The regulations made in terms of section 199 (3) (b) prescribe the information required to be provided to members which shall be attached with the notice of the meeting called for approval of members. The information shall include, general disclosure (Table 3), disclosure about the associated company or undertaking (Table 4), and disclosure for equity investment (Table 5) or for advances and loans (Table 6) as the case may be.
Further, information about the interest of the associated company or associated undertaking and its sponsors and directors in the investing company shall also be disclosed in the notice of general meeting if the associated company or associated undertaking or any of its sponsors or directors is also a member of the investing company.
Listed companies are required to dispatch a copy of the notice and the statement of material facts to the head office of the Securities and Exchange Commission of Pakistan, through fax or email and courier service on the same day it is dispatched to the members.
The directors of the investing company, while presenting the special resolution for making an investment in an associated company or associated undertaking are required to certify to their members that they have carried out necessary due diligence for the proposed investment before recommending it for members’ approval and that the financial health of the borrowing company is such that it has the ability to repay the loan as per the agreement.
It is pertinent to mention that the law requires that Investment by way of loans or advances can only be made in accordance with an agreement in writing which shall inter-alia include the terms and conditions specifying the nature, purpose, period of the loan, rate of return, fees or commission, repayment schedule for principal and return, penalty clause in case of default or late repayments and security, if any, for the loan in accordance with the approval of the members in the general meeting.