Directors of a Company in Pakistan

14 February 2014

1. What do the Board of Directors do?

(1) Under the law, the Board of Directors is the repository of all corporate powers, except those powers which, by law, are to be undertaken by the shareholders or such powers which have been given to the shareholders under the Articles of Association of a company.

Section 196 of the Companies Ordinance, 1984 outlines the powers of the Directors.

(2) Directors have almost all the powers over the operation and management of the Company until they are removed. It has been held that the shareholders cannot undertake functions allowed to the Board under law (Abdul Malik vs. Janana De Malucho Textile Mills Limited, PLD 1973 Note 116 (Lahore)).

2. Can Directors hold Board Meetings through telephone/video conferencing?

Circular Number 20/2005 dated 10 November 2005 issued by the Securities and Exchange Commission of Pakistan allows the Board to conduct board meetings through telephone/video conferencing.

3. What if the matter is urgent and the Directors have no time to hold a regular meeting?

If the matter is urgent then the Directors may exercise certain powers on behalf of the Company without their formal meeting through a circular resolution or a resolution in writing, provided that this permission has been granted in the Articles of Association of the Company.

4. What are the fiduciary (ethical/legal) duties of Directors?

(1) In the Companies Ordinance, 1984, there are strict provisions for disclosure of interest/ conflict of interest of Directors (Sections 215 and 216)

(2) Directors must exercise their powers for (only) the purposes for which they were conferred and if they are for the benefit of the Company as a whole.

(3) Directors should ensure that they do not put themselves in a position in which their duties to the Company and their personal interests may conflict (Section 214).

(4) The Directors have a duty to take care of the Company.

5. What is the benchmark expected of a Director?

In discharging his duties, Directors must act honestly and must exercise such care as might be expected from an ordinary man (see, generally, Govind Narayan Kakade vs. Rangnath Gopal Rajopadhye, 1930 AIR Bombay 572). If a Director so acted, and the decision led to irregularities or losses, he would not be liable in negligence for breach of his duty of care (see, generally, Dovey vs. Cory, (1901) AC 477: (1895-9) All ER Rep 724 (HL)).

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Myra Khan Qureshi is a Barrister-at-Law from the Honourable Society of Lincoln’s Inn and Vice Chairperson Women Rights Committee of the Lahore High Court Bar Association. She is currently practicing law in Lahore, Pakistan.

Any queries may be directed to lawyereadia@gmail.com

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Consumer Protection in Punjab

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 11 February 2014

Consumer Protection in Punjab

Scenario: You are driving your car to work when the tyre bursts without reason, causing damage to the car. The Car Company tells you that such damage was caused by a rock under the tyre and is not covered by the warranty. What do you do?

The phrases caveat emptor (let the buyer beware) and “the customer is always right” are well known to legal professionals around the world. The precedents in United Kingdom have set the trend of being favourable to the buyer and finding that, subject to reasonableness, the buyer should get his money’s worth.

The law governing claims for damages against manufacturers by product-users in Punjab, Pakistan is the Punjab Consumer Protection Act, 2005 (the “Act”).

The Act Simplified

The Act provides that a claim for damages is only sustainable where there is: (a) an evident defect in the manufacturing of the product and (b) it is a defect in the manufacturing by the manufacturer.

Under the Act, a manufacturer is liable only when the product is defective enough so as to render it useless to the consumer in which case the customer endures a loss.

Breakdown of the Act

(1) Under Part II of the Act, a consumer is afforded protection from damage caused by a product of the manufacturer.

(2) Part III, of the Act, governs the matters where the provider of services may be liable to a consumer for damages that are caused by the provision of services that have caused damage.

(3) “Consumer”, “manufacturer”, “services”, “product” and “damage” are defined under Section 2(c), (h), (k), (j) and (d) respectively.

Consumer means a person/entity who (a) buys or obtains on lease any product for a consideration and includes any user of such product but does not include a person who obtains any product for resale or for any commercial purpose; or (b) hires any services for a consideration and includes any beneficiary of such services.

Manufacturer means a person/entity who (a) is in the business of manufacturing a product for purposes of trade; (b) labels a product; (c) exercises control over the design, construction or quality of the product; (d) assembles a product; and (e) is a seller of a product of a foreign manufacturer and administers warranty obligations.

(4) In order to hold the manufacturer of a product liable, to the consumer for damages, criteria set out it Section 4, 5, 6, 7 and 8 has to be met:

4. Liability for defective products– (1) The manufacturer of a product shall be liable to a consumer for damages proximately caused by a characteristic of the product that renders the product defective when such damage arose from a reasonably anticipated use of the product by a consumer.

(2) A product shall be defective only if–

(a)  it is defective in construction or composition as provided in section 5;

(b)  it is defective in design as provided in section 6;

(c)  it is defective because an adequate warning has not been given as provided in section 7; and

(d) it is defective because it does not conform to an express warranty of the manufacturer as provided in section 8.

(5) Section 13 of the Act provides as follows:

Liability for faulty or defective services- A provider of services shall be liable to a consumer for damages proximately caused by the provision of services that have caused damage.

If the requisites are met, a claim is filed in the Consumer Court. Evidence is then placed in order to establish if the features required under the Act were met. There is, however, scant case law in relation to the matter.

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Myra Khan Qureshi is a Barrister-at-Law from the Honourable Society of Lincoln’s Inn and Vice Chairperson Women Rights Committee of the Lahore High Court Bar Association. She is currently practicing law in Lahore, Pakistan.

Any queries may be directed to lawyereadia@gmail.com

Procedure of Divorce in Pakistan – Part III (Miscellaneous)

6 February 2014

Procedure of Divorce in Pakistan – Part III (Miscellaneous)

1. Divorce in Shia Law:

A divorce must be pronounced orally in the presence of two (2) competent witnesses and a talaq / divorce communicated in writing is not valid unless husband is incapable of pronouncing it orally. Presence of witnesses is a condition precedent of a valid talaq / divorce according to Fiqha Jafria (Shia Faction).

2. Important point re verbal divorce (as detailed in my blogpost dated 4 February 2014 (Procedure of Divorce in Pakistan – Part II (Divorce))):

A verbal divorce is not recognized by law and the husband’s failure to send written notice to the government office is treated as no divorce in law. However it is also important to note that as per Islamic scholars, divorce once pronounced by the husband and khula once obtained from the court of law is effective and binding.

3. Important clauses to retain in the Nikkahnama (reference picture* attached below):

It is standard practice to slash Clause 18 in the Nikkahnama which reads (with English translation) as follows:

18. Aya shohar ne talaq ka haq biwi ko tafweez kardiya hai

(Has the husband granted the right of divorce to the wife)

Agar kardiya hai tou konsi sharayat ke tehet

(if he has, then under what conditions is such right granted)

The above Clause pertains to the wife’s right of divorce and should be retained in the Nikkahnama. Moreover, Clause 19 gives the wife the right to put conditions on the husband’s right of divorce too.

4. Rights of the wife after divorce:

(1) The wife is entitled to receive her complete haq mehr (the amount agreed during the signing of the Nikkahnama) and any bridal gifts given to her as jahez (dowry) or by her husband’s family. In respect of Khula, the wife is required to forego her claim to the haq mehr.

(2) Upon the dissolution the wife is also entitled to claim deferred haq mehr and maintenance (in an amount decided by the courts) during the period of Iddat (three (3) month waiting period after which the divorce is final).

5. The next step, after the husband sends a notice to the Union Council and a copy to the wife, is that within thirty (30) days of receipt of the notice by the Chairman (Union Council), the Chairman shall constitute an arbitration council for the purpose of bringing about reconciliation between the parties. If such reconciliation proceeds, after expiry of ninety (90) days, fail, then divorce shall take effect.

6.  If the whereabouts of a husband are unknown for a period of four (4) years then the wife can, under the Dissolution of Muslim Marriage Act, 1939, end the marriage.

7. During the proceedings or after the divorce if any party feels threatened by the other, the threatened party may file a complaint at the police station of that area, against the other.

8. For the sake of evidence and to avoid future complications, both parties are advised to collect their divorce certificate (Talaqnama) from the Union Council and keep it safe.

*reference picture as per Paragraph 3 (Important Clauses of Nikkahnama) above:

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Disclaimer: The above information is not legal advice but basic guidelines in respect of divorce in Pakistan. Each case is decided/evaluated/prepared in accordance with the individual/unique facts of the case. Nothing provided herein should be used as a substitute for advice of competent counsel.

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Myra Khan Qureshi is a Barrister-at-Law from the Honourable Society of Lincoln’s Inn and Vice Chairperson Women Rights Committee of the Lahore High Court Bar Association. She is currently practicing law in Lahore, Pakistan.

Any queries may be directed to lawyereadia@gmail.com

 

Procedure of Divorce in Pakistan – Part II (Divorce)

4 February 2014

Procedure of Divorce in Pakistan – Part II (Divorce)

Gist: Three (3) pronouncements of talaq in front of witnesses, make it effective. However, under the law, it is mandatory to issue, as soon as possible, a notice to the Chairman of the Union Council and a copy of such  notice to the wife. Ninety (90) days from the delivery of such notice, the talaq is deemed effective. Not following such procedure results in the revocation of the talaq by the husband and thus, ineffective.

1. Pronouncement of divorce three (3) times:

There remains much confusion around whether three (3) pronouncements of “talaq” in one sitting, by the husband, are valid or not under the laws of Pakistan. The question resonates across households, television dramas and awareness programs. Under the traditional laws of Islam, a divorce is deemed to have taken place when a husband pronounces three (3) times “main tumhain talaq deta hoon” or “I divorce you” in the presence of witnesses. Such a pronouncement has the effect of dissolving the marriage instantly. Moreover, the wife need not be present when the husband divorces his wife.

The law in Pakistan has however, standardized this process to provide legitimacy and clarity to the proceedings.

Under Section 7 of the Muslim Family Law Ordinance, 1961, the formal requirements for the recognition of a talaq (divorce) are as follows:

(1) Any man who wishes to divorce his wife shall, as soon as may be after the pronouncement of talaq in any form whatsoever, give the chairman (of the Union Council) a notice in writing of his having done so, and shall supply a copy thereof to the wife.

(2) Whoever, contravenes the provisions of sub-section (1) shall be punishable with simple imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both.

(3) Save as provided in sub-section (5) talaq, unless revoked earlier, expressly or otherwise, shall not be effective until the expiration of ninety days from day on which notice under sub-section (1) is delivered to the Chairman.

(4) Within thirty days of the receipt of notice under Sub-section (1), the Chairman shall constitute an Arbitration Council for the purpose of bringing about a reconciliation between the parties, and the Arbitration Council shall take all steps necessary to bring about such reconciliation.

(5) If the wife be pregnant at the time talaq is pronounced, talaq shall not be effective until the period mentioned in sub-section (3) or the pregnancy, whichever later, ends.

(6) Nothing shall debar a wife whose marriage has been terminated by talaq effective under this section from remarrying the same husband, without an intervening marriage with a third person, unless such termination is for the third time so effective.

Firstly, if no notice is given to the Chairman, the talaq, albeit effective, is deemed to be revoked by the husband (see, Ali Nawaz Gardezi vs. Lt. Col Muhammad Yusuf, PLD 1963 SC 51 and Ghulam Fatima vs. Abdul Qayyum, PLD 1981 SC 460.)

Secondly, it is mandatory that the husband issue a copy of the notice to the wife, otherwise the talaq (divorce) would be ineffective (see, Ghulam Nabi vs Farruk Latif, 1986 SCMR 1350 and Inamul Islam vs. Hussain Bano, PLD 1976 Lahore 1466).

If the above conditions are fulfilled, the talaq (divorce) becomes effective ninety (90) days from the notice.

2. Revocation of divorce:

If the notice of talaq (divorce) has been sent, it can be revoked before the expiry of ninety (90) days from the date of delivery. In the event of such revocation, the talaq (divorce) becomes ineffective.

3. Divorce by mutual consent:

A husband and wife can dissolve their marriage through a mutual agreement (“Talaq-e-Mubarat” meaning ‘obtaining release from each other’).

In such case, the offer for separation may proceed either from the wife or the husband and the dissolution is complete as soon as the other party accepts such offer.

Disclaimer: The above information is not legal advice but basic guidelines in respect of divorce in Pakistan. Each case is decided/evaluated/prepared in accordance with the individual/unique facts of the case. Nothing provided herein should be used as a substitute for advice of competent counsel.

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Myra Khan Qureshi is a Barrister-at-Law from the Honourable Society of Lincoln’s Inn and Vice Chairperson Women Rights Committee of the Lahore High Court Bar Association. She is currently practicing law in Lahore, Pakistan.

Any queries may be directed to lawyereadia@gmail.com