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16. Section 120 substituted by the Banking and Financial
Service (Amendment of Laws) Ordinance (LVII of Laws) Ordinance (LVII of 1984), S. 7.
Section 120 read:
"(1) *[A company may by public offer or], upon terms and conditions contained in an
agreement in writing, issue to one or more scheduled banks, financial institutions
or such other persons as are specified for the purpose by the Federal Government by
notification in the official gazette, either severally, jointly or through a syndicate,
Participation Terms Certificates in consideration of any funds, moneys, accommodations
received or to be received by the company, whether in cash or in specie or against any
promise, guarantee, undertaking or indemnity issued to or in favour or benefit of the
company.
Explanation.-- "Financial institution' means a financial institution set up and
controlled by the Federal Government and includes such other institutions or bodies
corporate as the Federal Government may, from time to time, by notification in the
official Gazette, specify for the purpose.
(2) The agreement referred to in subsection (I) may adopt and include all or any of the
regulations, terms and conditions contained in Table F in the First Schedule, and all such
regulations, terms and conditions shall be valid, binding and enforceable notwithstanding
anything contained in this Ordinance or any other law or the memorandum or articles or any
agreement or resolution of the company or any other document.
(3) In particular and without prejudice to the generality of the foregoing provision, the
agreement referred to in subsection (I) may provide for adopt or include, in addition to
others, all or any of the regulations, terms and conditions continued in table F of the
First Schedule, in respect of any of the following matters:
(a) the PTCs, shall be subject to the holders' option to convert them into ordinary shares
or to be entitled to or obtain convertible ordinary shares of the company in the
contingency provided in the regulations in Table F of the I list schedule;
(b) mode and basis of repayment by the company of the amount invested in the PTCs within a
certain period of time;
(c) the holders of the PTCs shares participate in the profits as well as in the losses in
each financial year of the company;
(d) the holders of the PTCs, in respect of the losses suffered in any financial year,
shall be issued convertible ordinary shares of the company to the extent of such loss,
from and under Term Capital shall increase, in the event of further or continued losses
corresponding to the issued convertible shares;
(e) the Term Capital, for its creation, increase or decrease, shall not be subject to the
provisions of the Capital Issues (Continuance and Control) Act, 1947 (XXIX of 1947), and
shall be created and increased by the first and the further issue of the convertible
shares of the company in lieu of PTCs being surrendered against losses of the company;
such convertible shares may be redeemed from profits of the company in the next following
or other subsequent year or years in the manner and to the extent provided in the
agreement;
(f) the holders of FTCs, in the events and contingencies mentioned in the following
sub-clauses shall have the option to exercise voting rights to the extent of the total
votes arrived at by dividing the face value of the certificates by the nominal value of
the ordinary shares of the company, as an ordinary shareholder may exercise Sub. by
Finance Act, 1994.
his right to vote: Provided always that the holder of the certificate shall exercise the
right to vote, pari passu with the ordinary shareholders in the following events and
contingencies,---
(i) if the company undergoes losses for two consecutive years,---
(ii) if the company earns inadequate profits for two consecutive years or three out of any
four years;
(h) the holders of the PTCs may agree to amend, vary, alter any terms and conditions
originally agreed.
(iii) if the net worth of the company is reduced by fifty per cent, or more from the date
of the original issue of the PTCs; or
(iv) if the company fails to repay two consecutive installments of the principal amount of
the PTCs or three out of five such repayment installments;
(g) the holders of convertible shares shall have the same rights as the ordinary
shareholders of the company in all matters and to the same extent, in particular in the
shareholders powers, voting rights, participation in all company meetings and in every
other company matter; and
(h) the holders of the PTCs may agree to amend, vary, alter any terms and conditions
originally agreed.
(4) The ordinary shareholders of the Company, shall not challenge the rights of the
holders of the PTCs which are for consideration and for such period as the PTCs are paid
off or their terms exist or otherwise till such time as the Term Capital shares, in the
event of the persistent losses of the company are finally written off or otherwise
redeemed.
(5) The terms and conditions for issue of the PTCs and the rights of their holders shall
not be challenged or questioned by the company or any of its shareholders as repugnant to
any provision of this Ordinance or any other law or the memorandum or articles or any
resolution of the general meeting or directors of the company or any other document and
the agreement shall be deemed to be for benefit of the company and its shareholders as
also for sufficient consideration.
S.R.O. 747(1)/2000.-- In pursuance of the provisions contained in sub-section
(1) of section 120 of the Companies Ordinance, 1984, the Securities and Exchange
Commission of Pakistan is pleased to specify the ‘Pension Fund Trusts’ as
persons to whom Term Finance Certificates (TFCs) in the nature of redeemable capital may
be issued by a company, subject to the terms and conditions of the agreement contemplated
in the said section.
[No. ED/SECP/33/2000.]
MOHAMMED HAYAT JASRA,
Executive Director (Law)
