REGISTERED No. M • 302 L.-7646 :.) CfJe ._le (!) of •aru.tan ~ EXTRAORDINARY PUBLISHED BY AUTH Corporate social responsibility initiatives including, donations, charities, contributions and other payments of a similar nature; (k) determination and delegation of financial powers to Executives and employees; (1) transactions or contracts with associated companies and related parties; (m) health, safety and environment; (n) development of whistle-blowing policy and protection mechanism; 628 THE GAZEITE OF PAKISTAN, EXTRA.• MARCH 8, 2013 [PARTII {o) capital expenditure planning and control; (p) protection of public interests; and (q) human resource policy including succession planning. (8) Any service delivered or goods sold by a !Public Sector Company as a public service obligation where decisions are taken in fulfilling social objectives of the Government but are not in its commercial interests, outlay of such action shall be quantified and request for appropriate compensation th1ere-for shall be submitted to the Government for consideration. (9) A complete record of particulars of the above-mentioned policies along with the dates on which they were approved or amended by the .Board shall be maintained. (10) The Board shall define the level of mawriality, keeping in view the specific context of the Public Sector Company and the recommendations of any committee of the Board that may be set up for the purpose. 6. Meetings of the Board.-( 1) The Boaird shaJI meet at least once, each quarter of a year,to ensure that it discharges its duties and obligations to shareholders and other stakeholders efficiently and ·~ffectively. In case of non- compliance, the same shall be reported to the Commission with reasons of non- compliance, within fourteen days of the end of the quarter in which the meeting should have been held. (2) Written notices of meetings, including the agenda.duly approved by the Chairman, shall be circulated not less than seven days before the meetings, except in the case of emergency meetings, where the notice period may be reduced or waived by the Board. (3) The chairman of the Board shall ensure that minutes of meetings of the Board are appropriately recorded by approving them under his signature. The minutes of meetings shall be circulated after approval of the chairman, to directors and officers entitled to attend Board meetings, not later than fourteen days thereof, unless a shorter period is provided in the articles of association of the Public Sector Company. (4) In the event that a director of a Public Sector Company is of the view that his dissenting note has not been satisfactorily rc~corded in the minutes of a meeting of the Board, he may refer the matter to th1e company secretary, or the chairman of the Board. The director may require the· note to be appended to the minutes, failing which he may file an objection with the Commission. PARTU] THE GAZEITE OF PAKISTAN, EXTRA., MARCH 8, 2013 629 (5) A Board meeting held and attended through video-conferencing shall be a valid meeting, as long as its proceedings: are properly recorded and the requirements specified by the Commission for public companies for holding Board meetings through video-conferencing are met. 7. Key information to be placed for decision by the Board.-( I) The Board shall establish appropriate arrangements to ensure it has access to all relevant information, advice and resources necessary to enable it to carry out its role effectively. Significant issues shall be placed before the Board for its information and consideration, in order to formalize and strengthen the corporate decision making process. (2) For the purpose of sub-rule (I), significant issues shall, inter-alia, include the following, namely:- (a) annual business plans, cash flow pmjections, forecasts and long term plans; budgets including capital, manpower and expenditure budgets, along with variance analyses; (b) internal audit reports, including cases of fraud or major irregularities; (c) management letters issued by the external auditors; (d) details of joint ventures or collaboration agreements or agreements with distributors, agents, etc; (e) promulgation or amendment of a law, rule or regulation or, enforcement of an accounting standard or such other matters as may affect the Public Sector Company; (f) status and implications of any lawsuit or judicial proceedings of material nature, filed by or against the Public Sector Company; (g) any show cause, demand or prose.cution notice received from any revenue or regulatory authority, which may be material; (h) material payments of government clues, including income tax, excise and customs duties, and other statutory dues including penal charges thereon; (i) inter-corporate investments in and loans to or from associated concerns in which the business group, of which the Public Sector Company is a part, has significant interest; 630 THE GAZEITE OF PAKISTAN, EXTRA., MARCH 8, 2013 [PARTII (j) policies related to the award of conttacts and purchase and sale of raw materials, finished goods, machinery ,e tc; (k) default in payment of principal or interest. including penalties on late payments and other dues, to a creditor, bank or financial institution or default in payment of public deposit; (I) failure to recover material amounts of loans, advances, and deposits made by the Public Sector Company, incliuding trade debts and inter- corporate finances; (m) any significant accidents, dangerous occ;urrences and instances of pollution and environmental problems involving the Public Sector Company; (n) significant public or product liability claims made or likely to be made against the Public Sector Company, including any adverse judgment or order made on the conduct of the Public Sector Company or of any other company that may bear negatively on the Public Sector Company; (o) disputes with labor and their proposed solutions, any agreement with the labor union or collective bargaining agent and any charter of demands on the Public Sector Company; (p) payment for goodwill, brand equity or intc:llectual property; (q) annual, quarterly, monthly orother periodical accounts as are required to be approved by the Board for circulation amongst its members; (r) reports on governance, risk and compliance issues; (s) whistle-blower protection mechanism; (t) report on Corporate Social Responsibility (CSR) activities; and (u) related party transactions. 8. Performance evaluation.-{ 1) The pedormance evaluation of the members of the Board including the chairman and the chief executive shall be undertaken for which the Board shall establish a process, based on specified criteria. and the chairman of the Board shall take ownership of such an evaluation. The committees shall also carry out their evaluation on an :annual basis. PARTll] 1llE GAZEITE OF PAKISTAN, EXTRA., MARCH 8, 2013 631 (2) The Board shall monitor and ass•ess the performance of senior management on a periodic basis, at least once a year, and hold them accountable for accomplishing objectives, goals and key performance indicators set for this purpose. 9. Related party tramactlons.-(l)The details of all related party transactions shall be placed before the audit committee of the Public Sector Company and upon recommendations of the audit committee, the same shall be placed before the Board for review and approval. (2) The related party transactions which are not executed at arm's length price shall also be placed separately at each Board meeting along with necessary justification for consideration and approval of the Board on recommendation of the au}iit committee of the Public Sector Company. (3) The Board shall approve the pricing methods for related party transactions that were made on the tenns equivalent to those that prevail in arm's length transaction only if such terms can be substantiated. (4) Every Public Sector Company shall maintain a party wise record of transactions, in each financial year, entered into with related parties in that year along with all such documents and explanations. The record of related party transaction shall include the following particulal's in respect of each transaction, namely:- (a) name of related party; (b) nature of relationship with related party; (c) nature of transaction; (d) amount of transaction; and (e) terms and conditions of transaction, including the amount of consideration received or given. (S) The Public Sector Company may seek a general mandate from its members for recurrent related party transactions of revenue or trading nature or those necessary for its day-to-day operations such as the purchase and sale of supplies and materials, but not in respect of the purchase or sale of assets, undertakings or businesses. A general mandate is subject to annual renewal. 632 THE GAZE1TE OF PAKISTAN, EXTRA., MARCH 8, 2013 10. Quarterly and Monthly Financial Statements and Annual Report.-{ I) Every Public Sector Company shall, within one month of the close of first, second and third quarter of its year of account, prepare a profit and loss account for, and balance-sh! et as at the end of, thaf quarter, whether audited or otherwise, for the Board's approval. Annual report including annual financial statements shall be placed on the Public Sector Company's website. (2) Every Public Sector Company shall also prepare monthly accounts, for circulation amongst the Board members. 11 . Board orientation and learning.--{ 1) Orientalion courses shall be held by a Public Sector Company, to enable direc~ors to better comprehend the specific context in which it operates, including its operations and environment, aw~reness of Public Sector Company's values and standards of probity and accountability as well as their duties as directors. (2) In order to ensure that the directors are well conversant with the corporate laws and practices, they are encouraged Ito have certification under an appropriate training or education program offered by any institution, local or foreign. (3) In order to acquaint the Board members with the wider scope of, responsibilities concerning the use of public resources, to act in good faith and in the best interests of the Public Sector Company, at least one orientation course shall be arranged annually for the directors and the following information in writing, illler- alia, shall be provided, namely:- (a) Public Sector Company's aims and objectives; (b) control environment and control activities; (c) key policies and procedures; (d) risk management and internal control framework; (e) background of key personnel, including their job descriptions; (f) delegation of financial and administrative powers; (g) Q<>ard and staff structure;and (h) budgeting, planning and performance evaluation systems. PART IJ] THE GAZE'ITE OF PAKJSTAN, EXTRA., MARCH 8, 2013 633 12. Formation of Board committees.--(1) The Board shall set up the following committees to support it in performing its functions efficiently, and for seeking assistance in the decision making process, namely:- (a) audit committee, for an efficient and effective internal and external financial reporting mechanism; (b) risk management committee, in case of Public Sector Companies either in the financial sector or those having assets of five billion rupees or more, to effectively review the risk fumction ; (c) human resources committee, to deal with all employee related matters including recruitment, training, remun1eration, performance evaluation, succession planning, and measures for effective utilization of the employees of the Public Sector Company; (d) procurement committee, to ensure transparency in procurement transactions and in dealing with the suppliers; and (e) nomination committee, to identify and recommend the candidates for the Board for the consideration of shareholders after examining their skills and characteristics that are needed in such candidates. (2) The Board committees shall be chaired by non-executive directors and the majority of their members shall be independent. However, the independent directors in the committees shall not be less than the:ir proportionate strength during the first four years of this notification. The existem::e of such committees shall not absolve the Board from its collective responsibility for all matters. Such committees shall have written terms of reference that defi ne their duties, authority and composition, and shall report to the full Board.The minutes of their meetings shall be circulated to all Board members. (3) The Board shall concern itself with policy formulation and oversight and not the approval of individual transactions except which are of an extraordinary nature or involve materially large amount. 13. Chief Financial Officer, Company Secretary and Chief Internal Auditor· appointment and removal.-( 1) The Board shall appoint a chief financial officer, a company secretary and a chief internal auditor. (2) 11le appointment, remuneration and tenns and conditions of employment of the chief financial officer, the company secretary and the chief internal auditor of Public Sector Company shall be determined with the approval of the Board. ' 634 111E GAZETl'E OF PAKISTAN, EXTRA., MARCH 8, 2013 [PAKTII (3) The chief financial officer, the company s;ecretary, or the chief internal auditor of Public Sector Company shall not be removed except with the approval of the Board. 14. Role and quallflcatlon of Chief Flnandal Oftker and Company Secretary.-( 1) The chief financial officer shall be responsible for ensuring that appropriate advice is given to the Board on all financia.l matters, for keeping proper financial records and accounts, and for maintaining a111 effective system of internal financial control. (2) No person shall be appointed as the chief financial officer of a Public Sector Company unless he is,- ' (a) a member of a recognized body of profiessi1111:1I ·1ccountants with at least five years relevant experience, in case of Public Sector Companies having total assets of five billion rupees •o r more; or (b) a person holding a master degree in finance= from a university recognized by the Higher Education Commission with at least ten years relevant .experience, in case of other Public Sector Companies. (3) The company secretary shall be respon~~ible for ensuring that Board procedures are followed, and that all applicable laws, n:ales and regulations and other relevant statements of best practice are complied with. Where the company secretary is not separately appointed, the role of company secn~tary may be combined with chief financial officer or any other member of senior management. (4) No person shall be appointed as the company secretary of a Public Sector Company unless he is a,- (a) member of a recognized body of professional accountants; or (b) member of a recognized body of corp0trate or chartered secretaries; or (c) person holding a master degree in business administration or commerce or being a law graduate from a university recognized by the Higher Education Commission with at least five: years relevant experience. (S) No person shall be appointed to the positions of the chief financial officer and company secretary unless he is fit and proper for the position. PARTll] THE GAZE1TE OF PAKISTAN, EXTRA., MARCH 8, 2013 635 15. Requirement to attend Board Meetings.-(l )Th~ chief financial officer and the company secretary of. a Public Sector Company shall attend all meetings of the Board: Provided that unless elected as a dirnctor, the chief financial officer and the company secretary shall not be deemed to be a director or entitled to cast a vote at meetings of the Board for the purposes of these rules: Provided further that the chief financial officer and the company secretary shall not attend such part of a meeting of the Board, which involves consideration of an agenda item relating to them or that relating to the chief executive or any director. (2) In pursuance of sub-rule (1), the Board shall ensure that the chief financial officer and the company secretary attend Board meetings, wherever required. 16. Financial Reporting Framework.-Every Public Sector Company shall adopt International Financial Reporting Standards, as are notified by the Commission under clause (i) of sub-section (3) of section 234 of the Ordinance. 17. Directors' report to the Sharelllolders.-( I) The Board shall submit an annual report to the shareholders. (2) The Board shall make the following statements and provide the following information in their report to the shareholders, prepared under section 236 of the Ordinance, namely:- (a) the Board has complied with the relevant principles of corporate governance, and has identified the rules that have not been complied with, the period in which such non-compliance continued, and reasons for such non-compliance; (b) the financial statements, prepared by the management of the Public Sector Company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity; (c) proper books of account of the Public Sector Company have been maintained; (d) appropriate accounting policies: have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment; 636 THE GAZElTE OF PAKISTAN, EXTRA., MARCH 8, 2013 [PAR'f II (e) they recognize their responsibility to establish and maintain sound system of internal control, which is regularly reviewed and monitored; and (f) the appointment of chairman and other members of Board and the terms of their appointment alongwith the 1remuneration policy adopted are in the best interests of the Public Sector Company as well as in line with the best practices. (3) The disclosure of an Executive's remuneration is an important aspect for a Public Sector Company. The annual report of a Public Sector Company shall contain a statement on the remuneration policy and d~!tails of the remuneration of members of the Board. Separate figures need to be shown for salary, fees, other benefits and other performance-related elements. (4) The directors' report of a Public Sector Company shall also include the following, where applicable, namely: - (a) where the Public Sector Company is re:liant on a subsidy or other financial support from the Government, a detailed disclosure of the fact; (b) significant deviations from last year in operating results of the Public Sector Company shall be highlighted and reasons thereof shall be explained; (c) key operating and financial data oflast si:"' years shall be summarized; (d) key performance indicators of the Public Sector Company relating to its social objectives and outcomes which significantly reflect the work and impact of Public Sector Company and a comparison of actual results with the budgeted figures. Such indicators shall focus on as to how well the Public Sector Company has responded to accountability requirements, improved service delivery, reduced costs and adherence to the principles of environmental and corJPorate social responsibilities; (e) where any statutory payment on accounit of taxes, duties, levies and charges is overdue or outstanding, the amount together with a brief description and reasons for the same shall be disclosed; (f) significant plans and decisions, such as corporate restructuring, business expansion and discontinuance of operations, shall be outlined along with future prospects, risks and uncertailflties surrounding the Public Sector Company; PART TI] THE GAZEITE OF PAKISTAN, EXTRA., MARCH 8, 2013 637 (g) a statement as to the value of investments of provident, gratuity and pension funds, based on their respective audited accounts, shaJl be included; (h) the number of Board meetings held during the year and attendance by each director shall be disclosed; and (i) the pattern of shareholding shall be reported to disclose the aggregate number of shares (alongwith details, stated below) held by,- (i) Government; (ii) associated companies, undert21kings and related parties (name wise details); (iii) mutual funds; (iv) directors, Chief Executive, and their spouse and minor children (name wise details); (v) Executives; (vi) Public Sector Companies and corporations; (vii) banks, development finance institutions, non-banking finance companies, insurance comp:anies, takaful companies, and modarabas; and (viii) shareholders holding five percent or more voting rights in the Public Sector Company (name wise details). 18. Disclosure of Interests by Directors and Officers.--{!) Every director of a Public Sector Company, if he or his re lative, is in any way, directly or indirectly, concerned or interested in any contract o r arrangement entered into, or to be entered into, by or on behaJf of the Public Sector Company shall disclose the nature of his concern or interest at a meeting of the directors. (2) Any other officer (including the Chie1fExecutive and other Executives) of a Public Sector Company, if he or his relative, is in any way, directly or indirectly, concerned or interested in any proposed contract or arrangement by the company shall disclose to the Company through a communication to the company secretary, the nature and extent of his interest in the transactio n. Such officer and the company shall ensure that such information is properly placed and considered by any forum 638 THE GAZETTE OF PAKISTAN, EXTRA., MARCH 8, 2013 [PARTII where the matter relating to such proposed contract or anrangement is to be discussed and approved. · (3) If a director or officer has an existing interest, before joining the Board, he shall disclose such interest to the Board, which shall take such facts into consideration for any current and future decision making. 19. Directors' Remuneration.-(l)There shall be a formal and transparent procedure for fixing the remuneration packages of individual directors. No director shall be involved in deciding his own remuneration. (2) Directors' remuneration packages shall encourage value creation within the company, and shall align their interests with those of the company. These shall be subject to prior approval of shareholders qr Board as required by company's Articles of Association. Levels of remuneration shall be sufficient to attract and retain the directors needed to run the company successfully. , (3) Subject to the provisions of the company's; Articles of Association, the shareholders or Board shall determine the scale of remuneration for non-executive directors. However, it shall not be at a level tbat could be perceived to compromise their independence. (4) The Public Sector CompanY'.s annual report shall contain criteria and details of the remuneration of each director, including salary, benefits and performance linked incentives. 20. Responsibility for financial reporting and corporate compliance.-No Public Sector Company shall circulate its financial statements unless the chief executive and the chief financil\,I officer, present the financial statements,duly certified under their respective signatiures, for consideration and approval of the audit committee and the Board.The Board shall, after consideration and approval, authorize the signing of financial statements. for issuance and circulation. 2 I . Audit Committee.-( 1) The Board shall establish an audit committee, whose members shall be financially literate and majority of them, including its chairman, shaJI be Independent Non Executive Directors, subject to the provisions of sub-rule (2) of rule 12. The names of members of the audit committee shall be disclosed in each annual report of the Public Sector Company. _ (2) The chairman of the Board as well as the chief executive of the Public Secto~ Company shall not be a member of the audit committee. PART 11) THE GAZETTE OF PAKISTAN, EXTRA., MARCH 8, 2013 639 (3) The chief financial officer, the chief internal auditor, and a representative of the external auditors shall attend all meetings of the audit committee at which issues relating to accounts and audit are discussed: Provided that at least once a year, the audit committee shall meet the external auditors without the presence of the chief financial officer, the chief internal auditor and other executives being present, to ensure independent communication between the external auditors and the audit committee: Provided further that at least once a year, 1the audit committee shall meet chief internal auditor and other members of the internal audit function without the chief financial officer and the external auditors being present. (4) The Board shall determine the terms of reference of the audit committee. The terms of reference shall be in writing, specifying the mandate of the audit committee.The audit committee shall have full antd explicit authority to investigate any matter within its terms of reference and shall be pirovided with adequate resources and access to all relevant information. (5) The audit committee shall, inter-alia, 1>4~ responsible for recommending to the Board the appointment of external auditors by the Public Sector Company's shareholders and shall consider any questions of resignation or removal of external auditors, audit fees and provision by external auditors of any service to the Public Sector Company in addition to audit of its financial statements. In the absence of strong grounds to proceed otherwise, the _Board shall act in accordance with the recommendations of the audit committee in all these matters. However, the Board shall not be deemed to absolve its~lf of its overall responsibility for the functions delegated to the audit committee. (6) The terms of reference of the audit committee may also include the following, namely:- (a) determination of appropriate measures to safeguard the Public Sector Company's assets; (b) re view of financial results; (c) review of quarterly, half-yearly and an111ual financial statements of the Public Sector Company, prior to their approval by the Board, focusing on,- (i) major judgment areas; (ii) significant adjustments resulting from the audit; 640 THE GAZETTE OF PAKISTAN, EXTRA., MARCH 8, 2013 [PART II (iii) the going-concern assumption; (iv) any changes in accounting policies and practices ; and (v) compliance with applicable accounting standards. E.xplanation.-The appropriateness o:f the use of the going concern assumption in the preparation of the financial statements is generally not in question when auditing Public Sec1tor Company having funding arrangements backed by the Government. However, where such arrangements do not exist, or where Gove:mment funding of the Public Sector Company may be withdrawn and the existence of the Public Sector Company may be at risk, International Standards on Auditing provide useful guidance. This issue is increasingly important for Public Sector Companies which have been privatized; (d) facilitating the external audit and discuss:ion with external auditors of major observations arising from interim aud final audits and any matter that the auditors may wish to highlight (ini the absence of management, where necessary); (e) review of management letter issued 'by external auditors and management's response thereto; (f) ensuring coordination between the internal and external auditors of the Public Sector Company; (g) review of the scope and extent of internal audit and ensuring that the internal audit function has adequate resources and is appropriately placed within the Public Sector Company; (h) considetation of major findings of internal investigations and management's response thereto; (i) ascertaining that the internal control system including financial and operational controls, accounting system and reporting structure are adequate and effective; G) review of the Public Sector Company's statement on internal control systems prior to endorsement by the Board; (k) recommending or approving the hiring or removal of the chief internal auditor; I THE GAZE1TE OF PAKISTAN, EXTRA, MARCH 8, 2013 641 (l) instituting special projects, value for money studies or other investigations on any matter specified by the Board, in consultation with the chief executive and to consider remittance of any matter to the external auditors or to any other external body; (m) determination of compliance with re]evant statutory requirements; . (n) monitoring compliance with the best.practices of corporate governance and identification of significant violaltions thereof; (o) overseeing whistle-blowing policy and protection mechanism; and (p) consideration of any other issue or matter as may be assigned by the Board. (7) The audit committee shall be responsible for managing the relationship of Public Sector Company with the external auditors. In managing the Public Sector Company's relationship with the external auditors on behalf of the Board, the audit committee's responsibilities include,- (a) suggesting the appointment of the external auditor to the Board, the audit fee, and any questions of resignation or dismissal; (b) considering the objectives and scope of any non-financial audit or consultancy work proposed to be undertaken by the external auditors, and reviewing the remuneration for this work; (c) discussing with the external auditors before the audit commences the scope of the audit and the extent of relianGe' on internal audit and other review agencies; (d) discussing with the external auditors any significant issues from the review ofthe financial statements by the management, and any other work undertaken or overseen by the audit committee; {e) reviewing and considering the external auditors' communication with management and management's response thereto; and (f) reviewing progress on accepted recommendations from the external auditors. (8) The recommendations of the audit committee for appointment of retiring auditors or otherwise, as mentioned in sub-rule (7) above, shall be included in the 642 THE GAZEITE OF PAKISTAN, EXTRA., MARCH 8, 2013 directors' report. In case of a recommendation for change of external auditors before the lapse of three consecutive financial years, the rieasons for the same shall be included in the directors' report. (9) The audit committee shall appoint a secretary of the Committee, who shall circulate minutes of its meetings to the all members, directors and the chief financial officer, within fourteen days of the meeting. 22. Internal Audit.-( 1) There shall be an internal audit function in ~very Public Sector Company. The chief internal auditor, who is the head of the internal audit function in the Public Sector Company, shall be accountable to the audit committee and have unrestricted access to the audit committee. (2) N.o person shall be appointed to the positiion of the chief internal auditor unless he is considered and approved as "fit and proper" for the position by the Audit Committee. No person shalJ be appointed as the Chie~f Internal Auditor of a Public Sector Company unless he has five years of relevant audit experience and is a,- , {a) member of a recognized body of profes:sional accountants; or (b) certified internal auditor; or (c) certified fraud examiner; or (d) certified internal control auditor; or (e) person holding a master degree in financie from a university recognized by the Higher Education Commission: Provided that individuals serving as chief internal auditor of the Public Sector Company for the last five years at the time of coming into force of these rules shall be exempted from the above qualification requirement. (3) Every Public Sector Company shall ensure that internal audit reports arc provided for the review of external auditors. The external auditors shall discuss any major findings in relation to the reports with the audit committee, which shall report matters of significance to the Board. (4) The internal audit function shall have an audit charter, duly approved by the audit committee and shall work, as far as practiicable, in accordance with the standards for the professional practice of internal auditors issued by the Institute of Internal Auditors Inc., (the global professional organization of internal audit profession). PARTII] THE GAZETTE OF PAKISTAN, EXTRA., MARCH 8, 2013 643 23. External Auditors.-( I) Every Public Sector Company shall.ensure that its annual accounts are audited by external auditors, as envisaged under section 252 of the Ordinance. When carrying out audit of a Public Sector Company, the external auditors shall take into account the specific requirements of any other relevant regulations, ordinances or ministerial directives which affect the audit mandate and any special auditing requirements. (2) In asses.s ing materiality, the external auditor must, in addition to 1 exercising professional judgment, consider any legiislation or regulation which may impact that assessment. (3) The external auditors shall independently report to the shareholders in accordance with statutory and professional requirements. They shall also report to the Board and audit committee the matters of audit interest, as laid down in the Int~rnational Standards on Auditing. (4) No Public Sector Company shall appoint as external auditors a firm of auditors which firm or a partner of which firm is non-compliant with the International Federation of Accoumants' (lFAC) Guidelines on Code of Ethics, as applicable in Pakistan. (5) The external auditors shall observe ap1plicable guidelines issued by the International Federation of Accountants with regard to restriction of non-audit services. The audit committee shall also ensure that the external auditors do not perform management functions or make management decisions, responsibility for which remains with the Board and management of the Public Sector Company. (6) Every Public Sector Company in the financial sector shall change its external auditors every fiveyears. Financial sector; for this purpose, means banks, non-ban.king finance companies, mutual funds, modarabas, takaful companies and insurance companies. Every Public Sector Company other than those in the financial sector shall, at a minimum, rotate the engagement partner after every fiveyears. (7) No Public Sector Company shall appoint a person as its chief executive, chief financial officer, chief internal auditor or director who was a partner of the firm of its external auditors (or an employee involved in the audit of the Public Sector Company) at any time during the two yeats preceding such appointment. (8) Every Public Sector Company shall requi re external auditors to furnish a management letter to its Board not later than th.irty days from the date of audit report. 644 THE GAZETTE OF PAKJSTAN, EXTRA., MARCH 8, 2013 [PARTll 24. Compliance with the rules.-( 1) EveryPublic Sector Company shall publish and circulate a statement along with its annual report to set out the status of its compliance with these rules, and shall also file wilth the Commission and the registrar concerned such statement alongwith its annu;al report. (2) Every Public Sector Company shall ensure that the statement of c!ompliance with the rules is reviewed and certified by external auditors, where such compliance can be objectively verified, before publitr.:ation by the Public Sector Company. (3) Where the Commission is satisfied that it is not practicable to comply with any of these rules, the Commission may, for reasons to be recorded, relax the same subject to such conditions as it may deem fit to impose. 25. Penalty for contravention of the rules.-Whoever fails or refuses to comply with, or contravenes any provision of these rul€~, or knowingly and willfully authorises or permits such failure, refusal or contravention shall, in addition to any other liability under the Ordinance, be punishable with fine and, in the case of continuing failure, to a further fine, as provided in sub-section (2) of section 506 of the Ordinance. · ANNEXURE CSee Rule 3<7)] CRITERIA FOR DETERMINING A 'FIT AND PROPER PERSON' (1) For the purpose of determining as to whether a person proposed to be appointed as director is a 'fit and proper person' , the Commission shall take into account any consideration as it deems fit, including but. not limited to the following criteria, namely:- The person proposed for the said position - (a) is at least graduate; (b) is a reputed businessman or a recognised professional with relevant sectoral experience; (c) has financial integrity; (d) has no convictions or civil liabilities; (e) is known to have competence; rnE GAZEITE OF PAKISTAN, EXTRA., MARCH 8, 2013 645 (f) has good reputation and character; (g) has the traits of efficiency and honesty; (h) does not suffer from any disqualifica.tion to act as a director stipulated in the Ordinance; (i) has not been subject to an order passc=d by the Commission cancelling the certificate of registration grantc::d to the person individually or collectively with ochers on the ground of its indulging in insider trading, fraudulent and unfair trade practices or market manipulation, illegal banking, forex or deposit taking busiiness; " (j) has not been subject to an order pa'>sed by the Commission or any other regulatory authority, withdrawing or refusing to grant any license or approval to him which has a bearing on the capital market; (k) is not a stock broker or agent of a broker, and (I) does not suffer from a conflict of interest; this includes political office holders in a legislative role. (2) A director shall cease to be considered as a "fit and proper person" for the purpose, if he incurs any of the following disqualifications, namely:- (a) he is convicted by a court for any offience involving moral turpitude, economic offence, disregard of securities and company laws or fraud; (b) an order for winding up has been passed against a company of which he was the officer as defined under s1ection 305 of the Ordinance; (c) he or his close relatives have been engaged in a business which is of the same nature as and directly compe!tes with the business carried on by the Public Sector Company of which he is the director. [CLD/RDIROC/CGf2004.] BUSHRA ASLAM, Se.cretary to the Commission. PRINTED BY THE MANAGER, PRINTING CORPORATION OF PAKISTAN PRESS, ISLAMABAD. PUBLISHED BY 1ltE DEPUTY COl'm«XJ..ER. STATIONERY AND FURMS, UNIVERSITY ROAD. KARACHI.