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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE. Mehmood Mandviwalla Barrister at Law President SAARCLAW. Code of Corporate Governance . - Consensus emerged that it would be unhelpful to put The Code into Companies Ordinance. - The need for flexibility in company governance was very strong.

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CORPORATE GOVERNANCE

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  1. CORPORATE GOVERNANCE Mehmood Mandviwalla Barrister at Law President SAARCLAW

  2. Code of Corporate Governance - Consensus emerged that it would be unhelpful to put The Code into Companies Ordinance. - The need for flexibility in company governance was very strong. - The Code derives its strength from widespread support which it is now receiving. Corporate Governance Mehmood Mandviwalla

  3. Purpose of the Code  - Where public investment is being sought the obligation of the State is to protect investors against malpractices. - Composition of Board; their responsibilities; eligibility. - Periodic meetings; appointment of CFO and Company Secretary; Audit Committees and change of External Auditors. - Disclosure of interest by directors and divestment of shares Corporate Governance Mehmood Mandviwalla

  4. Duties and Responsibilities of Directors - A company is an abstract entity which can only act through individuals. - Companies Ordinance has many specific provisions about the responsibilities of directors and reliance is made on: (i) Articles of the company (ii) Complex and inaccessible case law defined a directors propriety of conduct or the standard of skill and care that is required of directors. - As a result of this problem, directors were never clear about what their general duties were and to whom they owed such duties. Corporate Governance Mehmood Mandviwalla

  5. Increased Role of Non-Executive Directors 1. Directors are no longer rubber stamps or hold ceremonial positions. 2. Directors are no longer spectators. They are now required to participate in operational detail. 3. Greater Accountability of Directors will result in higher responsibilities. 4. Directors need to give more time and attention and carry out duties in a fiduciary manner. 5. Directors have to now form part of the majority of the Audit Committee. 6. Directors should give advice, make judgments and oversee commitment of corporate resources. Corporate Governance Mehmood Mandviwalla

  6. Increased Role of Non-Executive Directors 7. Directors are now responsible for oversight. 8. Directors are responsible for assuring long term survival. 9. Managements may come and go; internal structures may shift and change. The Directors responsibility to ensure long term survival continues. 10. Directors should act in the best interest of the shareholders. 11. Directors need to study the information provided to them and call for more information from management if they want it. The contents of Directors Report are set out in detail in The Code. Corporate Governance Mehmood Mandviwalla

  7. Role of the CEO 1 CEO is the one man agent of the Board. 2. CEO exercises the powers delegated by the Board. 3. No surprises. Board should know when and where trouble is brewing. Board needs to be fully informed. 4. CEO develops and implements an effective corporate strategy while the Board takes the responsibility of approving how risky a strategy the company will follow. Corporate Governance Mehmood Mandviwalla

  8. Minutes of Meetings – Section 173 • Copy of Minutes of Board Meeting to be furnished to every Director within 14 days of date of meeting. • Contents of the Minutes • Fair and Accurate Summary • Arguments, observations, criticism Mehmood Mandviwalla Corporate Governance

  9. Company Secretary-Section 204 • Mandatory full time secretary for listed companies • Qualified as per the specifications given in the Code of Corporate Governance • Terms and Conditions of Appointment and remuneration to be determined by the Board of Directors Mehmood Mandviwalla Corporate Governance

  10. Removal of Auditors - Section 252 • Powers given to shareholders to remove auditors by special resolution • Negative control with the Audit Committee Disqualification of Auditors - Section 254 • Auditors cannot hold shares of any audit client Mehmood Mandviwalla Corporate Governance

  11. SECP and SBP Liaison • Code of Corporate Governance also adopted by SBP in Prudential Regulations Mehmood Mandviwalla Corporate Governance

  12. THE OATH “I swear that to the best of my knowledge (“which is pretty poor and may be revised in future”) my Company accounts are (more or less) accurate. I have checked this with my auditors and directors who (I pay) agree with me”. Corporate Governance Mehmood Mandviwalla

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