Role of board of directors -Corporate Governance

Rehan Ehsan
Rehan EhsanFinance Professional. Researcher um The University Of Lahore
ROLE OF BOARDROLE OF BOARD
M.PHIL (FINANCE) An Under- Doctorate StudyM.PHIL (FINANCE) An Under- Doctorate Study
 What is Corporate Governance? (DEFINATION)
 Board
◦ Definition
◦ Explanation
 Literature Review (Dr. Tariq Hassan)
 Literature Review (WEB ACCESS)
 Role of Board Under section 174-197 of the
Companies Ordinance 1984:
◦ Check List (Overview)
◦ Explanation of Each Section of C/O 1984 mentioned above
 Conclusion
 Corporate governance is a term that refers broadly to the
rules, processes, or laws by which businesses are
operated, regulated, and controlled. The term can refer to
internal factors defined by the officers, stockholders or
constitution of a corporation, as well as to external forces
such as consumer groups, clients, and government
regulations.
 In Pakistan Corporate Governance is carried out through
Companies Ordinance 1984 under the supervision of
Securities and Exchange commission of Pakistan (SECP)
and Company Courts.
 Board is a collective name of directors. It is the top
administrative organ of a company with wide
powers in regard to management of company.
 A board of directors is a vital part of any corporation.
While staff and management take care of the day-to-
day activities, a board of directors sets the policies
that govern that corporation,
The roles of the board of directors include :-
Establish vision, mission and values
 Determine the company's vision and mission to
guide and set the pace for its current operations
and future development.
 Determine the values to be promoted throughout
the company.
 Determine and review company goals.
 Determine company policies
 Review and evaluate present and future
opportunities, threats and risks in the external
environment and current and future strengths,
weaknesses and risks relating to the company.
 Determine the business strategies and plans.
 Ensure that the company's organizational
structure and capability are appropriate.
 Exercise accountability to shareholders and be
responsible to relevant stakeholders
 Ensure that communications both to and from
shareholders and relevant stakeholders are effective.
 Monitor relations with shareholders and relevant
stakeholders by gathering and evaluation of
appropriate information.
 Promote the goodwill and support of shareholders
and relevant stakeholders.
 Delegate authority to management, and monitor
and evaluate the implementation of policies,
strategies and business plans.
 Determine monitoring criteria to be used by the
board.
 Ensure that internal controls are effective.
 Communicate with senior management.
Every listed company shall ensure
a. Statement of Ethics and Business practices is
prepared
b. Board of directors to adopt vision statement, and
overall corporate strategy; formulate significant
policies (for the purpose of risk management,
marketing, etc.)
c. Establish internal control
d. Documentation by resolutions passed in meetings
on all serious issues. i.e. investment and dis-
investment of funds, loans, write-off of bad debts
etc.
 To make calls on shareholders in respect of moneys unpaid on
their shares
 To issue Shares/ Debentures
 To borrow money
 To invest the funds of the company
 To make loans
 To approve Accounts (Annual, Half Yearly, Quarterly.
  Non-Executive Director (NED) or outside
director is a member of the board of directors of a
company who does not form part of the executive
management team. He or she is not an employee of
the company or affiliated with it in any other way. They
are differentiated from inside directors, who are
members of the board who also serve or previously
served as executive managers of the company.
 Non-executive directors have responsibilities in the
following areas, according to the Higgs Report,
commissioned by the British Government and
published in 2003.
 Strategy: Non-executive directors should
constructively challenge and contribute to the
development of strategy.
 Performance: Non-executive directors should
scrutinize the performance of management in meeting
agreed goals and objectives and monitoring, and
where necessary removing, senior management and in
succession planning.
 Risk: Non-executive directors should satisfy
themselves that financial information is accurate and
that financial controls and systems of risk management
are robust and defensible.
 People: Non-executive directors are responsible for
determining appropriate levels of remuneration of
executive directors and have a prime role in
 Avoidance of potential conflicts of interest
 Protection of Minority Shareholders’ Rights
 Exercising Independent Judgment
 Investor Confidence
 Independent Directors as counter balance
 A director of a listed company who has a direct
or indirect interest in any contract or
arrangement to which the company is or intends
to be a party must disclose the nature of this
interest at a meeting of the directors.
 Where a director – or his relative – has such an
interest, he may not deliberate or vote on the
matter, and his presence does not contribute to
the formation of a quorum. Where a director
represents a substantial shareholder, he should
consider himself as having an interest and
proceed on that basis.
 In addition to reporting on the financial statements and
accounting notes, the annual directors’ report must
report on the state of the company’s affairs, and disclose
any material changes affecting its financial position or
the nature of the business. Where a loss is incurred, this
must be explained. The report must also provide a
reasonable indication of future profit prospects.
 Debt defaults must also be fully disclosed and explained.
 The directors of a listed company are criminally liable for
failure to comply with these statutory disclosure
requirements.
 The SECP code requires the boards of directors of
listed companies to provide for a code of conduct
which the company and its personnel must observe.
Non-compliance constitutes a breach of the listing
rules and could affect the listing of the company’s
securities. Subject to this requirement, compliance
is left to each individual company
 Apart from issues relating to taxation, related-party
transactions are governed by company law. All such
transactions must be shown to have been
concluded on an arm’s-length basis. The SECP
code requires the approval of all such transactions
by the audit committee and the board of directors.
LITERATURE REVIEWLITERATURE REVIEWLITERATURE REVIEWLITERATURE REVIEW
 In the context of Pakistan, the need for good corporate governance assumes a
more significant dimension given the corporate culture and the fact that an
overwhelming number of companies are closely held. The need for reasonable
representation in corporate decision-making process for all stakeholders of a 4
company thus assumes a striking significance in the scheme of corporate
governance in Pakistan. The board of directors in a company has the overall
responsibility for management and direction of its affairs. In this regard, the
directors should exercise strategic oversight of business operations while directly
monitoring, measuring and rewarding management’s performance. The board
should also ensure the integrity of accounting and financial reporting systems and
oversee the process of disclosure and communications. The board’s responsibilities
inherently demand the exercise of judgment. Guiding business strategy,
determining an appropriate corporate appetite for risk or selecting a chief executive
from a pool of candidates involves decision-making that cannot be reduced to a
mechanical series of steps. Monitoring and supervisory functions may comprise a
range of reasonable approaches. In the end, healthy corporate profits do not
guarantee that directors performed well, nor losses prove that directors were
careless or incompetent. The board of directors has the responsibility to ensure that
corporate behavior conforms to best governance practices. This requires directors
to exhibit certain behavioral norms, including:
(a) informed and deliberative decision-making;
b) division of authority;
(c) effective monitoring of management; and
 The above norms stand in contrast to business practices that
often prevail in family or closely run companies abundant in
Pakistan. In closely held companies, a single family or group
appoints the entire board of directors. The governance of such
companies often relies on private, informal decision making,
deference to authority and loyalty based on long-term personal
relationships; in such cases, even if legal norms clearly fix
directors’ duties, human nature and cultural patterns can lead to
divided loyalties. The relatively large number of listed, family –
run firms in Pakistan and other emerging markets makes the
transition to internationalized behavioral norms particularly
important and challenging. Behavioral norms also affect
shareholders and regulators. For both cultural and practical
reasons, Asian shareholders often prove reluctant to litigate or to
assert formally their legal rights. This reluctance places greater
pressure on regulators and raises capacity and infrastructural
challenges for Asian corporate governance frameworks.
1. Provide continuity for the organization by setting up a corporation or legal existence, and to
represent the organization's point of view through interpretation of its products and services, and
advocacy for them
2. Select and appoint a chief executive to whom responsibility for the administration of the
organization is delegated, including:
- to review and evaluate his/her performance regularly on the basis of a specific job
description, including executive relations with the board, leadership in the organization, in
product/service/program planning and implementation, and in management of the organization and its
personnel
- to offer administrative guidance and determine whether to retain or dismiss the executive
3. Govern the organization by broad policies and objectives, formulated and agreed upon
by the chief executive and employees, including to assign priorities and ensure the organization's
capacity to carry out products/services/programs by continually reviewing its work
4. Acquire sufficient resources for the organization's operations and to finance the
products/services/programs adequately
5. Account to the stockholders (in the case of a for-profit) or public (in the case of a
nonprofit) for the products and services of the organization and expenditures  of its
funds, including:
- to provide for fiscal accountability, approve the budget, and formulate policies related to
contracts from public or private resources
- to accept responsibility for all conditions and policies attached to new, innovative, or
experimental products/services/programs.
Board Source, in their booklet "Ten Basic Responsibilities of Nonprofit
Boards", itemize the following 10 responsibilities for nonprofit boards.
(However, these responsibilities are also relevant to for-profit boards.)
1. Determine the Organization's Mission and Purpose
2. Select the Executive
3. Support the Executive and Review His or Her Performance
4. Ensure Effective Organizational Planning
5. Ensure Adequate Resources
6. Manage Resources Effectively
7. Determine and Monitor the Organization's Products, Services and
Programs
8. Enhance the Organization's Public Image
9. Serve as a Court of Appeal
10. Assess Its Own Performance
 174 Minimum number of directors
 175. Only natural persons to be directors
 176. First directors and their term
 177. Retirement of directors
 178. Procedure for election of directors
 179. Circumstances in which election of directors may be
declared invalid
 180. Term of office of directors
 181. Removal of director
 182. Creditors may nominate directors
 183. Certain provisions not to apply to directors
representing special interests
 184. Consent to act as director to be filed with registrar
 185. Validity of acts of directors
 186. Penalties
 187. Ineligibility of certain persons to become director
 188. Vacation of office by the directors
 189. Penalty for unqualified person acting as director, etc.
 190. Ineligibility of bankrupt to act as director, etc.
 191. Restriction on director's remuneration, etc.
 192. Restriction on assignment of office by directors
 193. Proceedings of directors
 194. Liabilities, etc., of directors and officers
 195. Loans to directors, etc.
 196. Powers of directors
 197. Prohibition regarding making of political contributions
 197-A Prohibition regarding distribution of gifts
(a) Every single member company shall have at
least one director.
(b) Every other Private Company shall have not
less than two Directors.
(c) Every Public Company other than a listed
company shall have not less than three
directors.
(d) Every listed company shall have not less
seven directors to be elected in a general
meeting in the manner provided in this
(Ordinance).
o Under Section 175 of the C/O 1984 Only Natural Person to be
directors.
 The first Directors shall be
determined in writing by a majority of
the subscribes of the memorandum.
 The First directors shall hold office
until the election of directors in the
first annual general meeting.
On the date of first annual general meeting of a
company all directors of the company for the time
being who are subject to election shall stand
retired from office.
Any person who seeks to contest an election to the
office director shall whether he is a retiring
director or otherwise, file with the company not
later than 14 days before the date of meeting.
Election of Directors:
The candidate who gets the highest number of
votes shall be declared elected as director and
then the candidate who gets the next highest
number of votes shall be declared and so on until
the total number of directors to be elected has
been so elected.
On the application of Members holding not less
than twenty per cent of the voting power in the
Company, made within thirty days of the date
of election.
The director elected under section 178 shall
hold office for a period three years unless he
earlier resigns, becomes disqualified from being
director.
A company may be resolution in general meeting
remove a director appointed under section 176
(First Director) and Section 180 (Resigns or
completion of three years.)
A company may have directors nominated by the
company’s Creditors or other or other special
interests by virtue of contractual Agreement.
Nothing in section 178 (Procedure Election of
Directors, Section 180 Terms of office of Directors,
Section 181 Removal of Directors
Directors nominated by the Federal Government or
Provincial Government on the Board of Directors of
the Company
No person shall be appointed or nominated as a
director or chief Executive of a company, unless such
person or such other person has given his consent in
writing for such appointment or nomination.
No Act of a Director or of a meeting of Directors
attended by him, shall be invalid merely on the
ground of any defect subsequently discovered in his
appointment to such office.
Fails to comply with any of the provisions of section
174 to 185 shall be Liable to a fine which may be
extend to ten thousand rupees.
 is a minor
 Is of unsound mind
 Insolvent
 Involving immoral act
 Lack of fiduciary behavior
 Declared defaulter by the court.
 Is member of Stock exchange.
He absents himself from three consecutive meetings
of the directors for continuous period of three
months.
To fine may extended to two hundred
rupees.
If any person being an un discharged insolvent acts
as Chief Executive, director or managing agent of a
company, he shall be liable to imprisonment for a
term not exceeding two year, or fine not exceeding
ten thousand rupees or both.
Extra Services---Determined by Director in General
meeting---According to provision of Companies
article and shall not exceed the Pay scales.
No effect unless and un till it is approved by a
special resolution of the company.
The quorum for a meeting of directors of a
listed company shall not be less than one
third of their number or four which ever is
greater.
Any liability which virtue of any law would
otherwise attach to him in respect of any
negligence, default, breach of duty or breach of
trust of which he may be guilty in relation to the
company, shall be void.
 The Directors shall Exercise the following power on behalf of the
Company:-
 To make calls on shareholders in respect of moneys unpaid on their shares
 To issue Shares/ Debentures
 To borrow money
 To invest the funds of the company
 To make loans
 To approve Accounts (Annual, Half Yearly, Quarterly.
 To approve bonus to employees.
 To incur capital Expenditure.
 To declare interim dividend
 Accounts Related matters
 Write off bad debts, advance and receivables.
 Write off inventories and other assets of the company.
 Any political party for any political purpose to any
individual or body.
 Every director and officer of the company who is
knowingly and willfully in default shall be
punishable with imprisonment of either description
for a term which may extend to two year and shall
be liable to fine.
o A company shall not distribute gifts in any form to
its members in its meetings.
If Default
o Fine not exceeding five hundred thousand rupees.
 The directors report regarding their responsibility
for preparing the annual report is set out in the
directors report and the independent auditors
report regarding their reporting responsibility
 COMPOSITION
 FREQUENCY OF MEETINGS
 TERMS OF REFERENCE
 REPORTING PROCEDURE
 APPOINTMENT AND APPROVAL
 QUALIFICATION OF CFO AND COMPANY
SECRETARY
 REQUIREMENT TO ATTEND BOARD
MEETINGS
 THE DIRECTORS’ REPORT TO
SHAREHOLDERS
 FREQUENCY OF FINANCIAL REPORTING
 RESPONSIBILITY FOR FINANCIAL REPORTING
AND CORPORATE COMPLIANCE
 DISCLOSURE OF INTEREST BY A DIRECTOR
HOLDING COMPANY’S SHARES
 AUDITORS NOT TO HOLD SHARES
 The Chairman of a listed company, if present, shall preside
over meetings of the Board of Directors.
 The Board of Directors of a listed company shall meet at
least once in every quarter of the financial year. Written
notices (including agenda) of meetings shall be circulated
not less than seven days before the meetings, except in the
case of emergency meetings, where the notice period may
be reduced or waived.
 The Chairman of a listed company shall ensure that minutes
of meetings of the Board of Directors are appropriately
recorded. The minutes of meetings shall be circulated to
directors and officers entitled to attend Board meetings not
later than 30 days thereof, unless a shorter period is
provided in the listed company’s Articles of Association.
 In the event that a director of a listed company is of the
view that his dissenting (disagreed) note has not been
satisfactorily recorded in the minutes of a meeting of the
Board of Directors, he may refer the matter to the
Company Secretary. The director may require the note
to be appended (Add) to the minutes, failing which he
may file an objection with the Securities and Exchange
Commission of Pakistan.
 Nomination Committee
 MEMBERSHIP
 MEETINGS
 ANNUAL GENERAL MEETING
 AUTHORITY
 DUTIES
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Role of board of directors -Corporate Governance

  • 1. ROLE OF BOARDROLE OF BOARD M.PHIL (FINANCE) An Under- Doctorate StudyM.PHIL (FINANCE) An Under- Doctorate Study
  • 2.  What is Corporate Governance? (DEFINATION)  Board ◦ Definition ◦ Explanation  Literature Review (Dr. Tariq Hassan)  Literature Review (WEB ACCESS)  Role of Board Under section 174-197 of the Companies Ordinance 1984: ◦ Check List (Overview) ◦ Explanation of Each Section of C/O 1984 mentioned above  Conclusion
  • 3.  Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations.  In Pakistan Corporate Governance is carried out through Companies Ordinance 1984 under the supervision of Securities and Exchange commission of Pakistan (SECP) and Company Courts.
  • 4.  Board is a collective name of directors. It is the top administrative organ of a company with wide powers in regard to management of company.
  • 5.  A board of directors is a vital part of any corporation. While staff and management take care of the day-to- day activities, a board of directors sets the policies that govern that corporation,
  • 6. The roles of the board of directors include :- Establish vision, mission and values  Determine the company's vision and mission to guide and set the pace for its current operations and future development.  Determine the values to be promoted throughout the company.  Determine and review company goals.  Determine company policies
  • 7.  Review and evaluate present and future opportunities, threats and risks in the external environment and current and future strengths, weaknesses and risks relating to the company.  Determine the business strategies and plans.  Ensure that the company's organizational structure and capability are appropriate.
  • 8.  Exercise accountability to shareholders and be responsible to relevant stakeholders  Ensure that communications both to and from shareholders and relevant stakeholders are effective.  Monitor relations with shareholders and relevant stakeholders by gathering and evaluation of appropriate information.  Promote the goodwill and support of shareholders and relevant stakeholders.
  • 9.  Delegate authority to management, and monitor and evaluate the implementation of policies, strategies and business plans.  Determine monitoring criteria to be used by the board.  Ensure that internal controls are effective.  Communicate with senior management.
  • 10. Every listed company shall ensure a. Statement of Ethics and Business practices is prepared b. Board of directors to adopt vision statement, and overall corporate strategy; formulate significant policies (for the purpose of risk management, marketing, etc.) c. Establish internal control d. Documentation by resolutions passed in meetings on all serious issues. i.e. investment and dis- investment of funds, loans, write-off of bad debts etc.
  • 11.  To make calls on shareholders in respect of moneys unpaid on their shares  To issue Shares/ Debentures  To borrow money  To invest the funds of the company  To make loans  To approve Accounts (Annual, Half Yearly, Quarterly.
  • 12.   Non-Executive Director (NED) or outside director is a member of the board of directors of a company who does not form part of the executive management team. He or she is not an employee of the company or affiliated with it in any other way. They are differentiated from inside directors, who are members of the board who also serve or previously served as executive managers of the company.  Non-executive directors have responsibilities in the following areas, according to the Higgs Report, commissioned by the British Government and published in 2003.
  • 13.  Strategy: Non-executive directors should constructively challenge and contribute to the development of strategy.  Performance: Non-executive directors should scrutinize the performance of management in meeting agreed goals and objectives and monitoring, and where necessary removing, senior management and in succession planning.  Risk: Non-executive directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.  People: Non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in
  • 14.  Avoidance of potential conflicts of interest  Protection of Minority Shareholders’ Rights  Exercising Independent Judgment  Investor Confidence  Independent Directors as counter balance
  • 15.  A director of a listed company who has a direct or indirect interest in any contract or arrangement to which the company is or intends to be a party must disclose the nature of this interest at a meeting of the directors.  Where a director – or his relative – has such an interest, he may not deliberate or vote on the matter, and his presence does not contribute to the formation of a quorum. Where a director represents a substantial shareholder, he should consider himself as having an interest and proceed on that basis.
  • 16.  In addition to reporting on the financial statements and accounting notes, the annual directors’ report must report on the state of the company’s affairs, and disclose any material changes affecting its financial position or the nature of the business. Where a loss is incurred, this must be explained. The report must also provide a reasonable indication of future profit prospects.  Debt defaults must also be fully disclosed and explained.  The directors of a listed company are criminally liable for failure to comply with these statutory disclosure requirements.
  • 17.  The SECP code requires the boards of directors of listed companies to provide for a code of conduct which the company and its personnel must observe. Non-compliance constitutes a breach of the listing rules and could affect the listing of the company’s securities. Subject to this requirement, compliance is left to each individual company  Apart from issues relating to taxation, related-party transactions are governed by company law. All such transactions must be shown to have been concluded on an arm’s-length basis. The SECP code requires the approval of all such transactions by the audit committee and the board of directors.
  • 19.  In the context of Pakistan, the need for good corporate governance assumes a more significant dimension given the corporate culture and the fact that an overwhelming number of companies are closely held. The need for reasonable representation in corporate decision-making process for all stakeholders of a 4 company thus assumes a striking significance in the scheme of corporate governance in Pakistan. The board of directors in a company has the overall responsibility for management and direction of its affairs. In this regard, the directors should exercise strategic oversight of business operations while directly monitoring, measuring and rewarding management’s performance. The board should also ensure the integrity of accounting and financial reporting systems and oversee the process of disclosure and communications. The board’s responsibilities inherently demand the exercise of judgment. Guiding business strategy, determining an appropriate corporate appetite for risk or selecting a chief executive from a pool of candidates involves decision-making that cannot be reduced to a mechanical series of steps. Monitoring and supervisory functions may comprise a range of reasonable approaches. In the end, healthy corporate profits do not guarantee that directors performed well, nor losses prove that directors were careless or incompetent. The board of directors has the responsibility to ensure that corporate behavior conforms to best governance practices. This requires directors to exhibit certain behavioral norms, including: (a) informed and deliberative decision-making; b) division of authority; (c) effective monitoring of management; and
  • 20.  The above norms stand in contrast to business practices that often prevail in family or closely run companies abundant in Pakistan. In closely held companies, a single family or group appoints the entire board of directors. The governance of such companies often relies on private, informal decision making, deference to authority and loyalty based on long-term personal relationships; in such cases, even if legal norms clearly fix directors’ duties, human nature and cultural patterns can lead to divided loyalties. The relatively large number of listed, family – run firms in Pakistan and other emerging markets makes the transition to internationalized behavioral norms particularly important and challenging. Behavioral norms also affect shareholders and regulators. For both cultural and practical reasons, Asian shareholders often prove reluctant to litigate or to assert formally their legal rights. This reluctance places greater pressure on regulators and raises capacity and infrastructural challenges for Asian corporate governance frameworks.
  • 21. 1. Provide continuity for the organization by setting up a corporation or legal existence, and to represent the organization's point of view through interpretation of its products and services, and advocacy for them 2. Select and appoint a chief executive to whom responsibility for the administration of the organization is delegated, including: - to review and evaluate his/her performance regularly on the basis of a specific job description, including executive relations with the board, leadership in the organization, in product/service/program planning and implementation, and in management of the organization and its personnel - to offer administrative guidance and determine whether to retain or dismiss the executive 3. Govern the organization by broad policies and objectives, formulated and agreed upon by the chief executive and employees, including to assign priorities and ensure the organization's capacity to carry out products/services/programs by continually reviewing its work 4. Acquire sufficient resources for the organization's operations and to finance the products/services/programs adequately 5. Account to the stockholders (in the case of a for-profit) or public (in the case of a nonprofit) for the products and services of the organization and expenditures  of its funds, including: - to provide for fiscal accountability, approve the budget, and formulate policies related to contracts from public or private resources - to accept responsibility for all conditions and policies attached to new, innovative, or experimental products/services/programs.
  • 22. Board Source, in their booklet "Ten Basic Responsibilities of Nonprofit Boards", itemize the following 10 responsibilities for nonprofit boards. (However, these responsibilities are also relevant to for-profit boards.) 1. Determine the Organization's Mission and Purpose 2. Select the Executive 3. Support the Executive and Review His or Her Performance 4. Ensure Effective Organizational Planning 5. Ensure Adequate Resources 6. Manage Resources Effectively 7. Determine and Monitor the Organization's Products, Services and Programs 8. Enhance the Organization's Public Image 9. Serve as a Court of Appeal 10. Assess Its Own Performance
  • 23.  174 Minimum number of directors  175. Only natural persons to be directors  176. First directors and their term  177. Retirement of directors  178. Procedure for election of directors  179. Circumstances in which election of directors may be declared invalid  180. Term of office of directors  181. Removal of director  182. Creditors may nominate directors  183. Certain provisions not to apply to directors representing special interests  184. Consent to act as director to be filed with registrar
  • 24.  185. Validity of acts of directors  186. Penalties  187. Ineligibility of certain persons to become director  188. Vacation of office by the directors  189. Penalty for unqualified person acting as director, etc.  190. Ineligibility of bankrupt to act as director, etc.  191. Restriction on director's remuneration, etc.  192. Restriction on assignment of office by directors  193. Proceedings of directors  194. Liabilities, etc., of directors and officers  195. Loans to directors, etc.  196. Powers of directors  197. Prohibition regarding making of political contributions  197-A Prohibition regarding distribution of gifts
  • 25. (a) Every single member company shall have at least one director. (b) Every other Private Company shall have not less than two Directors. (c) Every Public Company other than a listed company shall have not less than three directors. (d) Every listed company shall have not less seven directors to be elected in a general meeting in the manner provided in this (Ordinance).
  • 26. o Under Section 175 of the C/O 1984 Only Natural Person to be directors.
  • 27.  The first Directors shall be determined in writing by a majority of the subscribes of the memorandum.  The First directors shall hold office until the election of directors in the first annual general meeting.
  • 28. On the date of first annual general meeting of a company all directors of the company for the time being who are subject to election shall stand retired from office.
  • 29. Any person who seeks to contest an election to the office director shall whether he is a retiring director or otherwise, file with the company not later than 14 days before the date of meeting. Election of Directors: The candidate who gets the highest number of votes shall be declared elected as director and then the candidate who gets the next highest number of votes shall be declared and so on until the total number of directors to be elected has been so elected.
  • 30. On the application of Members holding not less than twenty per cent of the voting power in the Company, made within thirty days of the date of election.
  • 31. The director elected under section 178 shall hold office for a period three years unless he earlier resigns, becomes disqualified from being director.
  • 32. A company may be resolution in general meeting remove a director appointed under section 176 (First Director) and Section 180 (Resigns or completion of three years.)
  • 33. A company may have directors nominated by the company’s Creditors or other or other special interests by virtue of contractual Agreement.
  • 34. Nothing in section 178 (Procedure Election of Directors, Section 180 Terms of office of Directors, Section 181 Removal of Directors Directors nominated by the Federal Government or Provincial Government on the Board of Directors of the Company
  • 35. No person shall be appointed or nominated as a director or chief Executive of a company, unless such person or such other person has given his consent in writing for such appointment or nomination.
  • 36. No Act of a Director or of a meeting of Directors attended by him, shall be invalid merely on the ground of any defect subsequently discovered in his appointment to such office.
  • 37. Fails to comply with any of the provisions of section 174 to 185 shall be Liable to a fine which may be extend to ten thousand rupees.
  • 38.  is a minor  Is of unsound mind  Insolvent  Involving immoral act  Lack of fiduciary behavior  Declared defaulter by the court.  Is member of Stock exchange.
  • 39. He absents himself from three consecutive meetings of the directors for continuous period of three months.
  • 40. To fine may extended to two hundred rupees.
  • 41. If any person being an un discharged insolvent acts as Chief Executive, director or managing agent of a company, he shall be liable to imprisonment for a term not exceeding two year, or fine not exceeding ten thousand rupees or both.
  • 42. Extra Services---Determined by Director in General meeting---According to provision of Companies article and shall not exceed the Pay scales.
  • 43. No effect unless and un till it is approved by a special resolution of the company.
  • 44. The quorum for a meeting of directors of a listed company shall not be less than one third of their number or four which ever is greater.
  • 45. Any liability which virtue of any law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void.
  • 46.  The Directors shall Exercise the following power on behalf of the Company:-  To make calls on shareholders in respect of moneys unpaid on their shares  To issue Shares/ Debentures  To borrow money  To invest the funds of the company  To make loans  To approve Accounts (Annual, Half Yearly, Quarterly.  To approve bonus to employees.  To incur capital Expenditure.  To declare interim dividend  Accounts Related matters  Write off bad debts, advance and receivables.  Write off inventories and other assets of the company.
  • 47.  Any political party for any political purpose to any individual or body.  Every director and officer of the company who is knowingly and willfully in default shall be punishable with imprisonment of either description for a term which may extend to two year and shall be liable to fine.
  • 48. o A company shall not distribute gifts in any form to its members in its meetings. If Default o Fine not exceeding five hundred thousand rupees.
  • 49.  The directors report regarding their responsibility for preparing the annual report is set out in the directors report and the independent auditors report regarding their reporting responsibility
  • 50.  COMPOSITION  FREQUENCY OF MEETINGS  TERMS OF REFERENCE  REPORTING PROCEDURE
  • 51.  APPOINTMENT AND APPROVAL  QUALIFICATION OF CFO AND COMPANY SECRETARY  REQUIREMENT TO ATTEND BOARD MEETINGS
  • 52.  THE DIRECTORS’ REPORT TO SHAREHOLDERS  FREQUENCY OF FINANCIAL REPORTING  RESPONSIBILITY FOR FINANCIAL REPORTING AND CORPORATE COMPLIANCE  DISCLOSURE OF INTEREST BY A DIRECTOR HOLDING COMPANY’S SHARES  AUDITORS NOT TO HOLD SHARES
  • 53.  The Chairman of a listed company, if present, shall preside over meetings of the Board of Directors.  The Board of Directors of a listed company shall meet at least once in every quarter of the financial year. Written notices (including agenda) of meetings shall be circulated not less than seven days before the meetings, except in the case of emergency meetings, where the notice period may be reduced or waived.  The Chairman of a listed company shall ensure that minutes of meetings of the Board of Directors are appropriately recorded. The minutes of meetings shall be circulated to directors and officers entitled to attend Board meetings not later than 30 days thereof, unless a shorter period is provided in the listed company’s Articles of Association.
  • 54.  In the event that a director of a listed company is of the view that his dissenting (disagreed) note has not been satisfactorily recorded in the minutes of a meeting of the Board of Directors, he may refer the matter to the Company Secretary. The director may require the note to be appended (Add) to the minutes, failing which he may file an objection with the Securities and Exchange Commission of Pakistan.  Nomination Committee  MEMBERSHIP  MEETINGS  ANNUAL GENERAL MEETING  AUTHORITY  DUTIES