Fundamentals of Law

1. Fundamentals of Law www.cppa.gov.pk

2. Scheme of Presentation www.cppa.gov.pk

3. Part-1 Constitution, Pillars of State

4. The Constitution of the Islamic Republic of Pakistan • The system of fundamental laws and principles that prescribes the nature, functions of government or another institution • Goal is to ensure that the three branches of Government, i.e. the Legislature, the Executive, and the Judiciary, impose checks on one another to prevent an abuse of power by any one branch • The Legislature makes, the Executive executes, and the Judiciary interprets the law • The Constitution also creates a system of checks and balances between the powers of the Federal and Provincial Governments

5. Brief Constitutional History of Pakistan • At Independence Pakistan adopted the Government of India Act, 1935 with essential amendments as the Interim Constitution • In 1956 the Government of Prime Minister Chaudhry Muhammad Ali promulgated the first Constitution of Pakistan, which was in force from 23rd March, 1956 to 7th October, 1958 • In 1962 the Government of General Ayub Khan promulgated the 1962 Constitution, which was in force from 8th June, 1962 to 25th March, 1969 • In 1973 the Government of Prime Minister Zulfiqar Ali Bhutto promulgated the present Constitution, which came into force on 14th August, 1973

6. Basic Elements of the Constitution of Pakistan • The Constitution provides for a Federal, Parliamentary System of government • Under the Constitution the President is the Head of State and the popularly-elected Prime Minister is the Head of the Government • The Federal Legislature is a bicameral Majlis-e-Shoora (Parliament), composed of the Senate and the National Assembly • The Fourth Schedule of the Constitution provides the Federal Legislative List listing those subjects on which the Federal Government can legislate • The residual legislative powers rest with the Provinces

7. Government Framework under the Constitution President of Pakistan Head of State Prime Minister of Pakistan Head of Government and Executive The Senate The Upper House of Parliament A permanent legislative body with equal representation from each of the four provinces. Senators are elected by members of the respective Provincial Assemblies The National Assembly The Lower House of Parliament Seats for the Provinces and Federal Capital Territory are allocated on the basis of population Members elected through universal adult suffrage.

8. Subject-matter of Federal and Provincial laws – Article 142 Subject to the Constitution— • The Parliament shall have the exclusive power to make laws with respect to any matter in the Federal Legislative List; • The Parliament and a Provincial Assembly shall have power to make laws with respect to criminal law, criminal procedure, and evidence; • The Provincial Assemblies shall have the exclusive power to make laws with respect to any matter not enumerated in the Federal Legislative List [subject to (b) above]; • The Parliament shall have the exclusive power to make laws with respect to all matters pertaining to such areas in the Federation as are not included in any Province.

9. Inconsistency between Federal and Provincial law – Article 143 • If any provision of an Act of a Provincial Assembly is repugnant to any provision of an Act of Parliament on a subject in which the Parliament is competent to enact, then the Act of Parliament shall prevail and the Act of the Provincial Assembly shall, to the extent of the repugnancy, be void

10. Council of Common Interests (CCI) • Formed under article 153 of the Constitution, the CCI consists of the Prime Minister, the Provincial Chief Ministers, and three members nominated by the Federal Government • Formulates and regulates policies in relation to matters in Part II of the Federal Legislative List (including electricity, at Sr.4 of the Federal Legislative List) and exercises supervision and control over related institutions • If the Federal Government or a Provincial Government is dissatisfied with a decision of the Council, it may refer the matter to the Parliament in a joint sitting whose decision in this behalf shall be final.

11. Electricity – Article 157 • The Federal Government may in any Province construct or cause to be constructed hydro-electric or thermal power installations or grid stations for the generation of electricity and lay or cause to be laid inter-Provincial transmission lines Provided that the Federal Government, prior to taking a decision to construct or cause to be constructed, hydro-electric power stations in any Province, shall consult the Provincial Government concerned. (2) The Government of a Province may — • to the extent electricity is supplied to that Province from the national grid, require supply to be made in bulk for transmission and distribution within the Province; • levy tax on consumption of electricity within the Province; • construct power houses and grid stations and lay transmission lines for use within the Province; and • determine the tariff for distribution of electricity within the Province. (3) In case of any dispute between the Federal Government and a Provincial Government in respect of any matter under this Article, any of the said Governments may move the Council of Common Interests for resolution of the dispute.

12. Part-2 Introduction to Law and Legal System in Pakistan

13. What is Law? • Law: Principles that govern conduct and can be enforced in the courts, often enforced by means of a sanction • Sanction: a penalty or punishment provided as a means of enforcing obedience to the law Classification of Laws: • Substantive Law: Includes the laws that create, define, and regulate rights and obligations; • Procedural Law: Specifies the method of enforcing the rights and obligations created by substantive law • Public Law: Deals with the rights, powers, and duties of the government; • Private Law: The law administered between private citizens; • Civil Law: Deals with violations committed against an injured party; and • Criminal Law:Establishes the duties individuals owe to society

14. Classification of Law Criminal Law Administrative Law Public Law Substantive Law Contracts Sales Property Private Law Law Procedural Law Civil Procedure Criminal Procedure

15. Process of Law Making • The Constitution sets out the procedure to be followed for promulgating a statute • As per Article 70 of the Constitution, this requires a Bill to be passed by both Houses of Parliament – the National Assembly and the Senate • Upon a Bill’s passage through both Houses, it is presented to the President of Pakistan for assent and becomes an Act of Parliament upon receiving such assent. • If circumstances require immediate action and neither House is in session, Article 89 empowers the President to promulgate an Ordinance, which has the same force and effect as an Act of Parliament, but will expire after 120 days if it is not made into an Act by the Parliament • Article 128 of the Constitution bestows a similar power upon Provincial Governors in respect of matters falling within provincial legislative authority

16. Hierarchy of Courts Superior Judiciary Subordinate Judiciary . . . . . . . .

17. Different forms of Law: Bill: • A Bill is a proposal to make a new law and originates in one House of Parliament or the Provincial Assembly • Usually, a bill takes the form of a document summarizing the policy behind the proposed law and providing its content • A bill can be introduced by the Government itself or proposed by a Member of the Parliament or Provincial Assembly • The Bill is placed in the House it originates in and, after deliberations, once passed, it moves to the other House • Bills usually originate in the National Assembly before passing to the Senate • Once the bill gets passed by the other House it is sent to the President for his assent • Finally a bill becomes the law of the land once it has been passed by the parliament and receives the assent of the President Constitution Law Act Rules Regulations

18. Different forms of Law, cont’d.: Act: • Once a Bill has been passed by the Legislature, and has received the assent of the President or the Governor, as the case may be, it becomes promulgated as an Act Law: • The term 'law’ generally refers to the set of regulations or rules to be followed. Law can be in the form of an act, ordinance, order, by-laws, rule, regulation etc. • An act is a subset of the law • Anything which can confer legal rights, obligations, liabilities, etc. are laws • Law can be any provisions of all valid Acts passed by the Legislature, Ordinances passed by the President or a Provincial Governor, decisions of the Superior Judiciary, authorized orders, notices, rules, etc. made by government bodies 

19. Different forms of Law, cont’d.: Ordinances • Temporary laws promulgated by the President or Provincial Governor • Can only be issued when the Legislative is not in session • At times when the Legislature is not in session and there is a need to promulgate an Act immediately, the government refers a proposal to the President or Governor, and approved thereby it becomes an Ordinance • Legally, an ordinance is the equal to an Act. It can be seen as a temporary law until its expiry within 120 days, or until it is repealed or approved by the Legislature

20. Different forms of Law, cont’d.: Subordinate Legislation [rules, regulations, orders, etc.]: • The Legislature can delegate its power to make laws to governmental entities such as administrative or regulatory agencies • These laws are called “subordinate legislation” and operate just like laws passed by the Legislature • Often, administrative authorities also have the power to adjudicate disputes and issue orders. This is referred to as administrative adjudication • Such administrative orders are similar to court decisions • Administrative rules and orders are also source of law.

21. Different forms of Law, cont’d.: Judicial Precedent: • The decisions of the Superior Judiciary [i.e. the Supreme Court and the High Courts] are referred to as ‘precedent’ • Such decisions and orders have the same effect as a law, requiring adherence in subsequent cases • Further, as the Judiciary is empowered to interpret the laws, its pronouncements are to be adhered to as the correct interpretation of the law

22. Part-3 Introduction to Law of Contract

23. Contract Act 1872

24. Contents • What is a Contract? • Valid Contract and its essential characteristics • Classification for Contracts • Discharge of Contract • Remedies for Breach of Contract

25. Agreement The contract is formed only on the basis of agreement. It is a combined effect of offer and acceptance. AGREEMENT= OFFER+ ACCEPTANCE According to section 2(e) of the Contract Act, Agreement is a promise or set of promises forming consideration for each other

26. Contract • According to sec.2(h) of the Contract Act, a CONTRACT may be defined as “An Agreement enforceable by law ”. • These agreements create Rights and Obligations between the Parties which can be claimed in the Courts of Law

27. Major Components FOUR MAJOR COMPONENTS OF A CONTRACT • AGREEMENT • OBLIGATION • CONSIDERATION • ENFORCEABILITY For a contract to be valid under the law it must have an agreement between the parties, impose obligations upon the parties, involve valuable consideration, and be enforceable in the Courts of Law • Agreement + Legal Obligation Contract • Agreement + Social Obligation Contract

28. Essentials of a Valid Contract Legal conditions for a Contract: • Two or more parties (Offer and Acceptance) • Intention to create a Legal Relationship • Lawful Object of the relationship • Capacity of parties (major, sound of mind, etc.) • Free Consent (understanding of terms and conditions) • Writing and Registration and Duly stamped (not oral contract) • Certainty (clear and proper terms and conditions) • Possibility of the Performance (it should not be impossible) • Legality of performance (must not have been disqualified by any law)

29. Classification of Contracts • Express • Implied • Quasi • Executed • Executory • Valid • Void • Voidable

30. Discharge of Contract Discharge of contract means termination of the contractual relationship between the parties. A contract is said to be discharged when it ceases to operate, i.e., when the rights and obligations created by it come to an end. A Contract may be discharged • By performance • By mutual agreement or consent of the parties • By impossibility of performance • By lapse of time • By operation of law • By breach of contract

31. Remedies for Breach of Contract • A remedy is the course of action available to an aggrieved party (i.e. the party not at default) for the enforcement of a right under a contract • Remedies for breach of contract include: • Cancellation or rescission • Specific performance • Injunction • Quantum Meruit • Damages

32. Part-4 Introduction to Company Law and Corporate Governance (Companies Act 2017, and the Code of Corporate Governance, 2017)

33. Objectives • Provide maximum facilitation to the corporate sector and other stake holders • Strengthen the regulatory frame work • Introduce and maximize the use of technology • Protect the interest of shareholders • Abolish unnecessary requirements • Introduce appropriate terminologies • Remove defects in the company law • Softer regime for the companies in whom the general public have no stake • Introduce new concepts and best practices adopted by different jurisdictions • Steps towards paperless environment in the SECP • Protection of the interest of creditors and investors

34. Types of companies under the Companies Act, 2017 • Single Member Company (A proprietorship)Where there is one owner of the company • Private limited company (2-50 members)Where ownership of the company is shared among a limited number of shareholders, and the shares thereof cannot be traded • Public companyWhere the ownership of the company is shared among the shareholders (may or may not be listed on the stock exchange) • Public Sector CompanyWhere the Government owns 51% or more of the voting shares, or where the Government has the power to elect, nominate, or appoint a majority of its directors • Guarantee Limited CompanyWhere the liability of the members of the company are limited to such amount as the members undertake to contribute to its assets in the event it is wound up (may also have shares) • Charities or Non-Profit OrganizationsWhere the object is to promote social, charitable, commercial, or other similar useful goals

35. Memorandum and Articles of Association • Memorandum of Association: • A foundational document prepared in the formation and registration processes of a limited company which defines the company’s relationship with its shareholders • The memorandum defines the company’s purpose and forms the basis upon which the company is set up • The memorandum states the company’s object and principal line of business, as well as the relationship the company has with external interested parties (e.g. the Government, clients / customers etc.) • Section 27 of the Companies Act relates to the memorandum of association of a company limited by shares • Section 28 of the Companies Act relates to the memorandum of association of a company limited by guarantee • Section 29 of the Companies Act relates to the memorandum of association of an unlimited company • Articles of Association • Another foundational document prepared in the formation and registration processes of a limited company which defines the company’s relationship within itself (i.e. with its employees, shareholders, directors, etc.) • The articles are concerned with the internal management of the company and the means by which the objectives of the company – specified in the memorandum of association – are to be achieved • The articles specify the means and regulations for a company’s internal operations (such as the responsibilities of the directors, the voting rights of shareholders, payment of dividends, etc.), and lays out how the tasks related to the object of the company are to be performed • Sections 36 and 37 of the Companies Act principally deal with a company’s articles of association • Together both these documents comprise the “constitution” of the company, with the memorandum setting up the company and its line of business, and the articles filling in the details and how the line of business is to be pursued

36. What is a “Code of Corporate Governance”? • The phrase “code of corporate governance” is an amalgamation of three words: • “Code”, “Corporate”, and “Governance” respectively mean “a complete system of promulgated positive laws”, “incorporated companies” and “the activity of governing” • It is the framework of rules and practices by which the board of directors of a company ensures accountability, fairness, and transparency in a company's relationship with its stakeholders (including the shareholders, financiers, customers, management, employees, government, and the community) • Thus, the phrase “Code of Corporate Governance” refers to that area of company law which provides a complete system of officially promulgated positive laws that control the activity of governing incorporated companies • The Securities and Exchange Commission of Pakistan (SECP) thus endeavors to raise the corporate governance standards in the country

37. Codes of Corporate Governance in Pakistan • Code of Corporate Governance, 2002 • Now substituted • Code of Corporate Governance, 2012 • Amended in 2014, still partially in effect • Public Sector Companies (Corporate Governance) Rules, 2013 • Not a code per se but provides similar means of improving governance in public-sector companies • Code of Corporate Governance, 2017 • In effect from December 31, 2017 • Applies to listed companies and to all other entities, to the extent applicable, where the law require such entities to comply with the 2017 code

38. Corporate Governance Structure under the Code of Corporate Governance, 2017

39. Thank You