16.1.08 Correct Treatment in Filing of Form – 3


One of my clients who is a Public Limited Company and is quoted on all the three stock exchanges of Pakistan has just completed the process of issuance of Right Shares which have been offered to all the shareholders.

Necessary requirements of notice under section 86 and 87 (as the case may be) of the Companies Ordinance, 1984 have been complied with and all the other approvals from the concerned authorities were obtained.

The main purpose of the issue as fully described in circular under section 86(3) is to repay the loans obtained for expansion purposes so as to divert the savings in the financial Costs towards payment of dividend to the shareholders.

The sponsors had opted for the conversion of their loans towards subscription of Right Issue. These loans were advanced to the Company from their own private resources, were through normal banking channels and received prior to the announcement of Right Issue.


In the “Form 3” under section 73 (1) of the Companies Ordinance, 1984 “RETURN OF ALLOTMENTS” There are two columns in the return showing the allotment of shares as follows:

I.     Serial number 10 Part A – “SHARES ALLOTTED PAYABLE IN CASH”


Nowhere in the return is a column for the conversion of loans received prior to the issue into equity toward contribution against Right Issue already received through normal banking channels.

I seek your opinion as to where the conversion of loans would appear in the “Form 3” as

1.     Shares allotted payable in cash at serial number 10 for the reason that the funds were received by the company through banking channels earlier to the right issue.


2.     Shares allotted in consideration otherwise than in cash at serial number II for the reason that it s a conversion of loan into share capital. There is another point that issue of shares otherwise than in cash also need additional requirements such as valuation of assets against which shares are to be issued, contract between the company and the allottee, affidavit by the chief executive and the certificate from the auditor that all requirements have been complied with. In the above case, how can we obtain valuation certificate that the asset against which shares are to be issued is cash/funds received earlier to the decision of allotment of shares.


The Committee examined your enquiry and is of the opinion that the conversion of sponsors’ loans into equity should be considered as issuance of shares against cash and should appear in the “Form 3” as shares allotted payable in cash.

(July 8, 2010)