GOVERNMENT OF PAKISTAN CORPORATE LAW
AUTHORITY
****
NOTIFICATION
Islamabad,
the 1996
SRO (I)/96.- In
exercise of the powers conferred by section 506 of the Companies Ordinance,
1984 (XLVII of 1984) read with
Finance Division Notification No. SRO 698(I)/86, dated July 2, 1986, the
Corporate Law Authority hereby makes the following rules, the same having been
published previously as required by the said section, namely:-
THE LEASING COMPANIES
(ESTABLISHMENT AND REGULATION) RULES, 1996
1. Short title and
commencement .- (1) These rules may be called the Leasing Companies
(Establishment and Regulation) Rules, 1996.
(2) They shall come into force at once.
2. Definitions .- In these rules, unless there is any thing
repugnant in the subject or context:- (a) "Authority" means the
Corporate Law Authority;
(b) "certificate
of investment" means a certificate of investment issued by a leasing
company under these rules;
(c) "company"
means a company incorporated under the Companies Ordinance, l984 (XLVII of
l984);
(d) "leasing
company" means a company engaged wholly in the business of leasing or
which invests in such business at any one time an amount equivalent to atleast
seventy percent of the aggregate of its paid-up share capital and free
reserves;
(e) "Ordinance"
means the Companies Ordinance, l984 (XLVII of l984); and
(f)
In these rules, the words and expressions used shall
have the same meanings as are assigned to them in the Companies Ordinance, 1984
(XLVII of 1984).
3. Eligibility
conditions for the establishment of a leasing company:-A leasing company
may be established if each of its sponsors, proposed directors, proposed chief
executive and proposed chairman of the Board of Directors fulfils certain
specified terms and conditions, namely:-
(a)
he has not been associated with any illegal banking
business, deposit taking or financial dealings;
(b)
he and companies in which he is a director or holds not
less than ten percent beneficial interest , have no over-due loans or
instalments, outstanding towards banks or other financial institutions;
(c)
neither he nor the companies in which he is a director
or holds not less than ten percent beneficial interest , has defaulted in
paying taxes as on the date of application;
(d)
he has not been sponsor, director or chief executive of
a defaulting cooperative finance society or finance company;
(e)
he has never been convicted of fraud or breach of trust
or of an offense involving moral turpitude or removed from service for
misconduct;
(f)
he has neither been adjudged as an insolvent nor has
defaulted in making payments to his creditors;
(g)
except for a nominee director, his net-worth is not
less than the amount to be subscribed by him personally; and
(h)
the proposed chief executive and atleast one of the
proposed sponsor directors have senior management level experience in finance
for atleast five years.
4. Permission to form
a leasing company.- (1) Those desirous of forming a leasing company shall
make an application to the Authority on Form-I providing information as given
in Annexure thereto, alongwith all the relevant documents and treasury receipt
evidencing the payment of nonrefundable processing fee amounting to one hundred
thousand rupees.
(2)
The Authority may, if it is satisfied that the persons
seeking permission to form the leasing company have fulfilled the terms and
conditions specified in rule 3, permit by an order in writing the establishment
of a leasing company, to such persons.
(3)
The permission granted under sub-rule (2) shall be
valid for a period of six months unless extended for a maximum period of three
months under special circumstances, on the application of the promoters made
before the expiry of said six months.
5. Conditions for
grant of licence .-- A leasing company shall not be granted licence unless
it fulfils the following conditions, namely;
(a) it
is incorporated as a public limited company under the Ordinance;
(b) it
has a minimum paid-up share capital of one hundred million rupees;
(c) it
has allotted atleast fifteen percent of the paid-up share capital to the
sponsors/directors; (d) its sponsors / directors shall not dispose of their
shares for a minimum period of three years except with the prior approval of
the Authority;
(e)
it has certified that the chief executive of the
leasing company does not hold such office in any bank or NBFI or insurance
company;
(f)
it has certified that its chief executive and at least
one of the directors have senior management level experience in finance for at
least five years ;
(g)
it has certified that not more than twenty five percent
of its sponsors/directors are from the same family; i.e. spouse, dependent
lineal ascendants and descendents and dependent brothers and sisters; and
(h)
it has appointed as its chief accounting officer who is
a chartered accountant or cost and management accountant or a person having
Master’s Degree in Commerce or Business Administration with at least five years
experience.
6. Commencement of
leasing operations.- (1) A leasing company shall commence business and its
operations only after it has been issued a licence under these rules.
(2) For obtaining a licence to operate as a leasing
company:-
(a)
an application shall be made to the Authority on
Form-II within six months of its incorporation; and
(b)
an undertaking shall be given that no change in the
Memorandum of Association and in the directors shall be made without prior
written authorisation of the Authority and that all conditions of registration
shall be complied with.
(3)
The licence to carry on business as a leasing company
shall be granted by the Authority on Form-III.
(4)
The requirement for obtaining licence within six months
of the date of incorporation shall also be applicable to companies incorporated
before the commencement of these rules.
(5)
Without prejudice to all other conditions under these
rules, the Authority may while granting licence impose any conditions, as it
may deem necessary.
7. Terms and
conditions of operation .- A leasing company shall operate in accordance
with the following conditions, namely:-
(1) It shall -
i) invest
at least seventy per cent of its funds in leasing business;
ii)disclose all loans exceeding twenty
per cent of its paid-up share capital and free reserve in its accounts;
iii)
disclose all loans taken by it and the use of such
loans during a financial year; and iv) maintain accounts of leasing operations
having regard of the International Accounting Standard No.17.
(2) It shall not -
i)
make exposure to a single group for more than twenty
per cent of the over-all portfolio of leasing;
ii)
allow facilities to any of its directors or to
individuals, firms or companies in which it or any of its directors is
interested as partner, director or guarantor, as the case may be; its chief
executive and its shareholders, holding five percent or more of the paid-up
share capital of the leasing company, including their spouses, parents and
children or to firms and companies in which they are interested as partners,
directors or shareholders holding five percent or more of the paid-up share
capital of that concern without the approval of the directors of that leasing
company excluding the director concerned;
iii)
allow unsecured facilities or facilities secured only
by guarantees not being the facilities provided against bank guarantees, the
end use of which will be verified by the leasing company to be productive;
iv)
grant unsecured facilities to or allow facilities on
the guarantee of- (a) any of its directors;
(b) any
of the family members of any of its directors;
(c) any
firm or private company in which the leasing company or any of the persons
referred to in
(a) or (b) is interested as director , proprietor or
partner; or
(d)
any public limited company in which the leasing company
or any of the persons as aforesaid is substantially interested; and
(e)
its chief executive and its shareholders holding five
percent or more of the paid-up share capital of the leasing company, including
their spouses, parents, and children or to firms and companies in which they
are interested as partners, directors or shareholders holding five percent or
more of the paid-up share capital of that concern;
v) undertake
the business of real estate or provide funds to the construction companies,
builders and developers and companies dealing in real estate:
Provided that a leasing company may lease machinery,
equipment and specialised vehicles to the construction companies;
vi) hold,
deal, or trade in real estate except in use of leasing company itself;
vii) engage in leasing
operations pertaining to -
(a) open
land;
(b) buildings
(other than factory building and office building located within or outside the
factory premises to be used exclusively as such by a lessee, subject to a
maximum of 120 square feet per employee and residential undertaking and
warehouses); and c) furniture or furnishing of any type:
Provided that the company may lease hard furniture excluding
carpets and curtains etc., upto five per cent of its portfolio; and viii) fix
the period of lease less than three years in the case of any lease agreement.
(3)
The company shall be subject to such restrictions as
are laid down in the Third Schedule to the Income Tax Ordinance, 1979 (XXXI of
1979) and the rules made thereunder.
(4)
The companies granted licence before the commencement
of these rules and having paid-up share capital less than one hundred million
rupees, shall be required to raise their paid up capital to that limit within
two years from the date of commencement of these rules.
8.
Bar on
purchase or sale by beneficial owners:- A leasing company shall not,
without the prior approval in writing of the Authority, enter into leasing,
renting and sale/purchase of any kind with its directors, officers, employees
or persons who either individually or in concert with family members
beneficially own ten percent or more of the equity of the leasing company
9.
Issue of
certificates of investment .- (1) A leasing company which fulfils the
following conditions, may apply to the Authority for its permission to issue
certificates of investment, namely;
(a) the
company has been actively engaged in leasing business for a period of two years
and has been earning a profit after tax for not less than fifteen percent of
paid-up share capital during the said period:
Provided that the Authority may relax the aforesaid
condition under special circumstances; and
(b) the
corporate and fiduciary conduct of the company and its directors has been
satisfactory.
(2)
If the Authority is satisfied that the company fulfils
the conditions of eligibility specified in subrule (1), it may give permission
to such company to issue certificates of investment.
(3)
All leasing companies issuing certificates of
investment shall observe the following conditions:-
(a)
A certificate of investment issued under these rules
shall be registered in the name of the person to whom it is issued;
(b)
the maturity period of certificate of investment shall
be three months or six months or one year or two years or three years or four
years or five years; provided that a certificate shall be redeemable before its
maturity period but no return shall be paid if redeemed earlier than three
months;
(c)
the company has obtained credit rating of minimum
investment grade from a credit rating agency registered with the Authority
under the Securities and Exchange Ordinance, 1969; (d) the return on
certificates of investment shall be on uniform basis and shall be paid out of
and to the extent of profits of the company;
(e)
no advertisement inviting the general public for making
investment in such certificates shall be published unless prior approval of the
Authority to this effect has been obtained:
Provided that if no decision of the Authority is conveyed to
the leasing company within seven days of the receipt of application, the
advertisement shall be deemed to have been cleared for publication;
(f)
not less than fifteen percent of the resources raised
through certificates of investment shall either be invested in a National
Savings Scheme, registered NIT units, Government securities or listed
securities subject to the conditions as prescribed in the rules made for
investment of provident fund in listed securities.
l0. Submission of
reports, etc. .- (1) The Authority may, by general or special order,
require a leasing company, to prepare and send to members, the registrar, any
authority, a stock exchange and any other person such periodical statement of
accounts, information or other reports in such forms and manner and within such
time, as may be specified in the order.
(2)
The Authority shall monitor the general financial
health of a leasing company, and, at its discretion, may order special audit
and appoint an auditor to carry out detailed scrutiny of the affairs of the
company, or appoint both an auditor and an inspector, provided that the
Authority may, during the pendency of the scrutiny, pass such interim orders
and directions for the due completion of the scrutiny as may be deemed
appropriate.
(3)
On receipt of the special audit report or report from
the inspector, the Authority may direct the company to do or to abstain from
doing certain things and issue directives for immediate compliance which shall
forthwith be complied.
l1. Rate of mark up
and fees .- A leasing company may charge mark up rate on its loans in
accordance with the prevailing rates; provided that where disbursement of loans
is held up by the company for any reasons, the commitment fee charged shall not
exceed one percent of the undisbursed amount of loan.
l3. Insurance
coverage .- A leasing company shall -
(a) obtain sufficient insurance coverage on its own or on
its clients’ benefit against any losses that may be incurred as a result of
employees’ fraud or gross negligence; and (b) ensure that properties being
financed by it have adequate insurance cover.
l4. Bar to certain transactions .- No
leasing company shall -
(a) transfer ownership of controlling shares, merge with,
acquire or take over any other leasing company unless, besides compliance with
the relevant provisions of the Ordinance, it has obtained prior approval of the
Authority in writing to the scheme of such merger, acquisition or take over; or
b) employ as a broker, directly or indirectly, any of its
directors, officers, or employees, or a person who beneficially owns, whether
individually or in association with close relatives more than ten percent
either of the equity or other securities with voting rights, if any, issued by
the leasing company.
l5. Penalties .-
(1) Whoever fails or refuses to comply with, or contravenes any provision of
these rules, or knowingly and wilfully authorises or permits such failure,
refusal or contravention shall, in addition to any other liability under the
Ordinance, be also punishable with fine not exceeding two thousand rupees, and,
in case of continuing failure, refusal or contravention, to a further fine not
exceeding one hundred rupees for every day after the first during which such
contravention continues.
(2)
Notwithstanding anything contained in sub-rule (1), in
case of contravention of any provision of these rules, the Authority may cancel
the licence of the leasing company after issuing a show cause notice and giving
such company an opportunity of being heard or pass any other order deemed
appropriate by the Authority.
(3)
Upon cancellation of the licence, the functions and
carrying on the business of leasing company shall cease and the Authority may
move the Court for a winding up order in respect of the company.
(MOHAMMAD HAYAT JASRA)
Registrar of Companies
FORM I
[See rule 4(1)]
APPLICATION FOR PERMISSION TO FORM A LEASING COMPANY
Dated, the
TO
The Corporate Law Authority
-----------------------------
Islamabad. Dear Sir,
We hereby apply for grant of permission under rule 4 of the
Leasing Companies (Establishment
and Regulation) Rules, 1996,to from a leasing company under
the name and style of ----------------
------------------------------------------------------------------------
The information and documents as required in the Annexure to
this form duly verified and signed by all promoters/proposed directors
alongwith five spare copies of this application and an affidavit by them as to
the correctness of the details, is submitted. We undertake to keep this
information upto date by communicating changes/modifications therein within
fourteen days of such changes/modifications.
A receipt of Rs.---------------------being the processing
fee, deposited in-------------- on -----------------------is enclosed.
Yours faithfully,
------------------------
Verification by
Oath Commissioner.
ANNEX.
[See rule 4(1)]
INFORMATION TO BE SUPPLIED FOR OBTAINING PERMISSION TO FORM A LEASING
COMPANY
1. Full
name, former name if any, father’s/husband’s name, nationality, residential and
business address, national tax number, present occupation of each sponsor,
proposed director, proposed chief executive and proposed chairman of the Board.
(Institutional sponsors shall mention their names and addresses only instead of
giving all these particulars of their nominee directors).
2. Names
and addresses of companies, firms and other organizations of which the
aforesaid sponsors, proposed chief executive and proposed chairman are or have
been directors, partners or office holders during the last ten years. Copies of
annual accounts of such companies and firms for the last three years alongwith
summary of their paid-up share capital, free reserves, profit after tax and
dividend payment to be provided.
3. Financial
standing, educational as well as professional qualifications and experience of
persons mentioned in paragraph 1 above, supported by documentary evidence.
4. Percentage
of capital, each sponsor proposes to contribute in the proposed company.
5. Feasibility
report of the proposed company.
6. Evidence
of payment of income tax and wealth tax by the sponsors in individual capacity
as well as by the companies, firms, etc., wherein they are or have been
directors during the preceding five years.
7. Net-worth
certificate of each sponsor supported by a duly authenticated copy of the
latest wealth statement filed with the taxation department. In the case of
sponsors/directors residing in countries where filing of wealth statement is
not the requirement of law, a certificate of personal net-worth and general
reputation issued by a bank of international repute shall be acceptable.
8. Names
of the bankers of the sponsors alongwith their account numbers.
9. Draft
of the Memorandum and Articles of Association.
10. Affidavit
from each person mentioned in paragraph 1 above, stating that-
i)
he has not been associated with any illegal banking
business, deposit taking or financial dealings;
ii)
he and companies in which he is a director or hold not
less than ten percent of the beneficial interest have no over-due loans or
instalments outstanding towards banks or other financial institutions;
iii)
neither he nor companies in which he is a director or
hold not less than ten percent of the beneficial interest has defaulted in
paying taxes as on the date of application;
iv)
he has not been sponsor, director or chief executive of
a defaulting cooperative finance society or finance company;
v)
he has never been convicted of fraud or breach of trust
or of an offence involving moral turpitude or removed from service for
misconduct;
vi)
he has neither been adjudged an insolvent nor has
defaulted in making payments, to his creditors;
vii)
his net-worth is not less than the amount to be
subscribed by him personally (not applicable to a nominee director).
FORM-II
[See rule 6(2)(a)]
APPLICATION FORM FOR LICENCE TO OPERATE AS A LEASING COMPANY
Dated, the-------------- To,
The Corporate Law Authority,
Islamabad.
Dear Sir,
We hereby apply for grant of licence under rule 6 of the
Leasing Companies (Establishment and Regulation) Rules, 1996, to operate as a
leasing 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 (sponsors' equity indicated
separately).
(c) Names and
addresses of directors. Number of shares held by each of them.
(d) Directors'
interest, direct or indirect, in any other company(ies) with details of such
interest. (e) Details of persons or group controlling the company including of
those persons who own ten percent or more shares with number and value of
shares held.
(f) Name(s)
of holding, subsidiary and associated undertaking(s), if any.
(g) Details of
qualified staff engaged.
(h) Reasons for
selecting the proposed place of business with statistical data. (i) Additional
facts in support of this application.
3.
Certified copies of the Memorandum and Articles of
Association and Certificate of Incorporation are enclosed.
4.
An affidavit as to the correctness of the above
information by the chief executive and two director is also furnished herewith.
We undertake to keep this information upto date by communicating
changes/modifications therein within fourteen days of such
change/modifications.
Yours faithfully,
Signature-----------------
(To be signed by all the
directors)
FORM-III
[See rule 6(3)]
GOVERNMENT OF PAKISTAN CORPORATE LAW AUTHORITY
Islamabad,
Dated the___________
Registration No._________
LICENCE TO CARRY ON THE BUSINESS OF A LEASING COMPANY
The Corporate Law Authority having considered the
application for grant of licence under rule 6 of the Leasing Companies
(Establishment and Regulation) Rules, 1996 by * and being satisfied that the
said * is eligible for the licence, hereby grants, in exercise of the powers
conferred by sub-rule (3) of rule 6 of the Leasing Companies (Establishment and
Regulation) Rules, 1996, licence to * subject to the conditions stated herein
below or as may be prescribed or imposed hereafter.
----------------------------
Signature of the Officer
------------------------------------------------------------------------
* Name of the Company
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