ICAP CFAP CFAP-2: Corporate Laws and Governance Syllabus

CFAP-2: Corporate Laws and Governance syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for CFAP-2: Corporate Laws and Governance in ICAP CFAP, not a summary of it.

1. 1

   Secretarial Practices

   5 topics

   • General Law Governing Companies (Companies Act, 2017)
   • Issuance of Securities
   • Laws Governing Listed Companies
   • Selection of Independent Directors
   • Notices, Resolutions and Minutes of Meetings
2. 2

   Mediation, Arbitration, Restructuring and Governance

   3 topics

   • Mediation, Arbitration and Prevention of Oppression & Mismanagement
   • Corporate Restructuring
   • Listed Companies (Code of Corporate Governance) Regulations, 2019
3. 3

   Specialized Corporate Laws

   3 topics

   • Non-Banking Finance Companies Laws and Regulations
   • Insurance Companies (Insurance Ordinance, 2000)
   • Banking Companies (Banking Companies Ordinance, 1962)
4. 4

   Other Relevant Laws

   6 topics

   • Free Competition (Competition Act, 2010)
   • Foreign Exchange Transactions (SBP Foreign Exchange Manual)
   • Anti-Money Laundering and Terror Financing
   • Governance of Public Sector Companies
   • Law Relating to Trusts (ICT Trust Act, 2020)
   • Code of Ethics for Chartered Accountants

CFAP-2: Corporate Laws and Governance flashcards for ICAP CFAP

23 of 56 cards from the CFAP-2: Corporate Laws and Governance deck — real questions with worked answers.

1. Under the Companies Act, 2017, what is the minimum number of members required to form a public company, a private company, and a single member company (SMC)?

   Public company: minimum 3 members; Private company: minimum 2 members; Single Member Company (SMC): 1 member.

2. Under the Companies Act, 2017, define a "private company" by reference to the three restrictions in its articles.

   A private company by its articles: (1) restricts the right to transfer its shares; (2) limits the number of members to fifty (excluding employees/ex-employees who became members during employment); and (3) prohibits any invitation to the public to subscribe for its shares or debentures.

3. Under the Companies Act, 2017, what is the time limit for filing the prescribed return of allotment of shares with the Registrar after allotment?

   A return of allotment must be filed with the Registrar within thirty (30) days of allotment of shares.

4. Under the Companies Act, 2017, define an "associated company" / "associated undertaking."

   Two or more companies/undertakings are associated if a person controls them, is a director, owns/holds 20% or more of the voting shares, or they are interconnected through common directorship, shareholding (20%+), or control. (Companies in the same group, or where a common person holds 20%+ voting power, are associated.)

5. Under the Companies Act, 2017, what is the maximum period within which a company must hold its first Annual General Meeting (AGM) after incorporation?

   The first AGM must be held within sixteen (16) months of incorporation.

6. Under the Companies Act, 2017, what is the gap rule and timing for subsequent AGMs of a company?

   A subsequent AGM must be held within 120 days after the close of the financial year, and not more than fifteen (15) months may elapse between two AGMs (the SECP may extend by up to 30 days for cause; listed companies must also place audited accounts).

7. Under the Companies Act, 2017, what notice period is required for general meetings, and how may a shorter notice be given?

   At least twenty-one (21) days' notice (for listed companies also published in newspapers) is required for a general meeting. A shorter notice may be given if agreed by all members entitled to attend and vote in the case of an AGM, and by members holding 95% of voting rights in the case of any other meeting.

8. Under the Companies Act, 2017, what is the quorum for a general meeting of a public listed company, a public company, and a private company?

   Listed company: members present in person/proxy/video representing at least 25% of total voting power, and at least 10 members. Other public company: at least 2 members holding 25% of voting power. Private company: at least 2 members present (or as articles provide).

9. Distinguish an ordinary resolution from a special resolution under the Companies Act, 2017.

   Ordinary resolution: passed by a simple majority (more than 50%) of members present and voting. Special resolution: passed by at least 3/4 (75%) of members present and voting, with 21 days' notice specifying the intention to propose it as a special resolution.

10. Under the Companies Act, 2017, within what time must minutes of general meetings and board meetings be entered into the minute book?

    Minutes of proceedings of general meetings and meetings of directors/committees must be entered in the relevant minute book within fourteen (14) days of the meeting, and signed by the chairman of that or the next meeting.

11. What is the difference between a poll and a show of hands in voting at company general meetings?

    On a show of hands, each member present has one vote regardless of shareholding. On a poll, voting is by number of shares/voting rights held (one share one vote), allowing proxies; a poll may be demanded as prescribed and overrides the show of hands result.

12. Under the Companies Act, 2017, what is the procedure/requirement for issuing shares at a discount?

    Shares may be issued at a discount only with prior approval by special resolution and sanction of the SECP; the resolution must specify the maximum rate of discount, and the shares must be of a class already issued and issued within the time allowed by SECP.

13. Under the Companies Act, 2017, for what purposes may the securities premium (share premium) account be applied?

    The share premium account may be used to: issue fully paid bonus shares; write off preliminary expenses; write off expenses, commission or discount on issue of shares/debentures; and provide for the premium payable on redemption of redeemable preference shares or debentures.

14. Define "further issue of capital" rights (pre-emption) under section 83 of the Companies Act, 2017.

    When a company proposes to increase subscribed capital by issuing further shares, such shares must first be offered to existing shareholders in proportion to their existing shareholding (right shares), by notice specifying the number offered and time (not less than 15 days) to accept, subject to special resolution for other modes.

15. What is the main legal instrument and regulator governing public offering and issuance of securities in Pakistan, and what document is required for a public offer?

    The Securities Act, 2015 (administered by SECP), read with the Public Offering Regulations, governs public offerings; a prospectus (approved by SECP and the relevant stock exchange) is required for any invitation to the public to subscribe for securities.

16. What is the difference between a "fixed price" and a "book building" method of issuing shares to the public in Pakistan?

    Fixed price: shares offered to the public at a predetermined price set by the issuer. Book building: institutional/high-net-worth investors bid within a price band to discover the "strike price," which then becomes the basis for the public portion of the offer; book building applies to a defined portion of the issue.

17. Under the listing framework, what minimum public float / free float and other key conditions generally apply for listing equity securities on the PSX Main Board?

    For the Main Board, the company must offer a minimum of 25% of post-issue paid-up capital to the public (free float) with a minimum number of shareholders (e.g., 500) and meet minimum post-issue paid-up capital and profitability/track-record requirements set by PSX Regulations.

18. Under the Listed Companies (Code of Corporate Governance) Regulations, 2019, how many independent directors must a listed company's board have?

    At least one-third of the total members of the board must be independent directors (rounded up); each listed company is encouraged/required to have independent directors per the prescribed fraction, increasing over time as mandated.

19. Under the Companies Act, 2017 / CCG Regulations, 2019, what is the mechanism by which independent directors are selected for listed companies?

    Independent directors must be selected from a databank of independent directors maintained by an institute/authority notified by the SECP; persons must possess prescribed qualifications and pass/be exempt from the prescribed directors' training, and must meet the independence criteria (no material relationship with the company).

20. Under CCG Regulations, 2019, list the key criteria that disqualify a person from being an "independent director."

    A person is NOT independent if they (or close relatives) hold 5% or more shares, are/were an employee/executive in the last 3 years, have a material business relationship, are connected with the promoters/directors, served on the board for more than two consecutive terms, or receive remuneration other than directors' fees—i.e., must be free of any relationship that could impair independent judgment.

21. Under CCG Regulations, 2019, what is the requirement regarding the Chairman and CEO roles, and the composition split of the board?

    The roles of Chairman and CEO must be separated, with clearly defined responsibilities; the Chairman should preferably be an independent director. The board must have an appropriate mix of executive, non-executive, and independent directors, with non-executive plus independent directors forming the majority.

22. Under CCG Regulations, 2019, what is the required composition and chairmanship of the Audit Committee of a listed company?

    The Audit Committee must comprise at least three members, all non-executive directors, with the majority being independent directors; the Chairman of the Audit Committee must be an independent director. The CFO, head of internal audit, and external auditors attend by invitation.

23. Under CCG Regulations, 2019, what is the required composition of the Human Resource and Remuneration (HR&R) Committee?

    The HR&R Committee must consist of at least three members, the majority being non-executive directors including at least one independent director; the CEO may be a member but cannot be the Chairman, and the Chairman should preferably be an independent director.

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