SUBMITTED TO: SIR HARIS RAMZAN

SUBMITTED BY: Bisma Tahir

DEFINITION OF COMPANY LAW

The Legislation under which the formation, registration or incorporation, governance, and

dissolution of a firm is administered and controlled.

Company Ordinance 1984

An Ordinance to consolidate and amend the law relating to companies and certain other

associations

It is expedient to consolidate and amend the law relating to the companies and certain other

associations for the purpose of healthy growth of the corporate enterprises, protection of

investors and creditors, promotion of investment and development of economy and matters

arising out of or connected therewith.

In the twenty one years since the Ordinance was promulgated, the Pakistani economy,

particularly the corporate sector, has considerably evolved and expanded. Two significant

developments in this regard are (a) the growth of nonbanking finance companies and (b) the

introduction of single member companies.

The Ordinance has been amended (inter alia in 1991, 1999 and 2002)3 to cater to these and other

developments. However, these amendments have been piecemeal and narrowly focused, often

resulting in a disconnect or overlap in the provisions of the Ordinance.

LEGAL PERSONPersons in law are seen to be of only two kinds: real/natural and artificial. Human beings are

considered ‘real' or ‘natural' persons because they are ipso facto persons. The other kind of

person is the artificial person, which is a fiction of law invested with limited legal capacity. At

this juncture, it is necessary to clarify the meaning of the term ‘capacity' in law. Capacity is the

primary attribute of personality and denotes the ability to commit acts and undertake relations

that are recognized in the law. Capacity is what enables a person to have a ‘standing' in law, be it

in the person's ability to claim-possess-exercise rights, property, enter into contracts, sue and be

sued, commit legal injury or be the victim thereof. In other words, capacity in law is the medium

through which personality expresses itself.

The law in recognizing artificial persons infuses such entities with limited legal capacity. Their

ability to commit legally recognizable acts is limited to the extent that law allows for, nothing

more.

While human beings as natural persons are capable of every act and relation possible in fact, an

artificial person is only capable of those acts and relations allowed in law; the doctrine of ultra

vies with respect to joint stock companies prevents such artificial persons from committing

acts/undertaking relations that are outside their scope of activities as specified in the

Memorandum and Articles of Association.

CORPORATE PERSONALITY

Corporate personality refers to the fact that as far as the law is concerned a company personality

really exists apart and different from its owners. As a result of this, a company can sue and be

sued in its own name, hold its own property and crucially – be liable for its own debts. It is this

concept that enables limited liability for shareholders to occur as the debts belong to the legal

entity of the company and not to the shareholders in that company.

Hence, the debate seems well settled: an artificial person cannot claim the protection of

fundamental rights under Part III of the Constitution. However, a company is a ‘person’ in the

general sense of the term and should be treated as such.

Lifting the Corporate Veil

The advantages of incorporation are extended only to those wishing to make honest use of a

company. In the case of dishonest and fraudulent use of the facility of incorporation, the law lifts

the corporate veil and identifies the persons (i.e., members) who are behind the scenes and

responsible for the perpetration of fraud. The term ‘lifting the corporate veil’ has been defined as

“looking behind the company as a legal person, that is, disregarding the corporate entity and

paying regard instead, to the realities behind the legal façade.

There are some circumstances in which a company is not deemed as having a separate legal

personality from its members.

1. For the protection of revenue

2. Where the company is acting as an agent of the shareholders

3. Where the prospectus of the company includes a fraudulent

misrepresentation

4. Investigation of ownership of company

SALOMON V SALOMON CO LTD 1897

Reference to: Separate Legal Entity

FACTS

The doctrine of separate legal entity was originated from this case The facts in this case disclosed

that a company had been incorporated by Mr. Salomon in which he and members of his family

were the only shareholders. The issue arises when the company’s business turns to be a failure.

The value of the assets was insufficient to pay out both Mr. Salomon and the company’s other

creditors. Consequently, the creditors raised an issue whereby they argued that Mr. Salomon

should not receive the payment from the company because the degree of control he exercised

over the company.

Mr. Salomon, the owner of a very prosperous shoe business, sold his business for the sum of £

30,000 to Salomon and Co. Ltd. which consisted of Salomon himself, his wife, his daughter and

his four sons. The purchase consideration was paid by the company by allotment of 23,000

shares and £10,000 debentures and the balance in cash to Mr. Salomon. The debentures carried a

floating charge on the assets of the company. One share of £ 1 each was subscribed by the

remaining six members of his family. Salomon and his two sons became the directors of this

company. Salomon was

the managing Director. After a short duration, the company went into liquidation. At that time

the statement of affairs’ was like this:

Assets :$ 6000,

Liabilities:

Salomon debenture holder $ 10,000

Unsecured creditors $ 7,000.

Thus its assets were running short of its liabilities b $11,000. The unsecured creditors claimed a

priority over the debenture holder on the ground that company and Saloman were one and the

same person and the company was a mere agent in the eyes of law. But the House of Lords held

that the existence of a company is quite independent and distinct from its members and that the

assets of the company must be utilized in payment of the debentures first in priority to unsecured

creditors. The court held that though virtually Saloman was the holder of all the shares in the

company, he was also the secured creditor and was entitled to repayment in priority to the

unsecured creditors.

The court held:It was held by the House of Lords that despite Mr. Salomon having the control over the

company, it was neither his agent nor trustee. This is because, a company was treated as

operating the business in its own right, and as being separate from its controller, i.e. in this case

of Mr. Salomon. Therefore, the charge given by the company to Mr. Salomon was valid and he

was entitled to be paid his debt even though other creditors of the company would not be paid

because the company had insufficient assets to pay all its creditors.

Thus, it shows that a company is a legal person separate and distinct from its individual members

or directors as in the words of Cave J in Re Sheffield & South Sheffield Yorkshire Permanent

Building Society, In Liquidation [1889]: ‘a company is a legal persona just as much as an

individual'.

Saloman’s case established beyond doubt that in law a registered company is an entity distinct

from its members, even if the person hold all the shares in the company. There is no difference in

principle between a company consisting of only two shareholders and a company consisting of

two hundred members. In each case the company is a separate legal entity

LEE (CATHERINE) V. LEE'S AIR FARMING LTD.,(1961)

Reference: Separate Legal Entity

Case FactsThe facts disclosed that in 1954, Mr. Lee had formed the respondent company carrying on

the business of crop spraying from the air. Mr. Lee owned 2,999 of the company’s 3,000 shares.

Apart from that, he also was the company’s governing director whereby he had appointed

himself as the only pilot of the company at a salary arranged by himself. In March 1956, Mr. Lee

was killed while piloting an aircraft during the course of top-soil dressing.

Issue

The appellant want to claim compensation from the company as the employer of her husband

under the New Zealand Workers’ Compensation Act 1922 for the course if her husband's

employment.  The issue for determination was whether there existed the relationship of employer

and employee between the company and Mr. Lee. The insurance company does not want

to pay the employer since the employer is the employee.

The New Zealand Court of Appeal refused to hold that Lee was a worker, holding

that a man could not in effect, employ himself.

Court Held

The court held in favor of appellant and she was entitled to compensation. Following the

grounds of the decision in Salomon’s case, Mr. Lee was employed by the company in the sense

required by the Act 1922.Court held that Lee was a separate person from the company he

formed, and compensation was due to the widow. Thus, the rule of corporate personality enabled

Lee to be the master and servant at the same time.

Conclusion

The company and Mr. Lee were distinct legal entities and therefore capable of entering into legal

relations with one another. As such they had entered into a contractual relationship for him to be

employed as the chief pilot of the company. They found that he could in his role of governing

director give himself orders as chief pilot. It was therefore a master and servant relationship and

as such he fitted the definition of ‘worker’ under the Act. The circumstance that in his capacity

as a shareholder he could control the course of events would not in itself affect the validity of his

contractual relationship with the company. Just as the company and the deceased were separate

legal entities so as to permit of contractual relations being established between them, so also

were they separate legal entities so as to enable the company to give an order to the decease. In

their Lordships' view it is a logical consequence of the decision in Salomon's case that one

person may function in dual capacities. The appeal was allowed and the widow was therefore

entitled to compensation.

DIRECTORS

The number of the directors and the names of the first directors shall be determined in writing by

a majority of the subscribers of the memorandum of association so, however, that such number

shall not in any case be less than that specified in section 174,Companies Ordinance, 1984.

The remuneration of the directors shall from time to time be determined by the company in

general meeting subject to the provisions of the Ordinance.

Day-to-day management of a company is delegated to the directors by its shareholders. Directors

are initially appointed by the shareholders and can usually themselves appoint additional

directors up to any limit set by the articles of association.

The decisions of the directors are taken collectively by the board of directors. A director cannot

act as a director on his own unless only one director has been appointed. Decisions are either

taken by majority vote at board meetings or by the signing by all the directors of a written

resolution.

The director's role and his powers are primarily defined in the company's articles and, if he is

also an employee, in his service contract.

Duties of Directors Under Company Ordinance 1984

The business of the company shall be managed by the directors, who may exercise all such

powers of the company as are not by the Ordinance required to be exercised by the company in

general meeting.

The business of the company shall be managed by the directors, who may pay all

expenses incurred in promoting and registering the company, and may exercise all such

powers of the company as are not by the Ordinance or any statutory modification thereof

for the time being in force, or by these regulations, required to be exercised by the

company in general meeting.

The directors shall appoint a chief executive in accordance with the provisions of sections

198 and 199.

The amount for the time being remaining undercharged of moneys borrowed or raised by

the directors for the purposes of the company (otherwise than by the issue of share

capital) shall not at any time.

The directors shall cause minutes to be made in books provided for the purpose.

(a) Of all appointments of officers made by the directors;

(b) Of the names of the directors present at each meeting of the directors and

of any committee of the directors;

(c) Of all resolutions and proceedings at all meetings of the company

The directors Companies Ordinance, 1984 and every director present at any meeting of

directors or committee of directors shall sign his name in a book to be kept for that

purpose.

The directors may carry forward any profits which they may think prudent not to

distribute, without setting them aside as a reserve.

The directors shall from time to time determine whether and to what extent and at what

time and places and under what conditions or regulations the accounts and books or

papers of the company.

The directors shall as required by sections 233 and 236 cause to be prepared and to be

laid before the company in general meeting such profit and loss accounts or income and

expenditure accounts and balance sheets duly audited and reports as are referred to in

those sections.

The Directors may meet for the dispatch of business, adjourn and otherwise regulate their

meetings, as they think fit.

Director's liabilities

Being a director brings with it a high degree of responsibility and, increasingly, the risk

of personal liability. Directors are not generally personally liable to third parties, unless

they have given a personal guarantee for the liabilities of the company. However, various

statutes have imposed personal liability on directors in a wide range of situations,

including health and safety, environmental, competition and securities matter.

DUTIES OF DIRECTORS UNDER THE COMPANY ACT 2006The duties imposed on company directors have fallen under three principal headings:

1. The fiduciary duty

The courts have always regarded directors as being ‘fiduciaries’, a fiduciary being ‘someone who

has undertaken to act for or on behalf of another in a particular matter in circumstances which

give rise to a relationship of trust and confidence.

2. The duty of skill and careThe duty of skill and care evolved from the basic fiduciary duty and sought to address the

particular implications of the director’s position within the limited company environment.

3. Statutory duties

Company’s legislation (as well as other relevant legislation) has for many years imposed a range

of specific responsibilities on directors. As well as those duties that are placed on directors by

virtue of their status, many others will be imposed on the company itself.

Duty for directors to act within their powers (section 171 CA 2006)

Section 171 says that a director must a) act in accordance with the company’s

constitution and b) only exercise powers for the purposes for which they are

conferred. Section 171(a) requires a company’s directors to follow all the

directions as to how the company’s affairs should be organized and administered

that are set down in the company’s constitution

Duty to promote the success of the company (section 172 CA 2006)

This is the single most fundamental requirement of the statement of general duties and is crucial

to the performance of directors’ duties under the new legislation. Although section 172 is

presented in the legislation as a single, integrated measure there are effectively two, but

interlinking, parts to it

Duty To Exercise Reasonable Care, Skill And Diligence (Section 174 CA

2006)This is the section of the general duties which identifies the standard of competence which

directors are expected to meet in the course of carrying out their functions. ‘A director is not

bound to give continuous attention to the affairs of his company.

Duty to avoid conflicts of interest (section 175 CA 2006)

Under this section, a director must avoid a situation in which he has, or can have, a direct or

indirect interest that conflicts, or possibly may conflict, with the interests of the company.

Section 175 requires a director to avoid not only situations where there is plainly a conflict but

also those that ‘possibly may conflict’ with the director’s duty to the company

Duty Not To Accept Benefits From Third Parties (Section 176 CA 2006)

Under section 176, a director must not accept a benefit from a third party under section 176, a

director must not accept a benefit from a third party

Duty to Declare Interest In Proposed Transactions Or Arrangements

(Section 177 CA 2006)

A director must declare to the other directors any situation in which he is in any way, directly or

indirectly, interested in a proposed transaction or arrangement with the company. Disclosure,

where required, must be made to all the other directors

Other (Non-Statutory) General DutiesOther, non-statutory duties which a director may owe to a company include a duty not to

misapply the company's property and a duty of confidentiality

DEFINITION OF MINORITY

The state or condition of being under legal age.

A group that does not constitute a politically dominant voting majority of the total

population in a given society.. For example a minority religion refers to a religion held by

a minority of the population of a country, state, or region..

It can also refer to a group having less than a controlling number of votes.

A Case for Minority Shareholders Protection

Minority shareholders are defined as individuals or entities holding less than 50% of the

company stocks. Most companies require the capital injection of major and minor investors alike

Other shareholders' resolutions require only a simple majority, i.e. more than 50% voting in

favor. The Companies Act 2006 (CA 06) gives some protection to minority shareholders.

However it is always preferable to have shareholders' agreement, which can include more

extensive and effective minority protection

MINORITY SHAREHOLDER PROTECTION

Protecting the Rights of Minority Shareholders

A minority shareholder may bring a claim when the company has been or is being managed in a

way that is 'unfairly prejudicial' to some or all of its shareholders (including the claimant).

While these claims can be brought in relation to any kind of company, they are usually brought

successfully only in relation to companies where the claimant shareholder reasonably expected to

be involved (usually as a director) in the management of the company.

The rights of shareholders against each other and against the company are generally as defined

by the articles of association of the company and by relevant statute law, in particular by the

Companies Act 2006 (CA 2006).

The general principle is that a company is managed by its directors (not by its shareholders) and

that a decision of the majority of shareholders reached in general meeting is binding on the

minority.

A company should be run in accordance with its articles and the provisions of CA 2006 relating

to a shareholder’s personal rights and corporate governance. If it is, a minority shareholder will

usually have no right to challenge the decisions of the directors or the majority. Minority

shareholders claims all represent exceptions to this general rule, largely based on equitable

principles. The availability of these claims and the prospects of success are limited accordingly.

The Types of Claim and Remedy

The Practice Notes in this topic deal with three types of claim:

4. the unfair prejudice petition

5. the petition for the just and equitable winding up of a company, and

6. the derivative claims

The primary route to relief for a minority shareholder is to bring an unfair prejudice petition and

this should always be considered first.

Each kind of claim usually seeks a very different remedy but their common theme is that they are

strategies to enable the minority to obtain the proper value of their shares.

The remedy:

usually sought in an unfair prejudice petition is an order that the majority

purchase the petitioner’s shares at a price determined by the court

available in a petition for just and equitable winding-up is an order for the

winding-up of the company while solvent and the distribution of its net assets to

the shareholders

sought in a derivative claim is the enforcement of a claim against a director vested

in the company and for the company’s benefit, with a view to increasing the value

of the assets ultimately available for distribution to the shareholders

Note: none of these claims are claims against the company as such.

Minority shareholders claims are usually only appropriate when the company is solvent and the

claimant’s shares have substantial value.

1. Unfair prejudice petition

An unfair prejudice petition is a statutory remedy available to shareholders of a company now

provided by CA 2006, s 994 (formerly provided by Companies Act 1985, s 459 and then often

referred to as a 's 459 petition'). It is the primary procedure available to a minority shareholder

who is the victim of 'unfairly prejudicial' conduct.

The basis of the claim is that the affairs of the company have been, are being or will be

conducted in a way that is 'unfairly prejudicial' to its shareholders or some of them (and at least

to the petitioner).

The court has a wide discretion as to the remedy (if any) to be granted to the petitioner if it finds

that there has been 'unfairly prejudicial' conduct. However, the remedy most often sought and

most often granted is an order that the majority purchase the minority’s shares at a value

determined by the court (typically market value on a pro rata basis). An order for the

commencement of a derivative action are also among the remedies that the court may give but

despite the broad terms of the statute, the court apparently cannot make a winding-up order under

this jurisdiction.

It is not a claim made by or against the company (although the company is normally made a

party) and the company cannot or should not fund the claim or the majority’s defense to the

claim.

If the majority makes a reasonable offer to purchase the petitioner’s shares at an early stage an

unfair prejudice petition is likely to be struck out.

.

2. Just and Equitable Winding-Up

A petition to wind up a company on the just and equitable ground is a statutory remedy provided

by Insolvency Act 1986, s 125 (IA 1986). It is available to a shareholder but a petitioner must be

able to show that there would be a substantial surplus on a winding-up. In substance it is not,

therefore, an insolvency procedure in Insolvency Act 1986, s 125.

In general, the circumstances in which the court will order a company to be wound up on this

basis are the same circumstances in which the court would grant relief on an unfair prejudice

petition. However, the only remedy the court may give is to wind up the company, with all the

disadvantages for all shareholders that winding-up is likely to entail. The circumstances, in

which it will be an advantage to pursue a claim for a just and equitable winding-up, rather than

an unfair prejudice petition, are limited.

While the company is made a party to the petition it is not a claim against the company as such

and the company’s assets may not be used to fund the claim or the defense.

.

3. Derivative Claim

A derivative claim is a statutory remedy available to a shareholder provided by CA 2006, ss

260–264. A shareholder brings a derivative claim on behalf of the company and for the benefit of

the company. The claim must be a claim vested in the company involving negligence, default,

breach of duty or breach of trust by a director.

Immediately a derivative claim is issued, the claimant must seek the permission of the court to

continue the claim. The court may not permit a derivative claim to proceed if it finds that it is

clearly not in the company’s interests or that the conduct complained of has been validly

authorized or ratified by the company.

The court will otherwise exercise its discretion taking into account, among other things, the good

faith of the claimant, the legal and practical merits of the claim, the likelihood of the conduct

being authorized or ratified by the company and whether the claimant could bring an action

based on the conduct complained of in his own right (for example, by way of an unfair prejudice

petition).

Broadly speaking, the conduct of the director complained of will not be validly authorized or

ratified if to do so would amount to 'unfairly prejudicial' conduct by the majority or if to pass the

required resolution the majority relied upon the votes of shareholders personally interested in the

ratification, CA 2006, s 239.

I f permission is granted it is likely to be limited to taking specified further steps and then

seeking permission to continue further.

While the company is made a defendant to the claim, it is not a claim by or against the company

as such and the company is not likely to play an active part in the proceedings.

A claimant may also seek an order that the company indemnify him against the costs of the

derivative claim, because the claim is for the company’s benefit. This is likely to be granted if

permission to proceed is given but may be subject to restrictions both as to amount and scope.

A derivative claim with different characteristics may also be available by way of relief in an

unfair prejudice petition under CA 2006, s 996(2)(c).

The practical use of a freestanding derivative claim under CA 2006, s 260 is largely limited to

cases where the usual remedy granted in an unfair prejudice petition (purchase of the minority’s

shares by the majority) is not the outcome the claimant wants or is for some reason unlikely to be

available.

Related Claims

The situation in which a minority shareholder's claim arises may also be one in which one or

more of the following types of claim should be considered as well as or instead of that claim

include:

personal claims under the company’s articles

rectification of the company's register of members

claims relating to the appointment or removal of directors

corporate insolvency proceedings

Although the spirit of the law is to ensure equitable treatment of all stakeholders, “the company

law has always struggled in its attempt to uphold majority rule and yet respect minority

interests.” This is because the law has to delicately balance the interests of both parties, without

penalizing either side or subjecting the system to excessive legal proceedings in a bid to take

advantage of the provisions. The tendency of majority rules in statute-based regulation, whilst in

theory provide minority an avenue for redress, makes it difficult for minority shareholder to

prove his case in practice.

DEFINITION OF INSIDER

The term “insider” applies to anyone who, by virtue of a special relationship with the Company,

possesses material, non-public information regarding the business of the Company.

An individual can be considered an insider for a limited time with respect to certain material,

non-public information even though he or she is not a director or officer. For example, an

assistant who knows that an acquisition is about to occur may be regarded as an insider with

respect to that information until the news of such acquisition has been fully disclosed to the

public.

The prohibition against such trading generally is understood to prohibit

(1) Trading on the basis of material, non-public information,

(2) Disclosing or “tipping” material, non-public information to others or recommending the

purchase or sale of securities on the basis of such information or

(3) Assisting someone who is engaged in any of the above activities.

The term “insider” applies to anyone who, by virtue of a special relationship with the Company,

possesses material, non-public information regarding the business of the Company.

An individual can be considered an insider for a limited time with respect to certain material,

non-public information even though he or she is not a director or officer. For example, an

assistant who knows that an acquisition is about to occur may be regarded as an insider with

respect to that information until the news of such acquisition has been fully disclosed to the

public.

INSIDER TRADING

Insider trading is a term that most investors have heard and usually associate with illegal

conduct. But the term actually includes both legal and illegal conduct. The legal version is when

corporate insiders—officers, directors, and employees—buy and sell stock in their own

companies. When corporate insiders trade in their own securities, they must report their trades to

the SEC.

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary

duty or other relationship of trust and confidence, while in possession of material, nonpublic

information about the security. Insider trading violations may also include "tipping" such

information, securities trading by the person "tipped," and securities trading by those who

misappropriate such information.

What is material, non-public information?

Information is generally deemed to be “material” if there is a substantial likelihood a

“reasonable investor” would rely on it in deciding to purchase, sell or hold a security to which

the information relates.. Examples of information that is generally regarded as material are:

Financial results;

Projections that significantly differ from external expectations;

Major proposed or pending acquisitions, investments or divestitures;

Significant project or product developments;

Individuals found liable for insider trading face penalties of up to three (3) times the profit

gained or loss avoided a criminal fine of up to $5 million and up to twenty (20) years in jail. In

addition to the potential criminal and civil liabilities mentioned above, in certain circumstances

the Company may be able to recover all profits made by an insider who traded illegally, plus

collect other damages. In addition, the Company (and its executive officers and directors) could

itself face penalties of the greater of $1 million or three (3) times the profit gained or loss

avoided as a result of an employee’s violation and/or a criminal penalty of up to $25 million for

failing to take steps to prevent insider trading.

Without regard to the civil or criminal penalties that may be imposed by others, willful violation

of this Policy and its procedures may constitute grounds for dismissal

The procedures regarding securities trading outlined below are designed to deter and, where

possible, to prevent such improper trading.

PROHIBITIONS FOR ALL EMPLOYEES:

No Trading on Material, Non-Public Information

No employee who is aware of any material, non- public information concerning the Company or

a third-party with whom the Company does business, shall engage in any transaction in the

Company’s or such third-party’s securities,

No Tipping

No employee shall disclose (“tip”) material, non-public information to any other person where

such information may be used by such person to his or her benefit by trading in the securities of

the company to which such information relates,

No Short Sales

No employee shall engage in the short sale of the Company’s securities. A short sale is a sale of

securities not owned by the seller or, if owned, not delivered against such sale within twenty (20)

days thereafter (a “short against the box”)

No Margin Purchases.

No employee shall purchase the Company’s securities on margin. This means such persons are

prohibited from borrowing from a brokerage firm, bank or other entity in order to purchase.

No Trading in the Company’s Securities on a Short-Term Basis.

Any Company securities purchased on the open market by a Section 16 Reporting Person,

Designated Individual or member of such individuals’ immediate family or household must be

held for a minimum of six (6) months. Note that the SEC’s short swing profit rules already

penalize Section 16 Reporting Persons who sell any Company securities within six (6) months of

a purchase by requiring such person to disgorge all profits to the Company whether or not such

person had knowledge of any material, non-public information.

It should be noted that any person who possesses material, non-public information, , should not

engage in any transaction involving the company’s securities.

POLICIES REGARDING THE USE, DISCLOSURE AND

PROTECTION OF MATERIAL, NON-PUBLIC INFORMATION

All employees of the Company have ethical and legal responsibilities to maintain the

confidentiality of material, non-public information.

Use and Disclosure of Material, Non-Public Information. Material, Non-Public Information Regarding Other Companies

Unauthorized Disclosure of Internal Information

Precautions to Prevent Misuse or Unauthorized Disclosure of Sensitive

Information

Internet

Inadvertent Disclosure of Material, Non-Public Information

Inquiries Regarding Material, Non-public Information

Obligations of Insider On Investigation By The Commission

(1)It shall be the duty of every insider, who is being investigated, to produce to the enquiry

officer such books of account and other documents in his custody or control and furnish the

statements and information relating to the transactions in securities market within such time as

the enquiry officer may require.

(2) The insider shall allow the enquiry officer to have reasonable access to the premises occupied

by such insider and also extend reasonable facility for examining any books, records, documents

and computer data in the possession of the stock broker.

(3) The enquiry officer, in the course of enquiry, shall be entitled to examine or record

statements of any member, director, partner, proprietor and employee of the insider.

(4) It shall be the duty of every director, proprietor, partner, officer and employee of the insider

to give the enquiry officer all assistance in connection with the investigation.

Examples of insider trading cases that have been brought by the SEC are cases against:

Corporate officers, directors, and employees who traded the corporation's securities after

learning of significant, confidential corporate developments;

Government employees who learned of such information because of their employment by

the government; and

Other persons who misappropriated, and took advantage of, confidential information

from their employers.

Because insider trading undermines investor confidence in the fairness and integrity of the

securities markets, the SEC has treated the detection and prosecution of insider trading violations

as one of its enforcement priorities.

CONCLUSION

From the above information we concluded that company law covers different aspects related to

the companies for example in which aspects Company will act as a distinct entity. Directors are

appointed by shareholders to run the business so what are their duties and rights of minorities

and the concept of insider trading and how to prevent it.