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Code of Corporate Governance

Applicable on Listed Companies Checklist of Compliance of Code of Corporate Governance is to be finalized and annexed with final accounts

Executive Director Working or Whole time Director A working director of an organization who is usually also its full-time employee, and has a specified decision making role such as finance. Also called inside director or internal director Non-Executive Director A non-working director of a firm who is not an executive director and does not participate in the day-to-day management of the firm. But he is involved in planning & policy making. Expected to monitor & challenge the performance of the executive directors & the management; Expected to take a determined stand in the interests of the firm and its stakeholders. Also called external director, independent director or outside director. Independent Director Means a director who is not connected with the listed company or its promoters or directors on the basis of family relationship and who does not have any other relationship, whether pecuniary or otherwise, with the listed company, its associated companies, directors, executives or related parties. Any person nominated as a director under section 182 & 183 of the companies Ordinance (Directors Representing Special Interests) shall not be taken to be an independent director. Selected by such investor through a resolution of its Board of Directors and The policy with regard to selection of such person shall be disclosed in the Directors Report of the Investor Company.

Board of Directors
All listed companies shall encourage representation of o Non-Executive Directors o Minority Interest Holders, in the Board i.e., in Board of Directors Include at least one independent director representing institutional equity interest1. Executive Directors not more than 75% of the elected directors including the Chief Executive.2 Directors at the time of filing their consent to act shall give a declaration that they are aware of their duties and powers under o The Relevant law(s) o Companys Memorandum & Articles; and o The listing Regulations of Stock Exchanges in Pakistan.

Qualification and Eligibility to Act as a Director


Is not serving as a director of ten other listed Companies Shall be elected or nominated, if o NTN holder not to apply to Non-Resident Person o Has not been convicted as a defaulter in payment of any loan to a Financial Institution or declared defaulter by Stock Exchange Person elected or nominated or his spouse is not engaged in the business of Stock Brokerage.
Interest of a banking company, Development Financial Institution, NBFC, Mutual Fund or Insurance Company. Nothing contained in this clause shall apply to banking companies, which are required by Prudential Regulation No. 9 for Banks to have not more than 25% of the directors as paid executives of the Banks.
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Meetings of the Board


Chairman, if present, shall preside over meetings of the Board of Directors The Chairman shall preferably be elected from among the non-executive directors. Meet at least once in every quarter of the financial year Three Months Notices of Meetings shall be circulated not less than 7 days before the meetings. (In case of emergency meetings the notice period may be reduced or waived) Chairman shall ensure that minutes of meetings are appropriately recorded Minutes shall be circulated to directors and officers entitled to attend within14 days of the date of Board Meeting The CFO and the Company Secretary of a listed company shall attend Board Meeting.

Significant issues to be Placed for Decision by Board of Directors


Matters put before board for the information, consideration and decision include Annual Business Plans, Cash Flow Projections, Forecasts and long term plans; Management Letter3 issued by the external auditors Budgets Quarterly Operating Results Internal Audit Reports Details of joint venture or collaboration agreements or agreements with distributions, agents, etc; Status and implications of any law suit or proceedings of material nature, filed by or against the listed company

Related Party Transactions


All registered Companies shall place before the Board of Directors all the transactions with the related parties for review and approval Detail of all related party transactions shall be placed before the Audit Committee Related Party Transactions which are not executed at arms length price will also be placed separately at each Board Meeting with necessary justification for consideration and approval Every Company shall maintain a party wise record of transaction which shall include o Name of Related party o Nature of relationship with related party o Nature of transaction o Amount of transaction o Terms and conditions of transactions

Orientation Courses/ Directors Educational Program


All listed Companies shall make appropriate arrangements to carry out orientation courses for their directors It will be mandatory for all the directors to have certification under the The Board Development Series program offered by the Pakistan Institute of Corporate Governance At least one director shall be required to have such certification up to 30th June, 2011 and thereafter, every following year minimum one director on the Board shall acquired the said certification

Appointment & Removal of CFO and Company Secretary


o By CEO o With approval of Board of Directors
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Management Letter: Those reservations, issues need to be highlighted and addressed by Auditor.

Qualifications of CFO
Member of recognized body of Professional Accountants; or Graduate from a recognized university or equivalent, having at least five years relevant experience

Corporate Financial Reporting Framework


Directors Report
1. Directors Report is the review made by the Directors and annexed with the accounts 2. The Report shall be signed by a. Chairman of the directors or b. The Chief Executive on behalf to the Directors, if authorized c. The Chief Executive & such number of Directors as are required to sign u/s.2414 3. Contents (Comment on) a. General (All Companies) i. State the Company Affairs ii. Recommend Dividend iii. Recommend amount to Transfer to Reserves purpose and impact b. Public Company or a Private Company Subsidiary of Public company i. Material changes in 1. Nature of the business 2. Classes of business in which the company has interest ii. Response to Auditors Report 1. Circumstances 2. Justifications iii. Circulate information about the Pattern of Shareholding iv. State the Earnings per share v. Disclose Events after Balance Sheet Date vi. Give Reasons for incurring loss c. Listed Company i. If not considered to be a going concern, the fact along with reasons shall be disclosed ii. Significant Deviation from last year in operating results iii. Key operating and financial Data of last six years iv. If has not declared dividend or issued bonus shares for any year, the reasons thereof v. The number of Board Meetings held during the year & attendance by each director shall be disclosed vi. Pattern of shareholding vii. All trades in the shares of the listed company, carried out by its directors, CEO, CFO, Company Secretary and their spouses and minor children shall also be disclosed

Compliance with the Code of Corporate Governance All listed companies shall publish and circulate a statement along with their annual reports to set out the status of their compliance with the best practices of corporate governance as set out in Code of Corporate Governance Ensure Statement of Compliance with the best practices of corporate governance is review and certified by statutory auditors SECP can relax any of the best practices of corporate governance
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Authentication of Balance Sheet u/s. 241 The Balance Sheet and Profit and loss account shall be approved by the directors and shall be singed by the chief executive and at least one director. When the Chief Executive is for the time being not in Pakistan, then the Balance Sheet and Profit and loss account or income and expenditure account of the company shall be signed by not less than two Directors for the time being in Pakistan

Frequency of Financial Reporting


1. Quarterly unaudited financial statements shall be published and circulated along with directors review 2. Ensure 2nd Quarterly financial statements are subjected to a limited scope review by the statutory auditors 3. Ensure that the annual audited financial statements are sent to every member of the company at least 21 days before AGM 4. Immediately disseminate to the SECP and the Stock Exchange in which it is listed a. All material information relating to business; and b. Other affairs of the listed company affecting the market price of its shares

Responsibility for Financial Reporting and Corporate Compliance


1. Financial statements shall be circulated after consideration and approval of Board of Directors and the board shall authorize the signing of financial statements for issuance and circulation 2. It shall be mandatory for the CEO and CFO to have the 2nd quarter and annual accounts initialed by the external auditors before presenting to a. Audit committee; and b. The Board of Directors for approval 3. Company Secretary shall furnish Secretarial Compliance Certificate as a part of Annual Return filed with the Registrar

Disclosure of Interest by a Director Holding Companys Shares


No director, CEO or executive shall deal in the shares of the listed company in any manner during the closed period a period determined prior to the announcement of interim/final results & any business decisions affecting the market price of its shares. Where any director, CEO or executive of a listed company or their spouses sell, buy or take any position in shares of the listed company of which he is a director, CEO or executive he shall immediately notify in writing to the Company Secretary of his intentions. He shall also deliver a written record to the Company Secretary within 4 days of transaction. o Of the price, o Number of shares o Form of shares certificates physical or electronic within CDC; and o Nature of transaction The notice5 shall be presented by the Company Secretary at the meeting of the Board of Directors immediately subsequent to such transaction.

Auditors not to hold shares


All listed companies shall ensure that the firm of extern auditors or any partner in the firm of external auditors and his spouse and minor children do not at any time hold, purchase, sell or take any position in shares of the listed company or any of its associated companies/undertakings. Where a firm or a partner or his spouse or minor child owns shares in a listed company prior to the appointment as auditors, auditors shall disclose the interest to the listed company within 14 days of appointment and divest such interest not later than 90 days thereof.

Notice of the director, CEO or executive, as the case may be.

Audit Committee
1. Composition a. Comprise not less than 3 members, including the Chairman b. Majority of members shall be from the non-executive directors and the chairman of the Audit Committee shall preferably be a non-executive director. c. Names of members of the Audit Committee shall be disclosed in each annual report of the listed company. 2. Frequency of Meetings a. Meet at least once every quarter of the financial year b. Held prior to the approval of interim results by Board of directors and before and after completion of external audit. c. Shall also be held, if requested by the external auditors or the head of internal audit. 3. Attendance at Meetings a. CFO, the head of internal audit & a representative of the external auditors shall attend meeting at which issues relating to accounts and audit are discussed. b. At least once a year, the Audit committee shall meet the external auditors without i. CFO and ii. Head of internal audit c. At least one a year, the Audit Committee shall meet the head of internal audit and other members of the internal audit function without i. CFO and ii. The External Auditors 4. Terms of Reference a. The Board of Directors shall determine the terms of reference of the Audit Committee. b. Committee shall be responsible for recommending to the Board the appointment of external auditors and shall consider any questions of resignation or removal of external auditors, audit fees and provisions by external auditors of any service to the company. c. The terms of reference shall also include i. Determination of appropriate measures to safeguard the listed companys asset ii. Review of preliminary announcements of results prior to publication iii. Review of quarterly, half-yearly and annual financial statement, prior to the approval by the Board of directors iv. Review of management letter issued by external auditors and managements response thereto v. Ensuring coordination between the internal and external auditors of the listed company vi. Facilitating the external audit vii. Review of the scope and extent of internal audit viii. Consideration of any other issue or matter as may be assigned by the Board of Directors. 5. Reporting Procedure a. Audit Committee shall appoint a Secretary of the Committee b. The Secretary shall circulate minutes of the meetings to all members, directors and the CFO within a fortnight. 6. Internal Audit a. There shall be an internal audit function in every listed company b. The Head of internal audit shall have access to the chair of the Audit Committee. c. All listed companies shall ensure that internal audit reports are provided for the review of external auditors.

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