Smc cg resolutions

Single Member Company

Single Member Company• Private Company• One Member Company• (SMC-Private) Limited is written after name• Company secretary shall be appointed• Sole Director can not become Company

Secretary• Nominee Director and Alternative Nominee

Director also nominated by Single Member.• Quorum is 1 for meeting

Directors In SMCSOLE DIRECTOR NOMINEE DIRECTOR ALTERNATE NOMINEE

DIRECTORMeans the director of a single member companywho is for the time being the only director.

means an individual nominated by a singlemember to act as director in case of his death;

Single Member files nomination of nominee Director with the registrar at the time of incorporation on Form S1

means an individual nominated by asingle member to act as nominee director in case of no availabilityof nominee director

Single Member files nomination of nominee Director with the registrar at the time of incorporation on Form S1

SOLE DIRECTOR NOMINEE DIRECTOR ALTERNATE NOMINEE DIRECTOR

He can not serve as Company Secretary in addition to responsibility of Sole Director

Manage The Affairs Of The Company In Case Of Death Of Single Member Till The Transfer Of Shares To Legal Heirs Of The Single Member

He can be Member of the company.He has same power as given in section 196 of Companies Ordinance 1984

Transfer the shares to legal heirs of the single member; and call the general meeting of the members to elect directors.

Directors In SMC

SMC converts into Normal Private Company

Transfer o f Shares/ Shares Allotment

Death of Member Operation of Law

Pass Special Resolution; Nominee Director transfer the Shares to legal successors within 1-7 days of death of Member

Pass Special Resolution;

Pass Special Resolution;

Alter AOA (Add RPL) within 1-30 days of allotment / transfer of Shares

Alter AOA (add RPL) within 1-30 days of allotment / transfer of Shares

Alter AOA (add RPL) within 1-30 days of allotment / transfer of Shares

Appoint additional director if existing Director is one. Within 1-15 days and inform to ROC within 1-14 days

Appoint additional director if existing Director is one. Within 1-15 days and inform to ROC within 1-14 days

Appoint additional director if existing Director is one. Within 1-15 days and inform to ROC within 1-14 days

Important clauses of AOA of a private

Company

Restriction Prohibition Limitation

Transfer of sharesSubscription of

shares & Debentures to General Public

Of members from 2 to 50

excluding employees

NOTE AOA : IF IBA HAD DEW CAP ARE FOR BOTH PRIVATE AND PUBLIC

COMPANIES

RPL

COMPANY SECRETARY• A single member company (SMC) shall appoint a company secretary within

fifteen days of incorporation or of becoming a SMC

• The secretary shall be appointed at the time of incorporation and subsequently on the same day or the day next following his resignation or removal or in case of his death within seven days of the event

• Inform to ROC with 1-14 days for appointment or new appointment.

• Company shall attend all meeting but shall not have Voting power

• Company secretary does same function and in SMC It shall also be incumbent upon the company secretary to inform the registrar concerned about the death of the single member.

• Can be removed by Sole Director or Single Member

Separate person

Sole Director

Company Secretary

Normal Private Company become SMC

• Passes a special resolution for change of its status and makes necessary alteration in its AOA

• Obtains approval of the Commission within 1-30 days of passing Special Resolution.

• After approval Reduce members to 1 only.

• Change in Share Register

• Change BOD, if necessary

• Intimation to ROC within 1-14 days

• Nominee Director and Alternate nominee directors are to be appointed

• Changes after Name TCS (SMC-Private) Limited

• Registrar issues Certificate

Important clauses of AOA of a private

Company

Restriction Prohibition Limitation

Transfer of sharesSubscription of

shares & Debentures to General Public

Of members from 2 to 50

excluding employees

NOTE AOA : IF IBA HAD DEW CAP ARE FOR BOTH PRIVATE AND PUBLIC

COMPANIES

RPL

Changes in AOA remove RPL and Add following in AOA so private company becomes SMC

• (a) it shall not issue invitation to the public to subscribe for any share of the

• company;

• (b) the company shall not register any share(s) in the name of two or more persons to hold one or more shares individually or jointly; and

• (c) number of the members of the company shall be limited to one.

Meetings of directors and members

• Enables or requires any matter to be done or to be decided by directors or members, as the case may be, of the company; or

• Requires any matter to be decided by a resolution of the directors or members, as the case may be, of the company,

• Such matters shall be deemed to be satisfied if the decision is taken by the single member or sole director, as the case may be, and is drawn up in writing and recorded in the minutes book

Member Director

• Means an individual becoming director due to Shareholding/Membership of the company.

AOA

• (a) it shall not issue invitation to the public to subscribe for any share of the company;

• (b) the company shall not register any share(s) in the name of two or more persons to hold one or more shares individually or jointly; and

• (c) number of the members of the company shall be limited to one.

Corporate Governance OverviewThe responsibilities in corporate governance apply largely to accountability and ethical strategy.

World COM Listed at NASDAK USA Stock

Exchange

Took over 60

Companies

$7 Billion expenses

not recorded

Paid $37 Billion & bought

60 Companies

$2 Billion additional

income shown

Default declared in

2002 $41 billion

AT & T is number 1, W. Com was No. 2

Now W. Com is being run under

Business Horizon

World largest Bankruptcy

Use of Corporate Governance is now Must

Resolution passed in Board Meeting

Through Circulation In meeting

Meeting is counted

Meeting is not counted

Question : Test of Knowledge A director is serving on the board of 10 listed companies including three listed subsidiary companies of a holding

company. Is he compliant with the requirement of maximum number of directorships of the revised code?

• Yes, maximum number of directorships of seven does not include listed subsidiaries of a listed holding company.

Director in Board

Independent Directors

Maximum Executive Directors

Maximum number of Executive Directors cannot be more than

1/3rd of elected directors including CEO

while preference is for 1/3rd of the total members of the board to be independent directors.

One independent director is mandatory

Representation of following Directors in Board

Non-executive Directors

Directors Representing Minority Interests On Its

Board Of Directors Independent

Directors: Tax Payer & Not Defaulted

If Director is a member of a stock exchange, has not been declared as a defaulter by that stock exchange

None of them has defaulted in payment of

any loan to a banking company, a DFI or an

NBFI

All the resident directors of the company are registered as taxpayers

Remuneration of Directors

Disclosure Of Aggregate Remuneration In The Annual Report.

Formal And Transparent Procedure To Be

Followed

Training of the Board of Directors

Training Program must which meets the criteria specified by the SECP.

It will be mandatory for directors of

listed companies to attain

CERTIFICATION under any director training program

Training of the Board of Directors

• It will be mandatory for directors of listed companies to attain certification under any director training program (DTP) offered by any institution (local or foreign), which meets the criteria specified by the SECP.

• The criteria are available at the websites of the stock exchanges and the SECP.

Board Evaluation

The Board Has To Put In Place / Develop

Within Two Years Of The Implementation Of The

Code 2012

Mechanism For Undertaking Annual Evaluation Of The

Performance Of The Board.

Maximum Directorship

• A director can be on the board of 7 listed companies at the most at any one time.

• However, the limit does not include directorship in listed subsidiaries of a listed holding company.

Maximum Directorship

Excluding A director can be on the board of 7 listed

companies at the most at any one

timePrivate

Company

Subsidiary Companies

SMC

Unlisted Company

Board Evaluation

• Within two years of the implementation of the Code 2012, the Board has to put in place a mechanism for undertaking annual evaluation of the performance of the Board.

Chairman & CEO

• The Chairman and CEO shall not be the same person, unless specifically provided in any other law.

• The Chairman shall be elected from amongst the non-executive directors of the listed company.

Shall be elected from amongst the Non-Executive Directors of the listed company.

The Chairman of Board of Directors

unless specifically provided in any

other law

Chief Executive Officer

shall not be CEO shall not be

Chairman

Directors’ Training Program

• All listed companies shall make appropriate arrangements to carry out orientation courses for their directors to acquaint them with this code, applicable laws, their duties and responsibilities to enable them to effectively manage the affairs of the listed companies for and on behalf of shareholders.

• It shall be mandatory for all the directors of the listed companies to have certification under any directors’ training program offered by institutions—local or foreign—that meet the criteria specified by the SECP:

If a foreign director on the board of a listed company has already participated in a director training program abroad, then will it

still be mandatory for him to attend the orientation and director training program as required by the Code 2012?

• It is mandatory for the company to provide orientation to all directors - local and foreign.

• An orientation should cover the relevant information about the company as well as the relevant governing laws, rules and regulations.

• Foreign directors who have received training aboard shall be exempt from Directors’ Training Program (DTP) requirement of the Code 2012 if the program they attended broadly covered the areas stated in the criteria specified by the SECP for the purpose.

Approval of Accounts which are duly reviewed &

Audited

Audit Committee or

The Board Of Directors

Second Quarter & Annual Accounts

Second Quarter & Annual Accounts

OR

Circulation of Quarterly Accounts to Members, ROC,

SECP, Stock Exchange

Corporate Governance

Companies Ordinance

Does not require Directors review

report

Add also Directors review report

Attending of Meeting of Board Meeting

Company SecretaryCFO

CFO and Company Secretary shall not attend such part of a meeting of the Board of Directors, which involves consideration of an agenda item relating to the CFO and Company Secretary respectively

Removal

Company Secretary

Internal Audit Head

By the approval of Board of Directors

Outsource Internal Audit

Other than Statutory Audit

FirmAllowed but

Must not be Statutory Auditors

Outsourcing Internal Audit Function

• The internal audit function may be outsourced by a listed company to a professional services firm or be performed by the internal audit staff of the holding company.

• In the event of outsourcing the internal audit function, the company shall appoint or designate a fulltime employee other than the CFO, as Head of Internal Audit, to act as coordinator between the firm providing internal audit services and the board.

OUTSOURCING OF INERNAL AUDIT

• Can CFO work as head of Internal Audit if company has taken services from outside?– NO………… He is accounting man. Audit &

Accounting are two different work.– AN Internal Audit had must be appointed whether

outsource option is availed or not.

Outsourcing Internal Audit Function

In the event of outsourcing the internal audit function, the company shall appoint or designate a fulltime employee.

May Be Outsourced By A Listed Company To A Professional Services

Firm Or

other than the CFO, as Head of Internal Audit,

to act as coordinator between

Be Performed By The Internal Audit Staff Of The Holding Company.

the firm providing outsource Internal audit services and

the board

Internal Audit Staff Of The Holding

Company

Board of Directors

Must appoint Head of Internal

Audit

Who looks after the Internal

Control & Audit Functions

In case of out Source, He liaison the

Professional firm

with

BOD

Departments of organization

Audit Committee:

• The Chairman of the audit committee shall be an independent director, who shall not be the chairman of the board.

• Audit Committee shall comprise of non-executive directors.

• The secretary of Audit Committee shall either be the Company Secretary or Head of Internal Audit. However, the CFO shall not be appointed as the secretary to the Audit Committee

Audit Committee

Established by Listed Company 3 Members

Out of 3 one member must

understand Financial

Statements and Economics

One Chairman

2 other Members

Normally members are non Executive DirectorBut Independent

Directors are preferred

Human Resource & Remuneration Committee

Members(Preferred

Independent Director)

Chairman

Other members

CEO is alsoIncluded by Board in

HR & RC

CEO

Gives

Consideration about people

reporting to him

Shall not participate

If proceedings relates to CEO

benefits

Responsible

Recommending to Board for

HR Policy Succession Plan

Executive CompensationConsideration for CEO

Chairman Audit Committee

Shall Not Be The Chairman Of The Board.

Shall Be An INDEPENDENT

DIRECTOR

Minimum Meeting of Audit Committee at least one meeting in each Quarter

Quarter 1 Quarter 4Quarter 3Quarter 2

More than 1 meeting in each quarter is possible

Who can be appointed as the secretary of the Audit Committee?

• The secretary of the Audit Committee shall either be the Company Secretary or Head of Internal Audit.

• However, the CFO shall not be appointed as the secretary to the Audit Committee.

Secretary

Company Secretary Head of Internal Audit

Chief Financial Officer

Audit Committee

May be Not possible

Audit Committee Meeting

approval of interim and final results of the

company and as required by the CCG

AT LEAST ONCE EVERY QUARTER

Head of Internal Audit

No person shall be appointed as the Head of Internal Audit of a listed company unless he/she has 5 years of relevant audit experience and

Member of a recognized

body of professional accountants;

Certified Internal Auditor;

Certified Internal Control Auditor

Certified Fraud Examiner

individuals serving as Head of Internal Audit of a listed company for the last five years at the time of coming into effect of this Code shall be exempted

from the above qualification requirement

Head of Internal Audit

a director cannot be appointed,

in any capacity, in the internal audit function

Appointment , Remuneration and Term of

Employment

CFOCompany Secretary

Internal Audit Head

Determine by Board of Directors

Separate Person

Head of Internal Audit

Company Secretary

Can the positions of company secretary and internal auditor be given to one person within a listed company?

• No. The two positions carry minimal synergy and, therefore, should be performed by separate persons.

Mr. Ali both

CFOCompany Secretary

Mr. Ali can not be Secretary of Audit Committee. Any employee who is conversant in secretarial work then be

appointed as Secretary audit Committee.

Preferred Separate Person

CFOCompany Secretary

If CFO and Company Secretary are same person than Company Secretary can not be Secretary of Audit Committee. Any employee

who is conversant in secretarial work then be appointed as Secretary audit Committee.

Preferred to be different Person

Legal Advisor of the Company

Company Secretary

Though their work are to some extent same but Legal Advisor should be different

Person

Holding Company may provide

PROFESSIONAL SERVICE TO SUBSIDIARY

However, due care should be exercised to comply with the directives of the SECP in appointing external auditors to provide

other professional services

Holding Company can provide Professional Services to Subsidiaries

• In case of a holding company and a subsidiary (not wholly owned), both being listed companies, can the holding company for the purpose of handling operational and financial activities, provide professional services to the subsidiary through a service contract

• The holding company may provide professional services to its subsidiary.

• However, due care should be exercised to comply with the directives of the SECP in appointing external auditors to provide other professional services.

are mandated to present to

CFO CEO

Annual Accounts (Both Separate And Consolidated) And

Second-quarter (Only Separate/Stand-alone) Reviewed And Initialed By External Auditor,

Audit Committee Board

For The Purposes Of Identification, the responsibility of preparation of financial statements rests with the management in accordance with

provisions of the Companies Ordinance, 1984

Are consolidated accounts for the second quarter required to be reviewed by the statutory auditors?

• Consolidated accounts for the second quarter are not required to be reviewed by the statutory auditors.

• The requirement for the auditors to initial the financial statements has been introduced to ensure that only the accounts duly reviewed or audited are presented for the approval of the Audit Committee and the board.

What is meant by closed period?

• The closed period is a period during which no director, CEO or executive shall, directly or indirectly, deal in the shares of the listed company in any manner.

• It is expected that such a restriction would help minimize the risk of insider trading by key management/directors of the company.

CLOSED PERIOD

RESTRICTION Period A PERIOD DURING WHICH

NO

DIRECTOR, EXECUTIVE CEO

DIRECTLY OR INDIRECTLY

Deal In The Shares Of The Listed Company In Any Manner

such a restriction would help minimize

the risk of insider trading by key

management/directors of the company

CLOSED PERIOD

RESTRICTION Period

Shall Start From The Day When Any Document/Statement, Which Forms The Basis Of Price Sensitive

Information

Start Terminate

After The Information Is Told

To/Made Public

Is Sent To The Board Of Directors

Can the same person be appointed as the CFO and the CS of a listed company?

• The terms of reference of the two positions are distinct. It is, therefore, preferred that separate persons handle the functions of the CFO and company secretary within a listed company.

• The SECP Circular No 15 of July 8, 2003 also requires listed companies to have full time employee designated to perform specific assignments of company secretary

Requirement to attend board meetings

• The CFO and Company Secretary of a listed company or in their absence, the nominee, appointed by the board, shall attend all meetings of the Board of Directors.

• In the following issues CFO & Company Secretary shall not attend meeting of the Board of Directors, – which involves consideration (Incentive, increments,

benefits) of an agenda item relating to the CFO and Company Secretary respectively.

Passing of resolution no in meeting but by circulation

No face to face meeting. Resolution is acceptable but

meeting Is not counted

Can a broker be appointed as a director of a listed company?

• The Code 2012 does not restrict election/nomination of brokers on the boards of listed companies.

• However, the Companies Ordinance states that no person shall be appointed as a

– Director of a listed company if he/she is engaged in the business of brokerage, or is a spouse of such person or is a sponsor, director or officer of a corporate brokerage house.

• Therefore a broker cannot be appointed as a director on the board of a listed company.

Should the disclosure in the directors' report regarding the number of board meetings held during a year include the

number of resolutions passed by the board by circulation?

• The number of resolutions passed by the board of directors of a listed company through circulation should not be considered in determining the number of board meetings held during a year for the purpose of the Code 2012.

Can a director of a listed company be appointed as the head of internal audit of the company?

• The internal audit function of a listed company must be independent from the management/directors of a listed company. Therefore, a director cannot be appointed, in any capacity, in the internal audit function.

Can the offices of company secretary and legal advisor be held by one person, since both of them are required to be lawyers under the Code 2012 and the

Companies (Appointment of Legal Advisors) Act, 1974, respectively?

• The position of legal advisor in a company is a key appointment and is of executive nature, duties of which should not be expected to be fulfilled by a person who is also engaged in other responsibilities.

• As per the 1974 Rules a legal advisor must be an “Advocate” and not merely a lawyer. Therefore qualification for the two positions in not the same. 31

• Also, the SECP vide its Circular No 15 of July 8, 2003, reinforces that companies should engage full-time employees to perform functions of a "whole time secretary".

Significant Policies• Governance• Risk Management• Investors relations• Procurement of Goods & Services• Marketing• Determination of Credit terms & Discounts• Writing off Bad Debts• Investment & Disinvestment of funds• Planning & Controls• Expenditure capital in nature• Human Resource Management & Succession Plans• Code GRIP-MD-WIPE-H

Disclosure of Related Parties• Party wise maintenance of record • Supporting documents• Terms & Conditions• Received or paid in advance• Amount of transaction• Name of related parties• Nature of relationship• Nature of transaction

Secretarial Compliance Certificate

• Company Secretary shall furnish annually Compliance Certificate in prescribed form to ROC

• It means all Legal Compliance as per law has made & fulfilled / Completed by Company.

Audit Committee

• Who are not allowed to be part of Audit Committee?

• CEO• CFO• Head Internal Audit• The Best person for Audit committee are

Executive Directors

Qualification of Internal Auditor

• Member of Professional Body• CA, ACCA, CIMA, ICMA, CPA, CIA• Master degree in Business administration with

specialization in Finance. (MBA-Finance), M.Com in Finance.

• Local or Master degree in Finance.• Experience 3 years

Out Source of Internal Audit Function

• It is preferred to have inside Internal Audit Function Department

• Company must hire proper experienced & qualified people who perform Inter audit functions

• Law allows to take services of outsiders but Statutory Auditors are not allowed to serve Internal Audit functions

Description Executive Directors Non Executive Directors

Normally / Generally Paid (ON payroll of Company)

unpaid

Powers Dependent to Baord Independent to Board

Devotion Work -full time Normally do not work full time

Involvement in Management affairs

More Less

Directors Though Appointment Generally by election

Items mentioned on Dividend warrant

• Gross amount of dividend• Deduction of tax• Deduction of Zakat• Net Amount

When Change does not mean Change of Name

• Removal of Private Limited• TCS (Pvt) Limited– IF IT BECOMES Public Company it becomes TCS

Limited

• Addition of Private Limited• Unilever Pakistan Limited is a public Company– If it becomes private company it becomes Unilever

Pakistan (Private) Limited

Description Executive Directors Non Executive Directors

Normally / Generally Paid (ON payroll of Company)

unpaid

Powers Dependent to Board Independent to Board

Devotion Work -full time Normally do not work full time

Involvement in Management affairs

More Less

Directors Though Appointment Generally by election

•Resolution