Compliance on the internal Shariah Auditors Report:- The board of
directors of the Modaraba company, in consultation with the Shariah Advisor, shall
take necessary steps on the observations/recommendation of the internal Shariah
Auditor and prepare an action plan with a timetable for compliance. The audit
committee of the Modaraba shall monitor the compliance/implementation of the
action plan.

7. Since the Shariah review system is imperative in ensuring such compliance and an
effective Shariah framework will harmonize the Shariah interpretations, strengthen the
regulatory and supervisory oversight of the Modaraba sector and nurture a pool of competent
Shariah auditors, the implementation of SCSAM will help the management of modaraba
companies to achieve the objectives of Halal business as enshrined in the Shariah and emerge
as a responsible member of the Islamic financial regime.

8. The provisions contained in the SCSAM are the minimum requirements for Shariah
compliance to be followed by the modaraba companies and Modarabas in the course of their
operations. The Modaraba and the Modaraba Companies may include additional
requirements and control in their procedures for the sake of more effective Shariah compliance
and prudence.

11

9. All the modaraba companies are directed to ensure the implementation of the SCSAM
in letter and spirit and initiate necessary action for its compliance with immediate effect.

(Jawed Hussain)
Registrar

Distribution:

2. NBFI and Modaraba Association of Pakistan.
4. Institute of Cost and Management Accountants of Pakistan.
5. P.S. to all Commissioners, SECP.
6. Executive Director (PRDD-SCD).
7. Executive Director (SD-SCD).
8. Office Copy.

Note: For any query or further assistance the following team members may be contacted:

Name Designation Email Addresses
Imran Hussain Minhas Joint Registrar imran.hussain@secp.gov.pk
Shahid Mahmood Joint Registrar shahid.mahmood@secp.gov.pk
Hafiz M. Wajid Wahidi Assistant Registrar wajid.wahidi@secp.gov.pk
12

Annexure- A
Specimen of Annual Shariah Advisors Report

I have conducted the Shariah review of ______________________Modaraba managed
by _____________ Modaraba Management Company for the financial year ended
________ in accordance with the requirements of the Shariah Compliance and
Shariah Audit Mechanism for Modarabas and report that except the observations as
reported hereunder, in my opinion:

i. the Modaraba has introduced a mechanism which has strengthened the
Shariah compliance, in letter and spirit and the systems, procedures and
policies adopted by the Modaraba are in line with the Shariah principles;
ii. following were the major developments that took place during the year:

a) Research and new product development (Brief on the research and new
product development, if applicable)
b) Training and Development (detail of training conducted by the Shariah
Advisor of the Modaraba management and staff, if any).

iii. the agreement(s) entered into by the Modaraba are Shariah compliant and
the financing agreement(s) have been executed on the formats as approved
by the Religious Board and all the related conditions have been met;
iv. to the best of my information and according to the explanations given to me,
the business transactions undertaken by the Modaraba and all other matters
incidental thereto are in conformity with the Shariah requirements as well as
the requirements of the Prospectus, Islamic Financial Accounting Standards
as applicable in Pakistan and the Shariah Compliance and Shariah Audit
Regulations for Modarabas
v. profit sharing ratios, profits and charging of losses (if any) relating to any
deposit raising product conform to the basis and principles of Shariah.
vi. the earnings that have been realized from the sources or by means prohibited
by Shariah have been credited to charity accounts.

Observation(s)

Recommendation(s)

Conclusion

Signature
Stamp of the Shariah Advisor
Dated:

'.
-
Securiti l"; and h ch.1nge CommiMion of P"kisl.ln
Comp.lny L.lw Division
Curp",rilti/..:lti,m &. Cnmph,mcl' o..p,lrlllll'nt
....

-,
'I "
No.
q 12012
Subject: l TIUI o r OFfiCE OF lli IUn -ll KS
I, It h", t1c,'n ,,1'1'''110'''<1 (lui <'"Ma;n comp:mics limited guarank":, has IIlg
slmn: "ul'it li or not. not with me I'ro,jsion of section 180 of the
OnJil1an<"c. I' IR-I (lhe (lrdinar.:c") which pro. ides lhal the term of office of directors of a
under ,celion 1711 of the Ordinance shall be three years unless he earlier
re-igns. hc<:omc' db'luali lied from !Icing: u director or otherwise ceases 10 hold office.
2. Sorne com(Xlllic' incorporated under the Ordinance as companies limited b)
guarumcc di rectors for a term of less than three years which is contrary 10
section IXO uf Ihe Ordinallee. Fmlh", \he Artk !es or ,\ssoc; ati"" or such companies c"nlain
prm-isiun, \0 this erred wh ich arc " mtrar y to secI;o" 180 of the Ordinance and an: void ;n
terms or sc,l ion 6 ,,1' the Ord;nanc'e.
,
,
An compank s are hereby directed to strictly comply with tile provisions of section
( h,---
(Nu ir Ahmed Shaheen)
IXC,,'ul;\,c Il in.'Clor 'K;( ' I) }
180 of th<: Ordin:m, e and ensure tl1:,t election of d irectors elected under section 178 of Ihe
Ordinance' arc ror a pcriud of lhree years notwithstanding Ihe tenn of olTice or d,,,,,,lors. if
prm-ide<! ;n the Art id", "I' Associmion and lake 'lep, toward, Ihe alleral inl1 Articles of
,\ssocialion immcdi atd y'.

I. Chid' of all compllOi..." limited 11)
T1lc Instiwlc of Char1cn:d or Karachi.
3. Th<.- Institulc of Cost . nd Managcmcl1l "ccOImt"nt. ol!',, ' i. tan, Karachi.
Th<.- Instiwlc of Corporulc s..'Cn:laric. of 1';,ki"IIO,
5. All Chambcro> or Comm.. ..-cc and Indu' lnc',
6. Chid 1O '"",,,ti, ... of all Sa",k bchang..,
7. All CROs.
SECURITIES AND EXCHANGE COMMISSION

OF PAKISTAN
Company Law Division - Enforcement Department
SECP
No. EMD/233/473/2002 61 5. 7Islamabad, February 1 5, 201 2
Circular No. 1 0/201 2
Transmission of Notice of Annual General Meetings and Extra-ordinary General Meetings
through Electronic Medium
Pursuant to this Commission's Circular No.2 of 2001 and Circular No. 5 of 2002 ("Circulars") the listed
companies in addition to other compliances, were directed to comply with requirements concerning
transmission of notice of AGM/EOGMto the Commission on the same date on which the notices are issued
to the shareholders.
The Commission having reviewed the need for electronic transmission of documents for the purpose
of effective regulatory compliances has allowed listed companies to take useful benefit of technology.
In light of the abovementioned facts, this Commission is of the view that the listed companies shall
be in compliance of the regulatory requirements specified in the Circulars concerning the subject, if:
a notice of AGM or EOGM is emailed to the Commission along with statement under
Section 1 60 of the Companies Ordinance, 1 984, in case of a special business, as usual, on
the same date on which it is sent to the shareholders at general.meetings@secp.gov.pk .
the listed companies send scanned copies of newspapers in which the notices of AGMor
EOGM are published within 3 days of its publication through electronic mail at
general.meetings@secp.gov.pk.
iii)the format of the notice to be sent through electronic mail is MS Word and/or PDF.
4.This email facility shall be available for use w.e.f. March 1 5, 201 2.
(Tahirmood)
Commissio er (Company Law Division)
Distribution
All listed Companies.
Stock Exchanges, Karachi/Lahore/Islamabad,
The Institute of Chartered Accountants of Pakistan, Karachi.
The Institute of Cost and Management Accountants of Pakistan, Karachi.
SECURITIES AND EXCHANGE COMMISSION OF PAKIST....N
INSURANCE DIVISION
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",.""
SECURI TIES & EXCHANGE COMMISSIONOF PAKISTAN
COMPANYLAWDIVISION
CORPORATII ATION & COMPLIANCE DEPARTMENT
I
I
,I,
No. 1""
Circular No. / {Iof 2012
Subject: launch of Int er-CRO electronic
3" 2012
in of " ",,,nding tarthtauon to sta kehotders, Corporalllation & Department
ICCDI is to launch InlerCompany Regist rati on Office (CRO} electronic inspect ion 'e<vice.
Through subject ' ervice stakeholders un now electronically in, peel inlerCRO .ecord of companies,
whIC h inClude' <canned/archIved Yer<,on of phy,ital tecord of I.e, a sta'eholder in
Islamabad. ,nlendmg to impe<t record of any company at CRO Karachi, tan now inwect 'uch
record electronically at CRO and '0 On, Sublecl is avail able at all CRO, of SECP. acrO$'
Paki'tan
2, feat ures/CondItion, ollnter-CRO Eleetron,c Inspoelwn ..rvice (the are .. below:
{a) The Service available lor all "recorded/r egistered" documents only, liled by lile
ccmpames.
(bl inspettl on fee' Me applIcable. as pe, S,xlh Schedule to lhe Co'llp"o.e, Oro"."nce. 19&4
(the
(cl Stakeholder intend ing to inspect rem rd 01 any company regi,Ured wIth SECP. shall
an apphulion to Incharge 01 the CRO. where he is desi' ing to electr on,caUv
in,pea
Id) On retelpt Of above, t he shall Dermit the applicant to i",pect
such doc umenlSas under the Ordinance he Is ent itled to in,pect.
lel The inspection of tt'e documents be allowed during the time .\peci!ied for
tr aosacnon of bUSl ne" with Ihe public in the p, esence of the regi'Har m nc" med or an
aut noru ec ofIiciaI.
If} The concerned or authcrued offi cial may permit notes of t he inspected
docurnents to be taken, but verbalim ccpv of me document Inspected Shall not lJe
allowed to be laken,
",
The servi ce i' available lor electroni c inspection only. For obtainin8 cerl,foed (opie, of
record maintai ned by the CROs. t he app iicant make a application along
with prescr ibed lees at the concerned CRO. where t he comp" ny rs
,"m,' "" , ,,,
OirectorlC&CI
Di,l rihu\ ion:

1 President IrI,titute 0/ Ct\,J"ered Aet ourltaMs of Pa"i'lan, Chartered Account il nts A""nue,
(I,fton, Kara, hi75600
2. President, In, !,t utc of Cost & Accountant. of .. Gul,han-clqbal,
75300
3, President, In,tltute of Corpor . te ..s of 683-(, Allam. Iqb.1 Of" Ta' ;",
Block 2. Pf.<HS,
4 The Presioeet. Federation of Paki stan Chambe" 0/ Commerce and Indu, t ry,
Main (I,!ton, Karachi.
5. Tne Praside nt. All Chambers of Comme rce & Indust ry,
6. tilt P'e,.dent, P"ki, lan 8ar A,,,,,,i al;ofl.
7 All Company Registr at ion Olfke,
8, Otf;c,al Websit e lor informat ion,
,
I
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SJ' l T L\ U ZU ) rovn-,\.' n: s 111 \ '1\;10"1;
l' OLl {T , RH;n.,\Tl O"l; ,\ " I IlE\ U .OI' .\U::\ T
' 0. g /:20 11
Cl1HTL AR II o r 2012
5. 2012
Subj ect : ,\ ddil imml lI i""l,,,, u. e' fur W"r"eN' "'db. e l Ull d H alli!;" h'
con,,ti" , I ll ...., l n", nl sci,,'''''''
I , In the W",kcrs' \\ 'eltare Fund Ordinance. 1'l 7l (WWI'
Ordimlllee) in year ::!008. Collectiv e Im e,tmem S"heme, (0 " ) hrought within the
<cope ,,1' the 'WWf Ordioaucc. th" , render ing Ihem to contrib' lli,'n lO W\\T.
However. CI S through their trust,.x s e Ihe said or \\ \\T to CI S
the H" n" mblc Hi;:h Court. "hil'h is p,,, ,dinll
2. hhas tee n observed that "" ing 10 1he rending Lng lity " I'
WWF to CI S. diffe rent practices are bein g followed b) ..\ ,,,,t
(A\I"') " ith ",.. to W\\ 'F liahilil) . Ccnam A\I(", arc ma inwininll 1he requi' ite
pro" i,ion against \\ \\ '1' "I' CIS not made prevision to
this ell ", \. Irrc' p'-...,t i, e of the praclicc ad"ptcd by an A\Ie in case the decision or the
IInnorahlc COlI n i, aga in' l Ihe , urre'" approach heing foll" "ed I\ \l e. il
impael Ihe exi"ing lIr rede,' ming and unit holders or the CI S; .
Therefor e. maximum possible disclosure ufl hi, r;" t i> illlperali'e in the imere,1"I'
the stakeholders 01 CI S,
3. Alth""gh, A\ Ie, are alread) making , u!1icien1 di, do, urc in the financial
of C1\. "dditional ",p, ding \\'\\ '1' li" bi\il) and it>
imp;lCl ,)I' Ihe anJ of the Cl" ,h" " ld a l" , he in the monlhly lund
manager', repon ,. Jd "en i>elllent, and "tfer ing d"ellment' of the CIS . I'hncfore.
Commi"ion, in cxerc i>e of it> p,mers 211:21) or the Cn", p;mi<" Ordimm;:e
hereby direch ulfthc '\ \ 1Cs to immediatel y make Ihe r"llo\\ ing in the
Fund Manager Rep ort of CI S and in the .ld, ,,, n i,,, menl VIrd um of Cl\
"d nll managed by them:
" 1'11 1' Sdu'''''- lIu,' "",illlui" .'d pr", 'i.if", . UK" i"" WllrAa., ' WelJ" u
Fund .... liuhilily III III .. trI""'1 N., , .. ... " ilrl,.. w" t<' wa " ,wI /11" ,1"
r1,,' SA V pt'r ""ill ft' turn '1' I IJI' Sd,,'nl<' 1<" It/1<1 Itt' IIi,;Jr<'r hy
R" J e. F" r " ,,' uil,' im',- "un' ure "d,i,,'u ' " reud 11/"
,,,"tIf., . . ,1 111" 1"1,,,' Fi"""" iul S/"I' -""'II/.,' "I III,' S.-I,,'''I<' . M
11 ) Where re'lui, itc IlrI " 'i, ion i. nul I..,inl: tll3inlai" ed or tII aint" in,t1
aeai n,j Ib,' WWF liabilily _
"1'11 " F,mdISd ", ,,, ,, lIu.' '10/ lII",k I'r""i,i"" ., <)" "",mi"l: ' " N.' .
u;:uill..-t " "rA.'r,, lI 'dI " ,,' 1'"",1 Ii"hili(l". if rile .,mllt" It',","
"If fluilJ iog. Ji" ooh A",,u". Bt"c A"". h bon,b,J.
PAII\: r." "" KWIl
St:( T IU"IU :S " v u '::\('II\,(a : (: () \ l' llSSIf)' ( H' 1' ..\ 1\ ISIX '
SI' l n \ U I. U I ((1\ 11' "' Ils 1l1\ ' ISICl '
1'( 11 ,1 cv, Rt:( , 1 I,ATI( I' ,\ , I) I).:Vi: LOI' :\I.:' r \In' .\ HT \ I evt
"" " I.' 111., SA , . M ' ""i,I",,,,.,, '1'"' S"h,'"", "',,,,M "" 1"",<" h,1'
R... ...!.. ..... "",/.:<,. F". J"lai/, i" ,.....,"" aff " J"i ",J ' " " '"J " '"
.\.""............ ' '1 1".. 1"""" rill""";,,1 SI"I."".,,. '4 ,II.,1;,./,.. ",e.
Ihc n , al ", adJ ili,..ul di",k,,,,n: "illl rel""d to> "' ..... 1' tn i"
docum..nl u<1<kr Ille .... adin
"""' 11 in'" f,""" "ith immediah.. d T.'t anJ a ll III<: " ' It' ......
10 "'''''IT mcticul,,,,, >mrl i.....,e in k tl..- and "I'irit. ,\ n} , iob . "",-cil'<:l1"' '''11lil.'"
of tIIi, d;I'\.-.:lio.", """n "" dcalt " ith ,n .-:eord.Jr><:e .. Ih.: lek. ant rro\;sion, of III<:
( "' ''''I'''" i."", ( )nfi"" """. I
(
I . Chicf r ,<-.; lIIi, ,, Oft..""" of all A"'""- ....<...t ('
2. {"hief h ""uli'e ottcer of "' uIWI f soci.lt ion 1)1' P-.Jl,. i..un.
3. (liid h "",,' h e Olr ",er; of a ll 11'\1"' ."'><; I)((ol... ",. i,,, In' N menl
"' 11" l in""" ,\ "'n",,,Il l"" "\ " ',,
r \ 11\ : 1'0", . ...".
Securities Market Division
Market Supervision and Capital Issues Department
***
No. SMDlCIW/Miscl19/2009 June OS, 2012
Circular No.I'a of2012
Subject: Dividend Mandate under Section 250 ofthe Companies Ordinance, 1984
Section 250 of the Companies Ordinance, 1984 allows the shareholders of a
company to order the company to pay them cash dividend, if declared, through their
respective banks. It has been observed that most of the shareholders are unaware of the said
legal provision. In order to facilitate the shareholders and to encourage payment of dividend
,
through direct credit in the shareholder's bank account an amendment has been made in the
Form of Transfer Deed, provided in clause 9 of Ist Schedule to the Companies Ordinance,
1984, which is used for transfer of shares of companies. The revised Form of Transfer Deed
will enable the transferees to receive cash dividend directly in their bank accounts, if such
transferee provides particulars of its bank account which helshelit desires to be used for credit
of his cash dividend.
2. The Commission, therefore, through this circular being issued under section 506B
of the Companies Ordinance, 1984 directs all the listed companies to:
I. use the revised Transfer Deed in future; and
b
(Imrai I!!a litButt)
Direste IHOD (MS&CI)
ii. approach their shareholders to seek their option for dividend mandate as per
the standardized letter attached herewith.
Distribution:
I. The ManagingDirector, Karachi Stock Exchange, Karachi }
For circulation to all the listed companies.
ii. The ManagingDirector, Lahore Stock Exchange, Lahore
iii. The ManagingDirector, Islamabad StockExchange, Islamabad
IV. The Executive Director, IS&TD, OEDivision for placement on websiteof the Commission.
v. The Headof Department, Enforcement Department. }
vi. The Executive Director, Corporatization & Compliance Department. For information.
vii. The Executive Director, PRDD, Specialized Companies Division.
viii.The ExecutiveDirector, Insurance Division/SCD-SD.
ix. OfficeCopy
I
(On letterhead ojthe listed Company)
To:
(Name and address of t he
Membersof t he Company)
Subject: DIVIDEND MANDATE FORM
It is to inf orm you that under Sect ion 250 of the Companies Ordinance, 1984 a share holder may, if
so desire, directs the Company to pay dividend through his/her/its bank account.
In pursuance of t he directi ons given by t he Securities and Exchange Commission of Pakistan vide
Circular Number.....dated..... we request Mr./Ms/M/ s............ S/O,D/O,W/O.............. (where
appli cabl e)...... being t he registered shareholder of .......(name of t he company) holding ....
shares having foli o number to hereby give t he opport unity t o authorize t he Company t o
dir ectly credit in your bank account cash di vidend, if any, declared by the Company in f utu re.
[PLEASE NOTETHAT THISDIVIDEND MANDATE IS OPTIONAL AND NOT COMPULSORY, IN CASE YOU
DO NOT WISHYOUR DIVIDEND TO BE DIRECTLY CREDITED INTO YOUR BANK ACCOUNT THENTHE
SAME SHALL BEPAIDTOYOU THROUGHTHEDIVIDENDWARRANTS.
Do you wi sh the cash dividend declared by the company, if any, is dir ectly credi t ed in your bank
account , Instead of issue of di vidend warrants. Please t ick "-In any of th e fo llowing boxes:
If yes then pl ease provide t he following inf ormat ion:
Title of Bank Account
Bank Account Number
Bank' s Name
Branch Name and Address
Cell number of Transferee
Landli ne number of Transferee,
if any
It is st at ed that t he above-ment ioned informat ion is correct, t hat I will intimat e t he changes in t he
above-mentioned inf ormati on to t he company and t he concemed Share Registrar as soon as these
occur.
Signature of the member/shareholder
2
SECl'RITl ES .cxu EXCI IA'iG.: covtxnssr oxOF PAKIST.... 'i
(CO:.I PA'i Y LAW I).I\ISIO'i)
TIZATICl :'-/ ,'/,; C(}\U'U.vxce DF: P,\ H. T:\l r'T
No. CLD/RD! 60211lA/2004
CIRCUlAR NO.:..J./2012
Subje<:t: Re-Iaunchingof Companies Regula,il atioo (CBS)
Islamabad, June iiJ. 2012
The Companies Ordinance, 1984 It he Ordinance") proviaes for a numoe' of statutory
returnS which t he companies are required to file with the regist rar the specifi ed pertcd
together with payment of prescribed amount of fil ing fee. Secti on 469 of the Ordinance
particu larly lays down that where any documents required or author ized by or under the
provisionS of t h" Ordinance to be filed or regi stered the regi strar w,thin OJ ;>er,od :,
presentee after t he expiry of such period, the reglstrar may, on payment of such addit ional fee as
may be by the Securities and ""change Commission of Pa kistan {the Commission"l
not exceeding three times t he amount of specified fee, accept t he same.o that the acceptance of
the document by the registrar shall not absolve the default ing company or other per scr
concerned of any liabi lity arising from the default , delay in filing or other failure to company with
the requi rements of the Ordinance,
2. It has been noticed that a number of companies defaulted In filing the statutory
returns wil hi n th" prescribed period and apart from ot her penalti es for violat ing the spec,f,c
provis,ons of t he Ordinance. which include heavy amounl S of fines prosecution tne
defaulting director s/ officers. tne companies are also liabl e to pay addit ional fee not
three t imes lhe amount of the sp",ified fee payabl e. it has been felt that most of the companies
have become def aul ter for fear of payment of heallY amount of addi tional filing fee. apart from
ot her penait' es. In order to provi de relief to the management of companie.\, the Commi ssion had
taueched an amnesty scheme namely, 'Companies SCheme' (the Scheme") In the
year 2002, under which an opportcottv was prevrded to the ceracner companies to iile tneir
overdue statutory returns. wi th One t ime addilional fee, instead of three times fee. and
also absolved such companies of liabil ities ari sing from the del ay in filing of return. The "heme
was re-tauocbed in the year 2009 (which remained operalive from lSth May. 2009 to 315l July.
2(09) and in year 2010 (which remained operat ive from 1st July. 2010 to 3rd Janu,,'Y, 2011).
Thousands of companies availed the beneht s of the said schemes and got d"faults
regulari zed,
3. The Comm,s,i on is plNsed to relaunch the "Companies Reguiarization Scheme" for a
period of two months commencing from July 2. 2012. Salient features of t he Scheme are as
under:
(a}lhe companies t aking benefit of the SCheme shall be entit led to get lhe.r overa"e
returns and annual aCCOllnlSaccept ed on payment of nonnal fili ng fee pl us onehalf
Page I 01' 2
of Ihe fee a, IIIlne fee , in t he lim month of ttl! SCheme ..e.
from July 2, 2012 to July 31, 2012; on pa/ment of normal filing fee p!us one time
additional filing fee, in the second month of tM Scheme i.e. from Aug<J$t 1. 2012 to
Augusl 31, 2Cl2;
Ib, The Scheme ,h.1I be Gpplkllble 1<> n<>n-",;ed ccenc ccmpeores, pnvate
assoctauoes not fa, profit, trade c rgerreeuons. companies limited by guarantee and
toreign t.e. companies established outside ,' i kistan but ha'ling place of
busir>CIS InPaklS\ "n;
(c) Th.. S<h.. m" ,hall b" appicable 10 which ';'11 f-Ied In the ra!
Company Regi stration 01/1<1' atter the N plry of the perloo within ",hlch :\ wa,
required or authorized to be filed or legstered wit h the reg.strar C01cerned, not
be ing particLJars or documenls requiring regls:ralioo under sect.on 122, 123,
124,129. 131 Of 132 of t he Orrlinanc..;
(dl No cogniz<lnce of the default due to delay n filing of statutory returns/accounts shall
be taken In respect of the returns/ accounts tiled l.nde r tM SCheme.
(I' Tile Scheme would remain operative. fOI a period of two months I,o m 2, 20U tc
August 31, 2012 and shatl to the defaullS commill...t uplO lun.. 30. 2012.
(I) The documents would be filed as it wourd be difficult to file sencs 01
returns through eServices.
4. AI lhe r.onliste<j public private companies, assoctaucns net for profit, t rade
orgamzancns. compan iellimited by guarantee and fo-eign are advised ir. me r ::. ... n
interest to even 01 the opportuoily to regularize thEir sta t utory record by fili ng the overe.ie
accounts as soon as peSSlcle but not later than August 31, 2011 and to get
tbernscrves abscrvec from t heir guilt eve to late fili ng of IlOl t U:Ory ret"rns in of natvtcrv
proVls'ons "I tne Ordlna",e. After closure 01the Scheme, necessary legal act ion shal be InIt'ate:!
agai nst the noncompiiant companies,
(Nn lr Ahmed Shahe<:n)
Executive Director
Distri buti on:
1. The Institut e of Chartered Accountants 01 Pakistan, Karachi,
2. The InstItute of Cest & Manage",ent Accountar(s of Pakistan, (arachl,
3. The Inst itut e of Corpora te Secretaries of Pakistarl, Karachi.
4. Federation of Paks tan Chambers of Commerce and mdustrv,
S. All Chambers of Commerce & Industry,
6, All p" klstao Newsoape rl A$sociation 01 Paki stan, Karachi ,
7. All COmpany Registration Offices.
8, Offi cial we bsite for ;olofmallon.
23
" r n 'I) EXCl L\\C;r ("0\1 \11" ,,10' IH 1' .' II: lSl" .\ '"
t CO\ ll ' ,\" 1 .\\\ 111\ -1' 10' )
(e 1I11' OR-\ Il l . \TIOS .'\; ( ()\ II' I.I\ ,," cr ll t :I' \lH\ 1E'I, -'
C,
No CLD/RD/602111A/2004! y/'"
CIRCULAR N0 .3...L!2012
Islamabad. October t . 2012
Subject, hlension In lime period 01Companies Regular ization Scheme (("51 and Company Easy
Eo;1 Scheme (eEES)
In con \idpration of !lum..,ous 'equeslS re<e'ved from various Quarte's
",. tension in l ,me period of (RS and CEES ilnrlOUnceoJ "".Ie Corcula' No_22 and 13 of 2012, and
sub""q"",,! exten"on UP 10Onabe, l. 2012, ,,'de C"(ular No. 27 of 2012. (IIc (o"'m,\\,on her"l>v
" ,tends the I,me period of a ppl,ca b,litv for eRS and eEES up 10 October 31, 2012, w'th lh ..
following fec ,aa'S.
" Compan ie' Regulanzat ion Sl:heme leIlS):
- Normal / illng fl' e plu, two t imes addit ional flline fee
b. Kill;
Applicatlun ur RI to,OOO
2 of t he te rms of reference lToRsl remil in t he as st lpulalcd;n Circular No
22 and 23 of 2012
3, Int e r<: ' led part irl Mt' lherefore advised to ,Nai l thi s oppo't uMy w'th ;n
t ime pNio!!. I e, up t o O"t9,RI:lJ .h ZQ.U. ill no furt l",r exte nSion Ihilll bl' providl'd
Di,lribul ion:
1. The InSl ilull' of AtCOlHll" nl I of Pak,Iia n, Kar ach i,
2, The Inst ;lUl c' uf CUll & Atcounta nlSof Ka rach i.
3, The InSl;Wle of Corporal'" Secreta r'l'1 of Ka rach ,.
4, f edN"1Ion of Pi! ki sl" n Cha mbers of Comme' ,,' a nd Indullry. Karachi,
S, All Ch"mo,'" of & IndLJ II' y.
6, All I'ilk;,tdn Newspapers Association of Pak;stdn, Ka rac" ,.
7 All Company al lon Offoees,
S Official web" I" fm informal ,on.
SECP
No. SCD/PW/IP(R-24)
Securities & Exchange Commission of Pakistan
Specialized Companies Division
Policy, Regulations and Development Department
November 26 2012
CIRCULAR NO. 3 6 OF 2012
Subject:Amendment in Circular 36 of 2009 dated December 10, 2009 - Investment and
Allocation Policies for Pension Funds Authorized Under the Voluntary Pension
System Rules, 2005.
1.The Circular No. 36 of 2009 dated December 10, 2009 is hereby amended as follows:-
Para 15 on page 3 shall be omitted;
Clause (e) on page 4, under the heading "Equity Sub-fund" shall read as under:-
"Investment in equity securities of any single company shall not exceed ten
percent (10%) of net assets of an Equity Sub-fund or paid-up capital of that
single company, whichever is lower."
Clause (f) on page 4, under the heading "Equity Sub-fund" shall read as under:-
"Investment in securities issued by companies of any one sector (sector shall be
same as classified by Karachi Stock Exchange) shall not exceed thirty percent
(30%) or the index weight, whichever is higher, subject to maximum of thirty five
percent (35%) of the net assets of an Equity Sub-fund."
In clause (h) on page 5, after the word "within" and before the word "months",
the word "three" shall be substituted with the word "six".
2.The Circular No. 3 of 2011 dated January 20, 2011 is hereby withdrawn, however, the
following clauses of the afore-mentioned Circular shall remain in effect:-
1)Clause (a) on page 7, under the heading "Money Market Sub-fund" shall read as
under:-
"The weighted average time to maturity of assets of a Money Market Sub-fund
shall not exceed ninety (90) days, except for assets of Shariah compliant Money
Market Sub-fund, where time to maturity may be upto one year."
Page 1 of 2
(Mu amm
Chair an
2) Clause (b) on page 7, under the heading "Money Market Sub-fund" shall read as
under:
"Time to maturity of any security in the portfolio of Money Market Sub-fund
shall not exceed six (6) months, except in the case of a Shariah compliant
Money Market Sub-fund, where the time to maturity of Shariah compliant
Government securities such as Government ljarah Sukuks may be upto three
(3) years."
3.This Circular shall come into force with immediate effect.
Distribution:
Chief Executive, all Pension Fund Managers
Trustees of Pension Funds
iii. Mutual Fund Association of Pakistan
Page 2 of 2
SECURI TIES & EXCHANGE COMMISSION OF PAKISTAN
Karachi, 30 November 2012
Ref: ID/ LW/AR/Z012!15068
Circular Ref. No. 37/2012
t , New Insurance Accounting Regulations 2012; and
2. Amend ment in the SEC [Insu r ance] Rules 2002
The Securities and Exchange Commission of Pakistan is pleased to announce the
publication of SRO No, 1383 dated 19 November 2012 and SRO No. 1384 dated 19
November 2012 pertaining to Insurance Accounting Regulations 2012 and Draft
amend ment in SEC [Insur ance] Rules 2002, pertaining to revised accounting formats,
respectively, for eliciti ng public opinion thereon within thirty days from the date of tis
publications.
2. All concerned may please take notice that the modifications in the SEC
[Insurance] Rules 2002 specifically pertain to formats for published financial
statements and regulatory returns for convent ional life and non-life insurance
compames.
whilst the Gazette Noti fication is under publication; the aforementioned statutory
orders have been placed at the following URLs:
gpv pkl nQtifiM jonlodU20121SRO 13fl3 2012
hn p:!I"",,w "''W,gQY.pklnoti ficationlodU2012ISRO U8 I
Muhammad Kashif Siddiqce
Joint Dircctor - Insurance
CEO's of all conventional life & non-life insurance companies
Chair man, Insurance Association of Pakistan
President, Insti tut e of Chart ered Accountants of Pakista n
Pr esident, Instit ute of Cost & Management Accountants of Pakistan
Secretary, Government of Pakista n, Ministry of Commerce, Islamabad
Secretary, Government of Pakistan, Ministry of Finance, Islamabad
Secretary, Government of Pakistan, Ministry of Law, Justice & Human Rights,
Islamabad
Floo" s,.,. lif. BuHw,,!: w . n. R.,.d, K.... bL I P"""" No: OZI I F"" No. 021 3242.JZ4S
Islamabad, December 17 , 2012

CIRCULAR NO.391.2012
Clarification on Circular 14/2011 regarding Meetings of Board of Directors (A road)
In continuation of Circular 14/2011 dated November 10, 2011, issued by the Commission, to p ovide guiding
principles for holding meeting of Board of Directors of listed companies abroad.
It has been observed that Companies were holding Board meetings abroad for a single agenda
approval of quarterly accounts, despite the fact that there were no foreign directors on the Board.
attention is invited to the statutory framework comprising of the Companies Ordinance, 198
Corporate Governance which makes it mandatory for the Board of Directors to exercise objecti
carrying out its fiduciary duties and accordingly incur expenses in the best interest of the Compa
is the prime responsibility of directors to ensure that the decision to hold BOD meeting abroad s
on cogent reason, for example, mandatory physical presence for deliberating on confidential m
decision/ agreements to be executed with foreign companies and security concerns in Pakistan, as
of the circular referred above.
of review and
In this regard,
and Code of
e judgment in
y. Therefore it
ould be based
tters, business
was the intend
Through this circular, all listed companies are thereby advised to ensure that the decision to hold
abroad are based on cogent justifiable reasons and do not tantamount to wastage of resources
must also be ensured that the thresholds of foreign representation on Board prescribed in the sat
not, in any way, be misconstrued as permission by Commission to hold Board meeting abroad di
viable justification and overlooking the primary aim of facilitating directors in s al circumstan
board meeting
f company. It
circular must
regarding any
es.
Tahirood
Commissioner (CompaIQy Law
Distribution:
Chairman of Stock Exchanges, Karachi/ Lahore/ Islamabad
The President, Institute of Chartered Accountants of Pakistan
The President, Institute of Cost and Management Accountants of Pakistan
The Institute of Corporate Secretaries of Pakistan
ivision)
(COMPANY LAW DIVISION)
CORPORATIZATION & COMPLIANCE DEPARTMENT
No. CID/RD/602(1)A/2004/Islamabad, December 20, 2012
CIRCULAR NO. </open
Subject: Extension in time period of Companies Regularization Scheme (CRS) and Company Easy
Exit Scheme (LEES)
In consideration of requests received from various quarters regarding extension in time
period of CRS and CEES announced vide Circular No. 22 and 23 of 2012, and subsequent extension
up to November 30, 2012, vide Circular No. 34 of 2012, the Commission hereby extends the time
period of applicability for CRS and CEES up to December 31, 2012, with the following fee rates:
Companies Regularization Scheme (CRS1:
-Normal filing fee plus two times additional filing fee
Company Easy Exit Scheme (CEES):
-Application fee of Rs 10,000
Rest of the terms of reference (ToRs) shall remain the same, as stipulated in Circular No.
22 and 23 of 2012.
Interested parties are therefore advised to avail this opportunity within the extended
time period, i.e. up to December 31, 2012, as no further extension shall be provided.
Executive Director (CCD)
Distribution:
The Institute of Chartered Accountants of Pakistan, Karachi,
The Institute of Cost & Management Accountants of Pakistan, Karachi,
The Institute of Corporate Secretaries of Pakistan, Karachi,
Federation of Pakistan Chambers of Commerce and Industry, Karachi,
All Chambers of Commerce & Industry,
All Pakistan Newspapers Association of Pakistan, Karachi,
All Company Registration Offices,
Official website for information.

NICL Building, 63-Jinnah Avenue, Islamabad
UAN#: 111-11-7327
Direct #: 9214005,

SECP registered 274 companies in August

ISLAMABAD, September 14: Securities and Exchange Commission of Pakistan (SECP)
registered 274 companies in August 2012
The new incorporations during the month include 257 private, followed by 16 single-
member, 2 public unlisted companies, and 2 non-profit associations.
Trading sector has the highest new incorporation of 44 companies, followed by services with
28 companies, construction with 21 companies, power generation with 18 companies,
information technology with 17 companies and textile with 16 companies.

Highest company incorporation was witnessed at Company Registration Office (CRO),
Lahore of 89 companies followed by CROs Karachi and Islamabad registering 76 and 72
companies, respectively. Remaining CROs of Peshawar, Multan, Faisalabad and Quetta
registered 14, 12, 8 and 3 companies respectively.

Authorized capital and paid up capital of 274 companies, is Rs1.89 billion and Rs482 million
respectively. During the month, 56 companies increased their authorized capital with the
aggregate authorized capital increment of Rs2.99 billion and 52 companies raised their paid
up capital with the total paid up capital increment amounting to Rs3.20 billion.

2
TV Tickers

Securities and Exchange Commission of Pakistan (SECP) registered 274 companies in
August: Official statement

SEep
Insurance Division
Karachi
January 16,2013
Circ ular No. 1/ 2013
Rate of Return Assumptions for Life Insurance and Family Takaful Illustrations.
For the year 2013
Reference is made to Clause 5.1 & 7.2 of the "Guidelines for Life Insurance and Family Takaful
Illustrations - 2009", issued via Circular No 39/2009 dated December 24,2009.
Life insurance and family takaful companies use three growth rate scenarios to demonstrate projected
benefits to the potential policyholders. SECP specifies these scenariosbased on long term interest rate
outlook prevalent in the country. It was felt necessary to revise these scenarios as the interest rates
have been gradually decreased in the country. Accordingly, the growth rates scenarios for Life
insurance and Family takaful illustration have been decided by the SECP to be 7%, 9% and 11% for
the year 2013.
All new illustrations on or after 1st February 2013, should be made on these scenarios. All Life
insurance and Family takaful companies are required to submit sample illustration for each product to
the SECP on or before the above date.
Syed Nayyar Hussain
Director
Distribution:
1. Chief Executives of all Life insurance companies.
2. Chief Executives of all Family takaful operators.
3. Chairman Insurance Association of Pakistan (lAP).
4. President (Institute of Chartered Accountants of Pakistan)
. .5. President (Pakistan Society of Actuaries)
6. President (Institute of Cost and Management of Pakistan)
'; 7. Executive Director (IS &'T) (SECP Islampb-ad.) . I . f IJ '. .AAE'
' . 8. Secretary to Commission (SECP Islamabad). . .... _
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.... .... . ."
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. . " . SECURITIES & EXCHANGE
, . : COMMISSION OFPAKISTAN .
". DivISion, Sta'te ..
. ! .:.: 4th Floor,Wallace'Road, Karachi. Pakistan
. '''Tel: +92-21-3246 1053, +92-21 -32465469 .
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Fax: +92-21-32423248 ..We b: www.secp.qov.pk
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Reference No: ID/PR&D/PDW-II/GU20131002
Date: June 14, 2013
Subject: Amendment to SECP Circular No.9 of 200S on Group Insurance Premium Rates
This Commission had issued the Circular NO.9 of 2005 dated August 16, 2005 on group insurance
premium rates. The aforementioned circular required, amongst other, that the appointed actuary of a
life insurer shall certify that the premium rates and other terms and conditions of each group
insurance policy with annual premium of RS.1 ,000,000 or above are sound and workabie.
The Commission has carried out a survey of group life insurance market recently to assess the
effectiveness of the regulatory measures introduced in that Circular. The survey demonstrates that
the number of group life policies with premium exceeding Rs 1,000,000 have increased considerably
causing practical difficulties for the life insurers and the appointed actuaries. The survey also
demonstrates that overall claim ratios have been reasonably stable over the last six years. Now the
Commission is pleased to increase the limit from Rs1 ,000,000 to Rs 2,000,000 for the certification by
appointed actuary of a life insurer.
This circular shall be effective from ,July 1, 2013.
Distribution:
1. Chief Executives of all Life and Non-Life Insurance Companies.
2. Chief Executives of all Family Takaful & General Takaful Operators.
4. President (Institute of Chartered Accountants of Pakistan)
5. President (Pakistan Society of Actuaries)
6. President (Institute of Cost and Management Accountants of Pakistan)
7. Executive Director (IS & T) (SECP Islamabad)
8. Secretary to the Commission (SECP Islamabad)
_SECliRITIES & EXCHANGE
. COMMISSION OFPAKISTAN=-
Insurance DlvlsloreState Life
4th Flqgr, wauace goad,
TeI: 053, +9.2021 "32465469 Fax: +92-21-32423248 Web: www.secp.gov.pk
SEep
Insurance Division
Karachi
Reference No: ID/PRDD/PDW-II/BancaReg/2013/005
Subject: Draft Bancassurance Regulations, 2013
Date: September 24, 2013
In exercise of the powers conferred by sub-section (3) of section 167 of Insurance Ordinance, 2000
read with clause (i1) of sub-section (1) of section 40 and clause (u) of section 20 of the Securities and
Exchange Commission of Pakistan Act, 1997 thereof, the Commission is pleased to announce the publication
of the Draft Bancassurance Regulations, 2013 to elicit public opinion thereon within thirty days from the date
of its publication.
2 The draft regulations have been published in daily Dawn and Express Tribune today. The same
have been placed at the following URL:
http://www.secp.gov.pk/notification/pdf/2013/Draft-Bancassurance-Regulatlons-2013.pdf
3 All concerned are advised to submit their comments, if any, on the above to the Commission by
October 23, 2013. Any query on the above may be forwarded to the undersigned.
Distribution:
1. Chief Executives of all Life and Non-Life Insurers.
2. Chief Executives of all Family Takaful & General Takaful Operators.
4. President (Institute of Chartered Accountants of Pakistan).
5. President (Pakistan Society of Actuaries)
6. President (Institute of Cost and Management Accountants of Pakistan).
7. Executive Director, BPRD (State Bank of Pakistan)
8. Chairman (Pakistan Bank's Association)
9. Joint Secretary Investment (Ministry of Finance Islamabad)
10. Joint Secretary Insurance (Ministry of Commerce Islamabad)
11. Executive Director (IS & T) (SECP Islamabad)
12. Secretary to the Commission (SECP Islamabad)
SECURITIES & EXCHANGE
COMMISSION OFPAKISTAN
Insurance Division, State LifeBuilding-2
4th Floor, Wallace Road, Karachi. Pakistan
Tel: +92-21-32461053, +92-21-32465469 Fax: +92-21-32423248 Web: www.secp.gov.pk
PART II
Statutory Notification (S. R. 0)
NOTIFICATION
Islamabad, tlle-----Septembel', 2013
S.R.O_/2013: The following draft regulations, made by Securities and Exchange Commission
of Pakistan, in exercise of the powers conferred by sub-section (3) of section 167 of Insurance
Ordinance, 2000 ( XXXIX of 2000) read with clause (ii) of sub-section (I) of section 40 and
clause (u) of section 20 of the Securities and Exchange Commission of Pakistan Act, 1997
(XLII of 1997) thereof, are hereby published for the information of all the persons likely to be
effected thereby and notice is hereby given that all draft will be taken into consideration after
thirty days of its publication in the newspapers.
Any objections or suggestions which may be received from any person in respect of the said
draft, before the expiry of the aforesaid period shall be taken into consideration by the Securities
and Exchange Commission of Pakistan.
CHAPTER 1
PRELIMINARY
1. Short title, Commencement and Applicability. -
(1) These Regulations may be called the Bancassurance Regulations, 2013.
(2) These Regulations shall come into force at once.
(3) These Regulations shall apply on all new Bancassurance Agency Agreements signed on
or after January 1, 2014 and on existing Bancassurance Agency Agreements in force as on
December 31, 2013 and for all existing Bancassurance Agency Agreements, the Bank and the
Insurer shall make amendments in the existing relationship, wherever necessary, to comply
with these Regulations. Such amendments shall be completed no later than December 31,
2013. The Insurer shall send a written confirmation, signed by the Designated Insurance
Executive, to the Commission mentioning that the necessary changes have been completed and
the relationship with the Bank complies with the requirements of these Regulations.
I
2. Dcfinitions.- (1) In these Regulations, unless there is anything repugnant in the subject or
context,-
(a) "Annexure" means annexures appended to these Regulations;
(b) "Bancassurance" means the offering, advertising, distributing, selling and/or
marketing of insurance products by a Bank incorporated under relevant laws of
Pakistan to their account holders / customers / general public through their sales and
distribution channels including but not limited to branches, telemarketing centres,
websites etc. by virtue of Bancassurance Agency Agreement(s) between the Insurer and
the Bank whereby the Bank acts as the corporate agent of the Insurers;
(c) "Bancassurance Agency Agreement" called by whatever name or title, means a legal
contract between the Bank and the Insurer, under which the former acts as the corporate
insurance agent of the latter, meeting all the requirements of the relevant provisions of
the Ordinance and Insurance Rules;
(d) "Bank", for the purpose of these Regulations, means:
(i) a "Banking company" as defined in Clause (vii) of Section 2 of the Ordinance;
or
(ii) a "scheduled bank" as defined in Clause (lvii) of Section 2 of the Ordinance; or
(iii) any other institution or organisation directly or indirectly regulated by the State
Bank of Pakistan;
(e) "Bank Insurance Executive" means an employee of the Bank, by whatever name, title
or designation called, directly or indirectly responsible for managing the Bancassurance
arrangement for the Bank who complies with the provisions of sub-section (1) of
section 96 of the Ordinance, and such individual shall also comply with the provision of
Section 97 of the Ordinance;
(f) "Certification" means the process by which a Specified Person is issued a
certificate jointly by the Bank and the Insurer entitling him to solicit and procure
insurance business on behalf of the Insurer under the Bancassurance Agency
Agreement;
(g) "Commission" means the Securities and Exchange Commission of Pakistan established
under section 3 of the SECP Act 1997;
(h) "Designated Insurance Executive" means an employee of the Insurer, called by
whatever name, title or designation, directly or indirectly responsible for managing the
Bancassurance arrangement with the Bank on behalf of Insurer;
(i) "Direct Sales Model" means a particular bancassurance distribution model whereas the
Bank uses its own sales force to market and distribute insurance products through its
network;
CD "Group Life Insurance Policies" means a life insurance contract having a term not
exceeding one year, offered on yearly renewable term and group underwriting basis
through a master policy document. The policyholder is a company, body corporate,
bank, registered association or any enterprise having a separate legal entity. It excludes
2
Group Life policies with cash values and Individual Life policies which may be sold to
a group of individuals;
(k) "Insurer" means an insurance company registered under the Ordinance to carryon
insurance business;
(1) "Insurance Consultant" means a specified person who is an employee of the Insurer
and is responsible for soliciting and procuring insurance business under the
Bancassurance Agency Agreement;
(m) "Insurance Rules" means the Securities and Exchange Commission (Insurance) Rules
2002, Insurance Rules 2002; and/or Takaful Rules 2005 or any other rule(s) issued
under the Ordinance;
(n) "Ordinance" means the Insurance Ordinance, 2000 ( XXXIX of 2000);
(0) "Persistency" means the ratio of renewal year premiums collected in a policy year to
the premiums due in the same policy year (the premiums due being inclusive of any
increases as a result of a policy provision);
(p) "Policyholder" shall have the same meaning as per Section 2(xlvi) of the Ordinance;
(q) "Protection Products" refer to regular premium individual insurance products with no
element of savings or investments for the policyholder, such as term life policies;
(r) "Referral Model" means a particular bancassurance business distribution model
whereas the Insurer uses its own Insurance Consultants to market and distribute
insurance products through the Banks' distribution network based on sales leads
generated by the Bank;
(s) "Savings Products" refer to regular premium individual life insurance products which
have a savings or investment portion for the policyholder. This includes Investment
Linked Unit Linked policies, Investment Linked Account Value policies, Universal Life
policies, and with/without profits conventional endowment and whole life plans;
(t) "Regulations" means Bancassurance Regulations 2013;
(u) "Specialized Training" includes orientation, particularly in the area of insurance sales,
service and marketing, as per the relevant provisions of the Ordinance, the Rules and
the directives issued by the Commission;
(v) "Specified Person" means either an employee of the Bank or an employee of the
Insurer who has undergone the required practical training, examination, certification in
respect of Bancassurance arrangement/product, and who is responsible for soliciting
and procuring insurance business for the Insurer under the Bancassurance Agency
Agreement; and
(w) "Schedule" means schedules appended to these Regulations.
(2) All words and expressions used in these Regulations but not defined shall have the same
meaning as assigned to them in the Ordinance and the Insurance Rules.
(3) In these Regulations, the word "Takaful may be used interchangeably with the word
'insurance', 'Family Takaful' with 'Life Insurance', 'General Takaful' with 'General Insurance',
3
'contribution' with "premium', 'insured' with 'policyholder' and 'Company' & "Insurer" with
'Takaful Operator'. Similarly other terms used in the Takaful Rules, 2005 associated with the
Takaful business may be used interchangeably with their conventional counterpart
words/terms.
CHAPTER II
NATURE AND SCOPE OF BANCASSURANCE ARRANGEMENTS
3. Basis of Contract.- (I) The sale of all insurance products by any Bank on behalf of an Insurer
must be done in such a manner which demonstrates that the prospective purchaser of insurance
policy makes an offer by signing a proposal form to enter into the insurance contract either
through the Bank, being a corporate Insurance agent on behalf of the Insurer or with the Insurer
directly.
(2) Without the evidence of offer and acceptance, no insurance sale shall be deemed to be
completed and the insurance contract shall be considered null and void.
(3) The role and function of the Bank as a corporate insurance agent shall be subject to the
provisions of Ordinance including but not limited to eligibility, qualification and liability of
insurance agents.
4. Bancassurance Arrangement between Insurer and Bank. (I) Any Bancassurance
arrangement shall not be valid unless it incorporates the following components entered into
written Bancassurance Agency Agreement which shall,
(a) not contain any provisions which reduce in any way the liability or responsibility of the
Insurer towards the Policyholder under the Ordinance and Insurance Rules;
(b) specify any functions which the Insurer, as a part of such arrangement, intends to
delegate to the Bank;
(c) clearly define the Certification process which shall include a definition of the training
required prior to Certification;
(d) contain a provision which clearly states the "termination of agreement' clause and rights
and obligation of the Bank and Insurance Company subsequent to such termination and
such clause shall also state the treatment to be given to existing policyholders and
remuneration to the Bank subsequent to the termination; and
(e) contain a provision whereby the Bank explicitly agrees to adhere to the provisions of
these Regulations and the provisions of the Ordinance and the Insurance Rules in its
capacity as a corporate insurance agent.
5. Premium Collection.- (1) The Insurer may assign the responsibility of collecting premiums
due on policies once issued through the Bank but before it does this, the Insurer shall ensure
4
that the Bank has the necessary premium collection system, such as automated direct debit
system, debit on credit cards or any other system, in place.
(2) Where the Insurer is not satisfied with the Bank's capability to collect regular premiums and to
effectively follow up on premiums due but not paid, the premium collection function shall be
controlled by the Insurer.
(3) The Insurer shall also ensure that the Bank's premium collection system is effectively working
and, if it is not, shall take such action as is required to ensure that it is effective, including the
withdrawal of the premium collection function from the Bank,
(4) The Bank shall always pay the gross premium to the Insurer and shall not retain any part of the
insurance premium received from the policyholders for payment to the Insurer.
(5) Every Bank shall, with a view to conserve the insurance business already procured through it,
make every attempt to ensure remittance of the premiums by the policyholders within the
stipulated time, by notifying the policyholders orally and in writing, or through other means
such as call centre email or SMS and the Insurance Company shall advise the Bank of its
desired level of business persistency from time to time and the Bank shall make all reasonable
efforts to ensure that its systems and processes are in place to meet these levels.
(6) In the case of life Insurance, the Insurer shall also ensure that notices under Section 93 of the
Ordinance are sent to the policy holders.
(7) Any payment for premium made by the policyholder and received by the Bank shall be deemed
to constitute payment to the Insurer.
6. Marketing Brochures and Sales materia\.- (1) The content and layout of all marketing and
sales related materials used to solicit Bancassurance business shall be approved both by the
Bank and the Insurer and should not be in conflict with applicable insurance laws and
regulations.
(2) In all such material the relative roles of the Bank and the Insurer shall clearly be stated at a
prominent place and such statement must particularly contain the fact that the Bank's role is
that of a corporate insurance agent and that the Insurer as principal is responsible for all
liabilities under the policy and in all such material the name, address and contact details of the
Insurer shall be mentioned at a prominent place.
(3) The market conduct rules and rules issued in respect of the insurance agent by the Commission
shall be observed by the Bank.
(4) For Life Insurance, wherever applicable, Illustration of benefits, on the prescribed format
provided by the Insurer shall be signed by the Specified Person and the intending Policyholder
and any insurance proposal, where the Illustration of benefits is missing, unsigned or is not
based on the product parameters mentioned in the proposal form, shall not be accepted by the
Insurer for any further process.
7. Claims Handling.- (1) Under the Bancassurance arrangement, the claim adjudication
and settlement shall be the responsibility of the Insurer and the Bank shall playa facilitating
role by assisting the policyholder or nominee(s), as the case may be, in claim processing. The
contact details of the Insurer for claim settlement shall be prominently displayed on the
insurance contract and also be made available by the Insurer to the Bank so that the
information can be cascaded to the policyholder or nominee(s) at the time of claim intimation.
5
(2) The Bank shall facilitate the Insurer in all possible manner in collecting the necessary
documents and information related to claims, as requested by the Insurer and the Bank shall
not question the information requested by the Insurer for claim adjudication and settlement,
and shall not interfere with or influence the decision of the Insurer regarding the payment or
repudiation of a claim.
(3) The Insurer shall make the claim settlement directly in the name of the policyholder or his
nominee, as the case may be.
8. Commission Payable to Banlc- (1) The level of commission payable to the Bank for
its role of soliciting and procuring insurance business as corporate insurance agent may vary
based on any performance criteria which the Insurer and Bank may agree and the rates and
structure of the commission shall be clearly mentioned in the Bancassurance Agency
Agreement.
(2) Any commission to be paid by the Insurer to the Bank must be computed on premiums
received by the Insurer and under no circumstances the commission on premiums to be
received in future, be paid.
(3) The Bank shall not charge, to the policyholder, any service fee, processing fee, administration
charge or any other charge unless such a charge has been included by the Insurer in the
premium and communicated to the policyholder in advance.
(4) Nothing in Regulation 8(1) shall prevent the Insurer from sharing any third party costs incurred
by the Bank related to advertising or development of marketing material.
(5) The following shall be applicable for Life Insurers, in addition to those stated above:
(a) The commission payable to the Bank shall be in the form as set out in these Regulations
and shall not exceed the limits set out in these Regulations; and
(b) Any sharing of third party costs incurred by the Bank related to advertising or
development of marketing material shall be subject to any limits prescribed in these
Regulations.
9. Pricing /Risk AssessmentlInsurance Related Documents.- (I) Pricing of insurance
products shall be the sole domain of the Insurer and the Bank shall not interfere in this process.
(2) Risk assessment, determining the risk premium and insurance underwriting shall be the
responsibility of the Insurer and the Bank shall not interfere in this process.
(3) Where the Insurer has provided automated underwriting software to the Bank to accept and
underwrite insurance proposals, the Bank may use the system based on the exact guidelines
provided by the Insurer.
(For insurance proposals underwritten through such a system, and
where the policy can be issued immediately without referring the proposal to the Insurer, the
6
Bank, based on the guidelines provided by the Insurer, may issue policy/certificate/document
to the Policyholder).
(4) The Bank shall abide by the guidelines provided by the Insurer for usage of the automated
underwriting computer system and the use of the system by any sales channel of the Bank does
not imply in any way, or entitle the Bank to represent itself or act as the insurance underwriter.
(5) The Bank's name shall not appear in the policy document as this could mislead or deceive the
buyer of the insurance product and all requirements for new products (for life insurance), as
mentioned in the Ordinance, shall be complied with by the Insurer.
(6) The Insurer shall submit a copy of the Bancassurance Agency Agreement that it has entered
into with the Bank for the record of the Commission within 7 days of its execution. This
requirement shall apply to both Life and Non-Life Insurers.
CHAPTER III
CODE OF CONDUCT FOR BANK, INSURER AND SPECIFIED PERSONS
10. Code of Conduct for Bank.- (I) Every Bank shall,-
(a) ensure that the Bank Insurance Executive and all Specified Persons are properly trained
as per the relevant provisions of the Ordinance and possess sound knowledge of the
insurance products they would market, and have undergone the process of the
Certification.
(b) ensure that the Bank Insurance Executive and the Specified Person do not make any
misrepresentation or make misleading statement to the prospect on policy benefits and
returns available under the policy which may tantamount to misleading or being
deceptive under the relevant provisions of the Ordinance in respect of the market
conduct.
(c) ensure that no prospect is coerced by the Bank Insurance Executive or Specified Person
to buy an insurance product.
(d) give adequate pre-sale and post-sale advices to the prospective insured in respect of the
insurance product.
(e) extend all possible assistance and cooperation to an insured/nominee in completion of all
formalities and documentation in the event of a claim; and
(f) give due publicity to the fact that the Bank does not underwrite the risk or act as an
Insurer;
7
11. Code of Conduct for Bank Insurance Executives and Specified Persons.
(1) Every Bank Insurance Executive or Specified Person shall,-
(a) identify that the Bank is acting as an agent of the Insurer at every meeting with the
prospect and shall always ensure mentioning the name of the Insurer to the prospect;
(b) disseminate the requisite information in respect of the insurance products offered for sale
by the Insurer and take into account the needs of the prospect while
recommending/tailoring a specific insurance plan;
(c) indicate the premium to be charged by the Insurer for the insurance product offered for
sale;
(d) for an insurance product which is bundled with a Bank product, mention the cost of the
insurance product and the Bank product separately;
(e) guide the prospect in completing the proposal form and also explain to him the
importance of disclosure of material information required under the relevant insurance
contracts;
(f) obtain the requisite documents at the time of completion of the proposal form by the
prospect and other documents subsequently asked by the Insurer in connection
therewith; and
(g) render such assistance to the policyholder or claimant or nominee, as may be required in
complying with the requirements for settlement of claims by the Insurer.
(2) No Specified person shall,-
(a) solicit or procure insurance business without undergoing the Certification process;
(b) give information to the prospect which deviates from the information provided by the
Insurer with regard to the insurance product;
(c) induce or misguide the prospect to avoid disclosing any material information in the
proposal form;
(d) induce or misguide the prospect to submit wrong information in the proposal form or
documents submitted to the Insurer for acceptance of the proposal;
(e) behave in a discourteous manner with the prospect;
(f) interfere with any proposal introduced by any other Specified Person or any insurance
agent of the Insurer;
(g) offer different rates, benefits, terms and conditions other than those offered or agreed by
the Insurer;
(h) demand or receive a share of proceeds from the policyholder or claimant or nominee
under an insurance contract;
(i) force a policyholder to terminate the existing policy and to effect a new proposal from
him within three years from the date of such termination; and
(j) become or remain a director of any Insurer;
8
CHPATERIV
LIMIT ON THE COMMISSION PAYABLE TO BANK
12. Direct Sales ModeI.- Where Bank uses its own sales force to market and distribute insurance
products through its own distribution channel then such a model shall be referred to as the
Direct Sales Model.
(a) Regular Premium Individual Life Plans> (Savings Products and Protection Products)
(i) First Policy Year Commission to Bank.- In the first policy year the
commission to the bank will be subject to the maximum limit given as per Table
Al in Schedule to these Regulations;
(ii) Renewal years commission to Bank.- For the bank's efforts in collecting
second year and subsequent year's premium the second policy year commission
and subsequent policy year commission to the Bank (as a % of the
corresponding policy year collected premium) will be subject to the maximum
limit given as per Table Al in Schedule to these Regulations;
Share in Investment Management Charge (as an alternative to second policy
year and onwards commission rate); Starting from the second policy year
onwards, for Investment Linked Unit Linked and Investment Linked Account
Value products, the Insurer shall be allowed to share with the Bank, a part of the
Investment Management Fee as a % of the net asset value (NAY) of the
underlying unit linked fund, or the investment fund up to the extent of the fund
attributable to the policies procured through the Bank. The maximum share of
the Bank in the NAV shall at any time not exceed 50% of the total Investment
Management Fee charged by the Insurer on the fund to the extent of the policies
procured through the Bank, up to a maximum of 0.75% per annum of the NAV.
(iii) Production Bonus.- In lieu of a lower first policy year commission, an
Insurer shall be allowed to pay Production Bonus to the Bank linked to
achievement of mutually agreed new business targets. The sum of the
Production Bonus percentage and first policy year commission shall not exceed
the maximum commission rate mentioned in Schedule to these Regulations. The
Production Bonus in aggregate as a % of the first policy year collected premium
shall not exceed 5%.
(iv) Persistency Bonus> For the Bank's efforts in collecting renewal premium, and
improving and maintaining persistency, an Insurer shall be allowed to pay
9
Persistency Bonus to the Bank based on minimum persistency level achieved and
the rates as per as per Table Al in Schedule to these Regulations. An Insurer
may split Sth year and onward commission rates into upfront commission and
targeted persistency level.
(v) Maximum Aggregate Commission.- The maximum commission payable, i.e.
cumulative First policy year, Second policy year and Subsequent policy year
onwards commission, as stated above, over the entire premium paying term of a
policy shall not exceed the maximum limits prescribed as per Schedule to these
Regulations. For policies with premium paying terms between 10 and 20 years,
or terms less than 10 years, these limits shall be prorated according to premium
paying term.
(b) The maximum commission limits as per Schedule to these Regulations will also be
applicable for Single Premium Savings products, Regular Preminm annuities, Regular
premium personal accident type policies, Group Term Life Policies for retail customers
of Bank, including yearly renewable term policies, personal accident policies, Gronp
credit life and similar products.
13. Sales and Marketing Incentives to Banks> To promote Bancassurance business, an Insurer
shall be allowed to share with the Bank in the costs of sales and marketing incentives including
sales conventions and awards called by whatever name. The share of the Insurer in such
activities shall not exceed S% of the first policy year collected premium.
14. Referral Model.- (I) If an Insurer uses its own 'Insurance Consultants" to market and
distribute insurance products through the Banks' distribution channel based on sales leads
generated by the Bank such a model shall be referred to henceforth as the "Referral Model".
(a) The total direct expenses incurred by the Insurer in respect of new business as
commission to the Bank, salaries and commission to its Insurance Consultants, sales
and marketing incentives to the Bank or its Insurance Consultants and Production
Bonuses shall be within the aggregate of all first year limits prescribed in 13 and 14
above for each type of product.
(b) The total second year and renewal year direct expenses incurred by the Insurer such as
commission to the Bank and/or Its Insurance Consultants, and Persistency Bonus shall
be within the aggregate of all second and third year onwards limits prescribed in 13
above for each type of product.
(c) The following shall apply to Regular Premium Individual Life Plans (Savings Products
and Protection Products), to addition to IS(a) and IS(b) where relevant:
10
(i) First Policy Year Commission to Bank (as % of first year collected premium):
The first year commission to the bank shall be as per Table B in Schedule. The
Insurer may, based on the product structure, link the commission rate to the
premium paying term of the policy, subject to the condition that the maximum
commission at any premium paying term shall not exceed the above maximum
limit).
(ii) Renewal Year Commission to Bank.- Bank's effects in collecting second policy
year and renewal premium, Commission to Bank (as a % of the second year
collected premium) as per Table B under Schedule to these Regulations.
Persistency Bonus: For the Bank's efforts in collecting renewal premium, and
improving and maintaining persistency, an Insurer shall be allowed to pay
Persistency Bonus to the Bank based on minimum persistency level achieved and
the rates as per Table B under Schedule to these Regulations. An Insurer may
split SUI year and onward commission rates into upfront commission and targeted
persistency level.
(iii) where the Bank agrees to a commission rate which is less than the maximum
prescribed in Schedule, the Insurer shall have the option to pay the difference in
the commission rate as part of the second or later years' commission, provided the
product structure permits such a commission structure.
(2) An Insurer shall not give commission to a Bank in any manner other than as described
above in this section.
15. Commission Claw-back>
(I) Discontinuation of Life Insurance Policies: If a regular premium individual life
insurance policy is discontinued during the first policy year or before the payment of
second year annual premium, then the following shall be applicable:
(a) where the premium payment mode is annual and the reason for discontinuation is
lapsation due to non-payment of second year premium within the grace period, then
the entire first year commission paid by the Insurer to the Bank will be clawed back
and paid to the Policyholder;
(b) where the premium payment mode is annual and the reason for discontinuation
during the first policy year is surrender at the request of the Policyholder on the
11
grounds of being missold, then the entire first year commission paid by the Insurer
to the Bank will be clawed back and paid to the Policyholder;
(c) where the premium payment mode is non-annual and the reason for discontinuation
is lapsation due to non-payment of premium during the first policy year including
the grace period, then the entire first year commission paid by the Insurer to the
Bank will be clawed back and paid to the Policyholder; and
(d) where the premium payment mode is non-annual and the reason for discontinuation
during the first policy year is surrender at the request of the Policyholder on the
grounds of being missold, then the entire first year commission paid by the Insurer
to the Bank will be clawed back and paid to the Policyholder.
(2) Reduction in Premium:
(a) Excessive Reduction: If during the second policy year, the annual premium of a
regular premium individual life insurance policy is reduced by more than 20% of
the original annual premium, then the excessive reduction i.e. the difference
between actual reduction and allowed reduction of 20% will deemed to be an ad-
hoc premium paid by the Policyholder in the first policy year as a single year
premium. The excessive reduction in the annual premium will be transferred to the
Policyholder's investment or unit value to give an effect that such differential
cornnusston is paid by the Policyholder along with the most recent premium
payment.
(b) Differential Commission on Excessive Reduction: The differential commissron
will be calculated by applying the difference in commission rate in the first year
between a regular premium plan and single premium plan on the excessive
reduction. The differential commission will be clawed back from the Bank and
retained by the Insurer.
16. Minimum Surrender Values.- (I) This Section is applicable for regular premium
individual life investment plans offered under a bancassurance arrangement as investment
contracts (i.e. either investment linked unit linked policy or investment linked account value
policy) or conventional non-linked policy with cash value.
(2) Where an investment contract is discontinued as per paragraphs (a) to (d) under Rule 16(1),
then the Insurer will pay 100% of the Policyholder's investment account or unit value to the
Policyholder along with the commission clawed-back.
12
(3) If a conventional non-linked individual life policy (with cash value) is discontinued as per
paragraphs (a) to (d) under Rule 16(1), then the Insurer will pay 30% of the first year premium
to the Policyholder along with the commission clawed back.
(4) For the purpose of sub-regulation (2) above, the account value or unit value shall be calculated
based on the unit valuation methodology in respect of in-force policies as on the expiry of the
grace period of the policy.
17. Sales Process for Bancassurance Business>
(1) Insurance Need Analysis Document.- No life insurance policy will be sold through
bancassurance channel unless the specified person has carried out an "Insurance Need
Analysis" of the prospective customer. A general format has been given in Annexure to these
Regulations containing the minimum aspects to be covered by such a document. An Insurer
may use a different format for additional information.
(2) Illustration to be given in both Urdu aud English Iauguages.- No life insurance
policy will be sold unless the "illustration" is given in both Urdu and English languages and
comprehensively explained to a prospect.
(3) Illustration to be givcn as a stand-alone document.- The Bank shall ensure that the
illustration has been given to a prospect as a stand-alone document enabling him to take an
informed decision considering the appropriateness of a particular insurance product with his
identified insurance needs. The Bank shall ensure that there must be a reasonable time period
available to a prospect to understand the illustration before purchasing a life insurance product.
18. Minimum Financial Protection uuder Regular Premium Individual Life Plaus.-
(1) All life Insurers carrying out unit linked business shall offer the unit linked products
whereas the financial protection component (i.e. life insurance coverage) shall not be less than
as specified in table below:
Type of Product
Minimum Financial Protection
(life insurance cover for death due to any cause)
Regular premium individual life contracts
10 times the basic annual premium
(Endowment, wholelife etc.)
Child education / marriage or family income The present value of the income benefit
benefit contracts (where no fixed sum cover calculated at policy inception shall not be less
is paid on death due to any cause) than 10 times the basic annual premium
Single premium contracts / funds
1.25 times the premium amount
accelerated / adhoc / top-up premium
I3
(2) For children education, children marriage, family income benefit and similar plans the
present val ue shall be calculated on the same basis as being used for determining the sum cover
to be ceded to Re-insurer under existing reinsurance arrangement of the Insurer.
19. Minimum Term of the Regular Premium Individual Life Plans. No Insurer shall issue an
individual life insurance regular premium (saving) plan of a term shorter than 5 years through
the bancassurance channel.
20. Recycling of Life Insurance Policies.-
(l) Where a regular premium individual life policy is lapsed I surrendered during the first
three policy years, then unless that policy is reinstated I revived, a Bank will not sale a new
individual life policy to the same Policyholder through the same Insurer or through a different
Insurer within a year from the effective date of the policy acquiring lapsed I surrendered status.
(2) Where a regular premium individual life policy is lapsed I surrendered after the third
policy year, than unless that policy is reinstated I revived or the Policyholder has separately
consented to that effect, a Bank will not sale a similar new individual life policy to the same
Policyholder through the same Insurer or through a different Insurer within a year from the
effective date of the policy acquiring lapsed I surrendered status.
21. Minimum Financial Underwriting> (I) An Insurer will consider the regular income
of the proposed Policyholder in determining the affordability of the policy from the
Policyholders' perspective:
Explanations- For the purpose of this sub-regulation, the amount of the annual premium shall
not be more than 20% of the regular annual income of the Policyholder.
(2) An Insurer should consider, amongst other pertinent factors, the average balance maintained by
the prospect at the concerned Bank during at least the last year in assessing his annual regular
income.
22. After Sale Call by the Insurer to All Policyholders.- (l) The Insurer shall make a
structured telephonic call within the free look period to all Policyholders to confirm their
understanding of the product, appropriateness of the product considering the identified
insurance needs and affordability of the product for the entire term. The Insurer will retain the
record of such calls, preferably using Interactive Voice Response System, for at least 5 years or
maturity of the product whichever is earlier.
14
(2) Where the policyholder gives an adverse response, the Insurer will return the premium to the
policyholder within 15 days of such call.
CHPATERV
REGULATORY REPORTING OF BANCASSURANCE BUSINESS
23. Financial Reporting.- Every Insurer shall at the expiration of each year prepare and
deliver to the Commission with reference to that year's annual bancassurance business, the
following statement duly audited by an approved auditor:
(a) Statement of premium (for aggregate bancassurance business)
(b) Statement of premium (for each Bank)
(c) Statement of expenses (for aggregate bancassurance business)
(d) Statement of expenses (for each Bank)
(e) Statement of claim (for aggregate bancassurance business)
(f) Statement of claim (for each Bank)
(g) Such other statements as may be prescribed by the Commission
24. Information to be provided in Financial Condition Report (FCR) in respect of
Bancassurance Business.- Every Insurer carrying out bancassurance business shall prepare
and file with the Commission the following statements which shall be annexed to the financial
condition report, as required under Section 50 of the Ordinance and the formats of these forms
should be in accordance with the Annexure IV to the SEep (Insurance) Rules 2002 as
modified on 9 January 2012 or any subsequent modification. If this information relates to a
shorter period than a year, the forms may be adjusted accordingly.
(a) in respect ofInvestment Linked Business:
(i) Form LB-I;
(ii) Form LB-2;
(iii) Form LB-3;
(iv) Form DD;
(v) Form DDD; and
(vi) Form DDDD;
(b) in respect of Non-Investment Linked Business:
(i) Form NLB-I;
(ii) Form DD;
(iii) Form DDD;
15
(iv) Form DDDD;
(c) in respect of Universal Life and Universal Life Hybrid Business:
(i) Form ULB-I;
(ii) Form DD;
(iii) Form DDD; and
(iv) Form DDDD;
(d) in respect of Accident and Health Insurance Business, -
(i) Form NLB-1.
(e) Summary statements:
(i) Form H;
(ii) Form I; and
(iii) Statement of Composition and Distribution of surplus in respect of Policyholders'
fund
25. Reporting of Statement of Maximum Management Expenses.- In addition to the
information required under (I) and (2) above, every Insurer once a year, along with the
Statement of Maximum Management Expenses as required under Sections 22(9) and 23(9) of
the Ordinance, file an itemized computation for each Bank and product. This statement shall be
certified by the external auditor and Appointed Actuary.
26. RepeaI.- Bancassurance Guidelines 2010 is hereby repealed.
16
Schedule
Maximum Limits on Commission Payable to Bank in a Specific Policy Year
(These limits are subject to the aggregate limits as per Table B below whereas the proportionate reduction to be applied on each
year's maximum commission rate)
Tobie AJ. Direct Sales Model
40%
NA
NA
2.5%
2.5%
Commission
Rufc
Year4+
NA
5%
NA
50%
7.5%
NA
NA
5%
10%
2.5%
"Year3
NA
NA
90%
80%
90%
NA
NA
40%

Total Commissio
'Minimum
Coinmis'siri'it n Rate
Rate
2.5% 90% 5% 7.5% 2.5%
NA NA NA NA NA
2.5% 90% 2.5% 5% 2.5%
30% 80% 10% 40% 30%
NA NA NA NA NA
2.5%
2.5%
Regular Premium
Individual Life 45% 5% 80% 10% 15%
Plans
Single Premium
4% NA NA NA NA
Investment Plans
Regular Premium
10% 2.5% 80% 2.5% 5%
Annuities
Regular Premium
50% 40% 80% 10% 50%
Personal Accident
Group Credit Life
50% NA NA NA NA
and Similar Plans
Table A2. Referral Model

Commission
',Rate":
.",Rate'-'-

Regular Premium
Individual Life 35% 5% 80% 10% 15%
Plans
Single Premium
4% NA NA NA NA
Investment Plans
Regular Premium
7.5% 2.5% 80% 2.5% 5%
Annuities
Regular Premium
40% 30% 80% 10% 40%
Personal Accident
Group Credit Life
40% NA NA NA NA
and Similar Plans
Table B. Maximum Limits on Aggregate Commission Payable to a Bank over Entire Policy Term
-"",. .",,-,,'"

(excludin'g persisteucy bouus) for ".

." "<,'-, -"-'-",'/""""'.,-,", """, ',,,c-'';'>'''-'
Direct Sales Model
Referral Model
95%
85%
65%
55%
30%
25%
On linear
proportionate basis
17
Annexure
Insurance Need Analysis ofMr. _
I " '
Name
Address
Telephone (Landline / Mobile)
E-mailId
Date of birth
Marital status
State of health ExcellenVVery good/Good/Moderate/Poor
" .
Smoker YeslNo
I ' , ", "" ~ t ~ i l l i ~ ~ = = = = = = = = = = = = = ~
Number of dependents
Details of dependents I 2 3 4 5
Name
Relationship
Age
State of Health (ExcellenVVery Good/
Good/ Moderate/Poor)
Occupation
Income ifany
Whether financially dependent
Anv scope of expansion offamilv YeslNo
',' ; ;, ',' " " ",m
Occupation
Length of service
Annual Income
Covered under pension scheme?
Normal retirement age
" < ,,' '
Value of Savings and Assets
Details of Liabilities/ Outstanding Loan
Expected Inheritance
, .' ,'.
Emplover's Scheme/Insurance
Personal Contribution/Premium
Retirement Age
Anticipated Value
"", '., ' , ;,'
.
For Education for Children
For Wedding
For House Purchase
Others
I, ' , '. ",
I
.No. "
I
I
18
"///X'g}}]: //g./]g:];:;iii]]i]g:};fi
,.ride ......l...iii
...:i:]ii
What is more important for you? (Please numher in order of priority)
Financial Security for family in the event of death
Financial Security in the event of Critical JIIness
Providing Retirement Income
Planning for your children's education
Planning for your children's wedding
Building capital through regular saving
Investing existing capital for better return
]"']1}',:", ,/';j!! i!<;;;.;iU; ii'xU;;;1!, 'xiXeX;;'x; ii. 'x ii
Life Insurance (Death/Maturity)
Desirable Sum Assured
Health Insurance
Desirable limit of coverage per annum
Savings and Investment Planning
Desirable returns per annum
Pension planning
Desirable pension per annum
g'x!vv;gVV/:';il}/ i
/
i"'" .;;.; .... ":;xi"II]Anv: 1']Je,}"g':
;;;;";'k,}
ii, I'IV;"""';;/ i99]/,'ii;i9Vii//iii
';'/ ,i/i;:/';,
Childhood/Young unmarried/Young married/ Young married
Life stage with children/married with older children/post-family or pre-
retirement/ retirement
Protection needs Life & Health/Savings and Investment/Pension
Appetite for risk Low/Medium/High
Policv recommended, including name oflnsurer
Commitment for the current/future vears
Whether all risk elements and details of charges
to be incurred and all other obligations have been
explained
Whv vou think this nollcv is most suited prospect
Agent's Certification:
I /We hereby certify that I/we believe that the product/s recommended me/us above is suitable for the prospect,
based on the information submitted by him/her, as recorded above.
Dated: _
(Name and Signature of Agent)
Prospect's Acknowledgement:
The above recommendation is based on the information provided by me. I have been explained about the features of
the product and believe it would be suitable for me based on my insurance needs and financial objectives.
Dated: _
(Signature of Prospect)
19

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