LECTURE ONE

SEVENTH WEEK

PROVISIONS WITH RESPECT TO NAMES OF COMPANIES

Section 37. Prohibition of certain names. -

(1) No company shall be registered by a name which in the opinion of the Commission is
inappropriate or deceptive or is designed to exploit or offend the religious susceptibilities of the
people.

(2) A company shall not be registered by a name identical with that by which a company in
existence is already registered, or so nearly resembling that name as to be calculated to deceive,
except where the company in existence is in the course of being dissolved and signifies its
consent in such manner as the registrar requires.

(3) Except with the prior approval in writing of the Commission, no company shall be
registered by a name which contains any words suggesting or calculated to suggest—
(a) the patronage of any, past or present, Pakistani or foreign, Head of State;

(b) any connection with the Federal Government or a Provincial Government or any
department or authority of any such Government;

(c) any connection with any corporation set up by or under any Federal or Provincial
law; or

(d) the patronage of, or any connection with, any foreign Government or any
international organisation.

(4) Whenever a question arises as to whether or not the name of a company is in violation of the
foregoing provisions of this section the decision of the Commission shall be final.

Section 38. Rectification of name of a company. -

A company which, through inadvertence or otherwise, is registered by a name in contravention
of the provisions of section 37:

(a) may, with the approval of the registrar, change its name; and

(b) shall, if the registrar so directs, within thirty days of the receipt of such direction, change
its name with the approval of the registrar:

Provided that the registrar shall, before issuing a direction for the change of name, afford
the company an opportunity to make representation against the proposed direction:
 Provided further that no direction under clause (b) shall be issued after the expiration of
three years from the date of registration of the company or registration by its new name, as the
case may be.

Section 39. Change of name by a Company. –

A company may, by special resolution and with the approval of the registrar signified in writing,
change its name:

Provided that no such approval shall be required where the only change in the name of a
company is the addition thereto or, as the case may be, the deletion therefrom, of the parenthesis
and word “(Private)” consequent on the conversion in accordance with the provisions of this
Ordinance of a public company into a private company or of a private company into a public
company.

Section 40. Registration of change of name and effect thereof. –

(1) Where a company changes its name, the registrar shall enter the new name on the
register in place of the former name, and shall issue a certificate of incorporation altered to meet
the circumstances of the case; and, on the issue of such a certificate, the change of name shall be
complete.

(2) Where a company changes its name it shall, for a period of one year from the date of
issue of a certificate by the registrar under sub-section (1), continue to mention its former name
along with its new name on the outside of every office or place in which its business is carried
on and in every document or notice referred to in clauses (a) and (c) of section 143:

Provided that the addition or deletion, as the case may be, of the parenthesis and word
"(Private)" from the name of a company consequent on the conversion in accordance with the
provisions of this Ordinance of a public company into a private company or of a private
company into a public company shall not be deemed to be a change of name for the purpose of
this sub-section.

(3) The change of name shall not affect any rights or obligations of the company, or render
defective any legal proceedings by or against the company; and any legal proceedings that
might have been continued or commenced against the company by its former name may be
continued by or commenced against the company by its new name.

Section 41. Alteration of names on commencement of Ordinance and change of status of

company. -
(1) As from the date of commencement of this Ordinance, the name of every existing company
shall be deemed to include, before the last word "Limited", the parenthesis and word "(Private)"
in the case of private company and the parenthesis and word "(Guarantee)" in the case of a
company limited by guarantee, and the memorandum of association, the certificate of
incorporation and other books and papers shall be deemed to be altered accordingly from that
date.
(2) On conversion of a public company into a private company in accordance with the
provisions of this Ordinance, the registrar shall add the parenthesis and word "(Private)" before
the word "Limited" in the name of the company in the register and shall also issue a certificate
to meet the circumstances of the case.

(3) On conversion of a private company into a public company in accordance with the
provisions of this Ordinance, the registrar shall omit the parenthesis and word "(Private)" in the
name of company in the register and shall also issue a certificate to meet the circumstances of
the case.

(4) If default is made in complying with a direction issued by the registrar under section 38,
or with the requirements of sub-section (2) of section 40, or in giving effect to the provisions of
sub-section (1) of this section, the company, and every director or officer of the company who is
knowingly and willfully in default, shall be liable to a fine not exceeding ten thousand rupees
and to a further fine not exceeding two hundred rupees for every day after the first during which
the default continues.

ASSOCIATIONS NOT FOR PROFIT

Section 42. Power to dispense with "Limited" in the name of charitable and other
companies. -
(1) Where it is proved to the satisfaction of the Commission that an association capable of
being formed as a limited company has been or is about to be formed for promoting commerce,
art, science, religion, sports, social services, charity or any other useful object, and applies or
intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the
payment of any dividend to its members, the Commission may grant a licence and direct that the
association be registered as a company with limited liability, without the addition of the words
"Limited", "(Private) Limited" or "(Guarantee) Limited", as the case may be, to its name, and
the association may be registered accordingly.

(2) A licence under sub-section (1) may be granted on such conditions and subject to such
regulations as the Commission thinks fit and those conditions and regulations shall be binding
on the association and shall, if the Commission so directs, be inserted in the memorandum and
articles, or in one of those documents.

(3) The association shall on registration enjoy all the privileges of a limited company and be
subject to all its obligations, except those of using the word or words "Limited", "(Private)
Limited" or "(Guarantee) Limited", as the case may be, as part of its name.

(4) A licence under this section may at any time be revoked by the Commission and upon its
revocation the registrar shall enter the word or words "Limited", "(Private) Limited", or
"(Guarantee) Limited", as the case may be, at the end of the name of the association upon the
register, and the association shall cease to enjoy the exemptions and privileges granted by
preceding sub-sections:
 Provided that, before a licence is so revoked, the Commission shall give to the
association notice in writing of its intention, and shall afford the association an opportunity of
submitting a representation in opposition to the revocation.

Section 43. Provision as to companies limited by Guarantee. –

(1) In the case of a company limited by guarantee and not having a share capital, every
provision in the memorandum or articles or in any resolution of the company purporting to give
any person a right to participate in the divisible profits of the company otherwise than as a
member shall be void.

(2) For the purpose of the provisions of this Ordinance relating to the memorandum of a
company limited by guarantee and of sub-section (1) every provision in the memorandum or
articles, or in any resolution, of a company limited by guarantee purporting to divide the
undertaking of the company into shares or interests shall be treated as a provision for a share
capital, notwithstanding that the nominal amount or number of the shares or interests is not
specified thereby.

Provisions Relating to Conversion of Public Company into Private Company and vice versa
and other Matters

Section 44. Conversion of public company into private company. -

No public company shall, except with the prior approval of the Commission in writing, and
subject to such conditions as may be imposed by the Commission in this behalf, convert itself
into a private company.

Section 45. Prospectus or statement in lieu of prospectus to be filed by private company

on ceasing to be private company. -
(1) If a company, being a private company, alters its articles in such a manner that they no
longer include the provisions which, under clause (28) of sub-section (1) of section 2, are
required to be included in the articles of a company in order to constitute it a private company,
the company—

(a) shall, as on the date of the alteration, cease to be a private company; and

(b) shall, within a period of fourteen days after the said date, file with the registrar
either a prospectus or a statement in lieu of prospectus as specified in sub-section (2) or
sub-section (3).

(2) Every prospectus filed under sub-section (1) shall state the matters specified in section 1
of Part I of the Second Schedule and set out the reports specified in section 2 of that Part, and
the said sections 1 and 2 shall have effect subject to the provisions contained in section 3 of that
Part.

(3) Every statement in lieu of prospectus filed under sub-section (1) shall be in the form and
contain the particulars set out in section 1 of Part III of the Second Schedule and, in the cases
mentioned in section 2 of that Part, set out the reports specified therein, and the said sections 1
and 2 shall have effect subject to the provisions contained in section 3 of that Part.

(4) Where the persons making any such report as is referred to in sub-section (2) or sub-
section (3) have made therein, or have, without giving the reasons indicated therein, made any
such adjustments as are mentioned in clause 36 of Part I of the Second Schedule or clause 5 of
section 3 of Part III of the Second Schedule, as the case may be, the prospectus or statement in
lieu of prospectus filed as aforesaid shall have endorsed thereon or attached thereto a written
statement, signed by those persons, setting out the adjustments and giving the reasons therefor.

(5) If default is made in complying with the provisions of any of preceding sub-sections, the
company, and every officer of the company who is in default, shall be punishable with fine
which may extend to five thousand rupees and to a further fine not exceeding one hundred
rupees for every day after the first during which the default continues.

(6) Where any prospectus or statement in lieu of prospectus filed under subsection (1)
includes any untrue statement, any person who authorised the filing of such prospectus or
statement shall be punishable with imprisonment for a term which may extend to two years, or
with fine which may extend to ten thousand rupees, or with both, unless he proves either that the
statement was immaterial or that he had reasonable ground to believe and did, upto the time of
the filing of the prospectus or statement, believe, that the statement was true.

(7) For the purposes of sub-section (6):

(a) a statement included in a prospectus or a statement in lieu of prospectus shall be

deemed to be untrue if it is misleading in the form and context in which it is included;
and

(b) where the omission from a prospectus or a statement in lieu of prospectus of any
matter is calculated to mislead, the prospectus or statement in lieu of prospectus shall be
deemed, in respect of such omission, to be a prospectus or a statement in lieu of
prospectus in which an untrue statement is included.

(8) For the purposes of sub-section (6) and clause (a) of sub-section (7), the expression
"included" when used with reference to a prospectus or statement in lieu of prospectus, means
included in the prospectus or statement in lieu of prospectus itself or contained in any report or
memorandum appearing on the face thereof, or by reference incorporated therein.

Section 46. Consequence of default in complying with conditions constituting a

company a private company. -
Where the articles of a company include the provisions which, under clause (28) of sub-section
(1) of section 2, are required to be included in the articles of a company in order to constitute it
a private company, but default is made in complying with any of those provisions, the company
shall cease to be entitled to the privileges and exemptions conferred on private companies by or
under this Ordinance, and this Ordinance shall apply to the company as if it were not a private
company:
 Provided that the Commission, on being satisfied that the failure to comply with the
conditions was accidental or due to inadvertence or to some other sufficient cause, or that on
other ground it is just and equitable to grant relief, may, on the application of the company or
any other person interested and on such terms and conditions as seem to the Commission just
and expedient, order that the company be relieved from such consequences as aforesaid.

Section 47. Liability for carrying on business with less than three or, in the case of a
private company, two members. –
If at any time the number of members of a company is reduced, in the case of a private company
other than a single member company, below two, or in the case of any other company, below
three, and the company carries on business for more than six months while the number is so
reduced, every person who is a member of the company during the time that it so carries on
business after those six months and is cognizant of the fact that it is carrying on business with
fewer than two members or three members, as the case may be, shall be severally liable for the
payment of the whole debts of the company contracted during that time, and may be sued
therefor without joinder in the suit of any other member.

SERVICE AND AUTHENTICATION OF DOCUMENTS

Section 48. Service of documents on a company. –

A document may be served on a company or an officer thereof by sending it to the company or
officer at the registered office of the company by post under a certificate of posting or by
registered post, or by leaving it at the registered office of the company.

Section 49. Service documents on registrar. -

A document may be served on the registrar by sending it to him at his office by registered post,
or by delivering it to him, or leaving it for him at his office, against an acknowledgment of
receipt.

Section 50. Service of notice on members, etc.-

(1) A notice may be given by a company to any member either personally or by sending it by
post to him to his registered address or, if he has no registered address in Pakistan to the
address, if any, within Pakistan supplied by him to the company for the giving of notices to him.

(2) Where a notice is sent by post, service of the notice shall be deemed to be effected by
properly addressing, prepaying and posting a letter containing the notice and, unless the
contrary is proved, to have been effected at the time at which the letter would be delivered in the
ordinary course of post.

(3) If a member has no registered address in Pakistan, and has not supplied to the company
an address within Pakistan for the giving of notices to him, a notice addressed to him or to the
shareholder generally and advertised in a newspaper circulating in the Province or the part of
Pakistan not forming part of a province in which the registered office of the company is situate
shall be deemed to be duly given to him on the day on which the advertisement appears:
 Provided that in the case of a listed company such notice shall in addition to its being
published as aforesaid be also published at least in one issue each of a daily newspaper in
English language and a daily newspaper in a Urdu language having circulation in the Province
in which the stock exchange on which the company is listed is situate.

(4) A notice may be given by the company to the joint-holders of a share by giving the
notice to the joint-holder named first in the register in respect of the share.

(5) A notice may be given by the company to the person entitled to a share in consequence
of the death or insolvency of a member by sending it through the post in a prepaid letter
addressed to them by name, or by the title or representatives of the deceased, or assignees of the
insolvent, or by any like description, at the address, if any, in Pakistan supplied for the purpose
by the person claiming to be so entitled, or until such an address has been so supplied by giving
the notice in any manner in which the same might have been given if the death or insolvency
had not occurred.

(6) In addition to any other mode provided by this Ordinance for notice of any general
meeting, notice of every general meeting shall be given in some manner hereinbefore authorised
to;

(a) every member of the company except those members who, having no registered
address within Pakistan, have not supplied to the company an address within Pakistan
for the giving of notices to them;

(b) every person entitled to a share in consequence of the death or insolvency of a

member who, but for his death or insolvency, would be entitled to receive, notice of the
meeting; and

(c) the auditors of the company.

Section 51. Authentication of documents and proceedings. -

Save as expressly provided in this Ordinance, a document or proceeding requiring
authentication by a company may be signed by the chief executive or a director, secretary or
other authorised officer of the company, and need not be under its common seal.
 LECTURE TWO
SEVENTH WEEK

PROSPECTUS

Section 52. Prospectus to be Dated. –

A prospectus issued by or on behalf of a company shall be dated, and that date shall, unless the
contrary is proved, be taken as the date of publication of the prospectus.

Section 53. Matters to be stated and reports to be set out in Prospectus. –

(1) Every prospectus issued—

(a) by or on behalf of a company, or

(b) by or on behalf of any person who has been engaged or interested in the
formation of a company;

shall state the matters specified in section 1 of Part I of the Second Schedule and set out the
reports specified in section 2 of that Part and the said sections 1 and 2 shall have effect subject
to the provisions contained in section 3 of that part.

(1A) A sufficient number of copies of the prospectus issued under sub-section (1) shall be
made available at the registered office of the company, with the stock exchange at which the
company is listed or proposes to be listed and with the bankers to the issue, and the prospectus
in its full text or in such abridged form as may be prescribed, shall be published at least in one
Urdu and one English daily newspaper.

(2) No prospectus shall be issued or an advertisement of a prospectus published in a

newspaper less than seven days or more than thirty days before the subscription list, as specified
in the prospectus, is due to open:

Provided that the Commission may for special reasons allow a prospectus to be issued or
an advertisement of a prospectus to be published more than thirty days before the subscription
list is due to open.

(3) If a prospectus is issued which does not comply with the provisions of sub-section (1) or
sub-section (2), every person who is knowingly responsible for the issue of such prospectus
shall be liable to a fine not exceeding ten thousand rupees and in the case of a containing default
to a further fine not exceeding two hundred rupees for every day from the day of the issue of the
prospectus until a prospectus complying with the requirements aforesaid is issued and a copy
thereof is filed with the registrar.

(4) A condition requiring or binding an applicant for shares in or debentures of a company

to waive compliance with any of the requirements of this section, or purporting to affect him
with notice of any contract, document or matter not specifically referred to in the prospectus,
shall be void.

(5) No one shall issue any form of application for shares in or debentures of a company,
unless the form is accompanied by a prospectus which complies with the requirements of this
section:

Provided that this sub-section shall not apply if it is shown that the form of application
was issued either--

(i) in connection with a bona fide invitation to a person to enter into an underwriting
agreement with respect to the shares or debentures; or

(ii) in relation to shares or debentures which were not offered to the public.

(6) If any person acts in contravention of the provisions of sub-section (5) he shall be liable
to a fine not exceeding two thousand rupees.

(7) A director or other person responsible for the prospectus shall not incur liability by
reason of any non-compliance with, or contravention of, any of the requirements of this section,
if--

(a) as regards any matter not disclosed, he proves that he had no knowledge thereof;
or

(b) he proves that the non-compliance or contravention arose from an honest mistake
of fact on his part; or

(c) that non-compliance or contravention was in respect of matters which, in the

opinion of the registrar or officer dealing with the case, were immaterial, or was
otherwise such as ought, in the opinion of that registrar or officer, as the case may be,
having regard to all the circumstances of the case, reasonably to be excused:

Provided that no director or other person shall incur any liability in respect of the failure
to include in a prospectus a statement with respect to the matters specified in clause 18 of Part I
of the Second Schedule, unless it is proved that he had knowledge of the matters not disclosed.

(8) This section shall not apply--

(a) to issue to the existing members or debenture-holders of a company of a

prospectus or form of application relating to shares in or debentures of the company,
whether an applicant for shares or debentures will or will not have the right to renounce
in favour of other persons; or
 (b) to the issue of a prospectus or form of application relating to shares or debenture
which are, or are to be, in all respects uniform with shares or debentures previously
issued and for the time being dealt in or quoted on a stock exchange;

but, subject as aforesaid, this section shall apply to a prospectus or a form of application,
whether issued on or with reference to the formation of a company or subsequently.

(9) Nothing in this section shall limit or diminish any liability which any person may incur
under the general law or under any other provision of this Ordinance.

Section 54. Expert to be unconnected with formation or management of company.

A prospectus inviting persons to subscribe for shares in or debentures of a company shall not
include a statement purporting to be made by an expert, unless the expert is a person who is not,
and has not been, engaged or interested in the formation or promotion, or in the management, of
the company.

Section 55. Expert's consent to issue of prospectus containing statement by him. –

A prospectus inviting persons to subscribe for shares in or debentures of a company and
including a statement purporting to be made by an expert shall not be issued, unless--

(a) he has given his written consent to the issue thereof with the statement included
in the form and context in which it is included and has not withdrawn such consent
before the delivery of a copy of the prospectus for registration; and

(b) a statement that he has given and has not withdrawn his consent as aforesaid
appears in the prospectus.

Section 56. Penalty and Interpretation. –

(1) If any prospectus is issued in contravention of section 54 or 55, the company, and every
person who is knowingly a party to the issue thereof, shall be punishable with fine not
exceeding five thousand rupees.

(2) In section 54 and 55, the expression "expert" includes an engineer, a valuer, an
accountant and every other person whose profession gives Commission to a statement made by
him.

Section 57. Approval, Issue and Registration of Prospectus. –

(1) No listed company, and no company which proposes to make an application to a stock
exchange for listing of its securities, and no other person] shall issue, circulate or publish any
prospectus or other document offering for subscription or publicly offering for sale any security
unless approval of the Commission to its issue, circulation or publication has been obtained
within the period of sixty days preceding the date of its issue.

(2) The Commission may, while according approval under sub-section (1), impose such
condition as it may deem necessary;
(3) No prospectus shall be issued by or on behalf of a company unless on or before the date
of its publication, there has been delivered to the registrar a copy thereof signed by every person
who is named therein as a director or proposed director of the company or by his agent
authorised in writing, and having endorsed thereon or attached thereto;

(a) any consent to the issue of the prospectus required by section 55 from any person
as an expert; and
(b) in the case of a prospectus issued generally, also

(i) a copy of every contract required by clause 16 of Part I of the Second Schedule
to be specified in the prospectus, or, in the case of a contract not reduced into writing, a
memorandum giving full particulars thereof; and
(ii) where the persons making any report required by Part II of that Schedule have
made therein, or have without giving the reasons, indicated therein, any such
adjustments as are mentioned in clause 36 of Part I of that Schedule, a written statement
signed by those persons setting out the adjustments and giving the reasons therefor.

(4) Every prospectus to which this section applies shall, on the face of it;

(a) state that a copy has been delivered to the registrar as required by subsection (3);

(b) specify any documents required by this section to be endorsed on or attached to

the copy so delivered, or refer to statements included in the prospectus which specify
those documents; and

(c) where application has been made, or is proposed to be made, to a stock exchange
for the listing of the security, state that such an application has been made or is proposed
to be made.

(5) The registrar shall not register a prospectus unless the requirements of sections 52, 53,
54 and 55 and this section have been complied with and the prospectus is accompanied by the
consent in writing of the person, if any, named therein as the auditor, legal adviser, attorney,
solicitor, banker or broker, being a member of a stock exchange, of the company, to act in that
capacity.

(6) If a prospectus is issued, published or circulated without complying with, or in

contravention of any provision of this section, the company, and every person who is knowingly
a party to the issue, publication or circulation of the prospectus, shall be liable to a fine not
exceeding ten thousand rupees and in the case of a continuing default to a further fine not
exceeding two hundred rupees for every day from the date of issue, publication or circulation, as
the case may be, of the prospectus, until a copy thereof complying with all the requirements of
this section has been delivered to the registrar.

Section 58. Terms of contract mentioned in prospectus or statement in lieu of

prospectus not to be varied. –
A company shall not, at any time, vary the terms of contract referred to in the prospectus or a
statement in lieu of prospectus except subject to the approval of, or except on authority given
by, the company in general meeting.

Section 59. Civil liability for mis-statements in Prospectus. -

(1) Subject to the provisions of this section, where a prospectus invites persons to subscribe
for shares in or debentures of a company, the following persons shall be liable to pay
compensation to every person who subscribes for or purchases any share or debentures on the
faith of the prospectus for any loss or damage he may have sustained by reason of any untrue
statement included therein namely;

(a) every person who is a director of the company at the time of the issue of the
prospectus;

(b) every person who has authorised himself to be named and is named in the
prospectus either as a director, or as having agreed to become a director, either
immediately or after an interval of time;

(c) every person who is a promoter of the company; and

(d) every person who has given consent to the issue of the prospectus under section
55 or sub-section (5) of section 57:

Provided that where, under section 55, the consent of a person is required to the issue of
a prospectus and he has given that consent, or where, under sub-section (5) of section 57, the
consent of a person named in a prospectus is required and he has given that consent, he shall
not, by reason of having given such consent, be liable under this subsection as a person who has
authorised the issue of the prospectus except in respect of an untrue statement, if any, purporting
to be made by him as an expert.

(2) No person shall be liable under sub-section (1), if he proves;

(a) that, having consented to become a director of the company, he withdrew his
consent before the issue of the prospectus, and that it was issued without his authority or
consent;

(b) that the prospectus was issued without his knowledge or consent, and that on
becoming aware of its issue, he forthwith gave reasonable public notice that it was
issued without his knowledge or consent;

(c) that, after the issue of the prospectus and before allotment thereunder, he, on
becoming aware of any untrue statement therein, withdrew his consent to the prospectus
and gave reasonable public notice of the withdrawal and of the reason therefor; or

(d) that:
 (i) as regards every untrue statement not purporting to be made on the authority of
an expert or of a public official document or statement, he had reasonable ground to
believe, and did up to the time of the allotment of the shares or debentures, as the case
may be, believe, that the statement was true; and

(ii) as regards every untrue statement purporting to be a statement by an expert or

contained in what purports to be a copy of or an extract from a report or valuation of an
expert, it was a correct and fair representation of the statement, or a correct copy of, or a
correct and fair extract from, the report or valuation; and he had reasonable ground to
believe, and did up to the time of the issue of the prospectus believe, that the person
making the statement was competent to make it and that that person had given the
consent required by section 55 to the issue of the prospectus and had not withdrawn that
consent before delivery of a copy of the prospectus for registration or, to the defendant's
knowledge, before allotment thereunder; and

(iii) as regard every untrue statement purporting to be a statement made by an official

person or contained in what purports to be a copy of or extract from a public official
document, it was a correct and fair representation of the statement, or a correct copy of,
or a correct and fair extract from, the document:

Provided that this sub-section shall not apply in the case of a person liable, by reason of
his having given consent required of him by section 55, as a person who has authorised the issue
of the prospectus in respect of an untrue statement purporting to be made by him as an expert.

(3) A person who, apart from this sub-section would, under sub-section (1), be liable by
reason of his having given a consent required of him by section 55, as a person who has
authorised the issue of the prospectus in respect of an untrue statement purporting to be made by
him as an expert, shall not be so liable, if he proves;

(a) that, having given his consent under section 55 to the issue of the prospectus, he
withdrew it in writing before delivery of a copy of the prospectus for registration;

(b) that, after delivery of a copy of the prospectus for registration and before
allotment thereunder, he, on becoming aware of the untrue statement withdrew his
consent in writing and gave reasonable public notice of the withdrawal and of the reason
therefor; or

(c) that he was competent to make the statement and that he had reasonable ground
to believe, and did up to the time of the allotment of shares or debentures believe, that
the statement was true.

(4) Where;

(a) the prospectus specifies the name of a person as a director of the company, or as
having agreed to become a director thereof, and he has not consented to become a
 director, or has withdrawn his consent before the issue of the prospectus, and has not
authorised or consented to the issue thereof; or

(b) the consent of a person is required under section 55 to the issue of the prospectus
and he either has not given that consent or has withdrawn it before the issue of the
prospectus:

the directors of the company, excluding those without whose knowledge or consent the
prospectus was issued, and every other person who authorised the issue thereof, shall be liable
to indemnify the person referred to in clause (a) or clause (b), as the case may be, against all
damages, costs and expenses to which he may be made liable by reason of his name having been
inserted in the prospectus or of the inclusion therein of a statement purporting to be made by
him as an expert, as the case may be, or in defending himself against any suit or legal
proceeding brought against him in respect thereof:

Provided that a person shall not be deemed for the purposes of this sub-section to have
authorised the issue of a prospectus by reason only of his having given the consent required by
section 55 to the inclusion therein of a statement purporting to be made by him as an expert.

(5) Every person who becomes liable to make any payment by virtue of this section may
recover contribution, as in cases of contract, from any other person who, if sued separately,
would have been liable to make the same payment, unless the former person was, and the latter
person was not, guilty of fraudulent misrepresentation.

(6) For the purposes of this section;

(a) the expression "promoter" means a promoter who was a party to the preparation
of prospectus or a portion thereof containing the untrue statement, but does not include
any person by reason of his acting in a professional capacity for persons engaged in
procuring the formation of the company; and

(b) the expression "expert" has the same meaning as in section 55.

Section 60. Criminal liability for mis-statements in Prospectus. -

(1) Where a prospectus includes any untrue statement, every person who signed or
authorised the issue of the prospectus shall be punishable with imprisonment for a term which
may extend to two years, or with fine which may extend to ten thousand rupees, or with both,
unless he proves either that the statement was immaterial or that he had reasonable ground to
believe, and did up to the time of the issue of the prospectus believe, that the statement was true.

(2) A person shall not be deemed for the purposes of this section to have authorised the issue
of a prospectus by reason only of his having given--

(a) the consent required by section 55 to the inclusion therein of a statement

purporting to be made by him as an expert, or
 (b) the consent required by sub-section (5) of section 57.

Section 61. Document containing Offer of Shares or Debentures for Sale to be deemed
Prospectus. -
(1) Where a company allots or agrees to allot any shares in or debentures of the company
with a view to all or any of those shares or debentures being offered for sale to the public, any
document by which the offer for sale to the public is made shall, for all purposes, be deemed to
be a prospectus issued by the company; and all enactments and rules of law as to the contents,
filing and registration of a prospectus and as to liability in respect of statements in and
omissions from a prospectus, or otherwise relating to prospectus, shall apply with the
modifications, specified in sub-section (3), (4) and (5), and have effect accordingly, as if the
shares or debentures had been offered to the public for subscription and as if persons accepting
the offer in respect of any shares or debentures, were subscribers for those shares or debentures,
but without prejudice to the liability, if any, of the person by whom the offer is made in respect
of mis-statement contained in the document or otherwise in respect thereof.

(2) For the purposes of this Ordinance, it shall, unless the contrary is proved, be evidence
that an allotment of, or an agreement to allot, shares or debentures was made with a view to the
shares or debentures being offered for sale to the public if it is shown--

(a) that an offer of the shares or debentures or of any of them for sale to the public
was made within one year after the allotment or agreement to allot;

(b) that at the date when the offer was made; the whole of the consideration to be
received by the company in respect of the shares or debentures had not been received by
it; or

(c) that an offer of the shares or debentures or of any of them for sale to the public
was made in pursuance of an understanding to which the company was directly or
indirectly a party or a condition imposed by any authority in relation to the position,
business or privileges of the company.

(3) For the purposes of this section, section 53 shall have effect as if it required a prospectus
to state, in addition to the matters required by that section to be stated in a prospectus, --

(a) the net amount of the consideration received or to be received by the company in
respect of the shares or debentures to which the offer relates; and

(b) the place and time at which the contract under which the said shares or
debentures have been or are to be allotted may be inspected.

(4) For the purposes of this section, section 57 shall have effect as if the persons making the
offer were persons named in a prospectus as directors of a company.

(5) Where a person making an offer to which this section relates is a company or a firm, it
shall be sufficient if the document referred to in sub-section (1) is signed on behalf of the
company or firm by two directors of the company or by not less than one-half of the partners in
the firm, as the case may be; and any such director or partner may sign by his agent authorised
in writing.

Section 62. Offer of shares or debentures for sale by certain persons. -

(1) No person who holds more than ten per cent of the shares or debentures of a company
shall offer for sale to the public any shares or debenture of the company held by him except with
the approval of the Commission.

(2) Any document by which an offer for sale to the public is made by any such person as is
referred to in sub-section (1) shall, for all purposes, be deemed to be a prospectus issued by a
company, and all enactments and rules of law as to the contents, filing and registration of a
prospectus and as to the liability in respect of statements in and omissions from a prospectus, or
otherwise relating to a prospectus, shall apply with the modifications specified in sub-sections
(3) and (4), and have effect accordingly, but without prejudice to the liability, if any, of the
persons by whom the offer is made in respect of mis-statements contained in the document or
otherwise in respect thereof.

(3) For the purposes of this section, section 57 shall have effect as if the person making the
offer were a person named in a prospectus as director of a company.

(4) Where a person making an offer to which this section relates is a company or a firm, it
shall be sufficient if the document referred to in sub-section (2) is signed on behalf of the
company or firm by two directors of the company or not less than one-half of the partners in the
firm, as the case may be and any such director or partner may sign by his agent authorsied in
writing.

(5) A notice, circular, advertisement or other document soliciting bids, offers, proposals or
tenders for sale of shares or other securities acquired in the course of normal business or for
negotiating sale thereof or expressing an intention to disinvest such shares or other securities
issued by a scheduled bank or a financial institution shall not be deemed to be a prospectus or an
offer for sale to the public for the purposes of sections 61 and 62.

Section 62A. Issue of securities outside Pakistan. –

No company shall, except with the prior approval of the Commission, issue any security outside
Pakistan.

Section 63. Interpretation of provisions relating to prospectus. –

(1) For the purposes of the foregoing provisions relating to a prospectus, --

(a) a statement included in a prospectus shall be deemed to be untrue, if the

statement is misleading in the form and context in which it is included; and

(b) where the omission from a prospectus of any matter is calculated to mislead, the
prospectus shall be deemed, in respect of such omission, to be a prospectus in which an
untrue statement is included.
(2) For the purposes of sections 59 and 60 and clause (a) of sub-section (1) of this section,
the expression "included", when used in reference to a prospectus, means included in the
prospectus itself or contained in any report or memorandum appearing on the face thereof or by
reference incorporated therein or issued herewith.

Section 64. Newspaper advertisement of prospectus. -

Where any prospectus is published as a newspaper advertisement, it shall not be necessary in the
advertisement to comply with the requirements of sub-clause (1) of clause 1 of section 1 of Part
I of the Second Schedule in so far as the said provisions require the contents of the
memorandum or the signatories thereto, or the number of shares subscribed for by them, to be
specified.

Section 65. Construction of references to offering shares or debentures to the public,

etc. –
(1) Any reference in this Ordinance or in the articles of a company to offering of shares or
debentures to the public, or to invitation to public to subscribe for shares or debentures, shall,
unless otherwise expressly provided in this Ordinance, include a reference to offering of shares
or debentures to any section of the public or to invitation to any section of public to subscribe
for shares or debentures, as the case may be.

Explanation: The term "section of the public" includes existing members or debenture-holders
of the company or clients of the persons issuing the prospectus.

(2) No offer or invitation shall be treated as made to the public by virtue of sub-section (1) if
the offer or invitation can properly be regarded, in all the circumstances-

(a) as not being calculated to result, directly or indirectly, in the shares or debentures
becoming available for subscription or purchase by persons other than those receiving
the offer or invitation; or
(b) otherwise as being a domestic concern of the persons making and receiving the
offer or invitation.

(3) Without prejudice to the generality of sub-section (2), a provision in a company's articles
prohibiting invitations to the public to subscribe for shares or debentures shall not be taken as
prohibiting the making to members or debenture-holders of an invitation which can properly be
regarded in the manner set forth in that subsection.

(4) The provisions of this Ordinance relating to private companies shall be construed in
accordance with the provisions contained in sub-sections (1) to (3).

Section 66. Penalty for fraudulently inducing persons to invest money. -

Any person who, either by knowingly or recklessly making any statement, promise or forecast
which is false, deceptive or misleading, or by any dishonest concealment of material facts,
induces or attempts to induce another person to enter into, or to offer to enter into;
 (a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or
underwriting shares or debentures; or
(b) any agreement the purpose or pretended purpose of which is to secure a profit to
any of the parties from the yield of shares or debentures, or by reference to fluctuations
in the value of shares or debentures;

shall be punishable with imprisonment of either description for a term which may extend to
three years, or with fine which may extend to twenty thousand rupees, or with both.