The Securities & Exchange Commission of Pakistan
circulated draft of Leasing Companies [Establishment and Regulation] Rules, 2000
recently and invited comments from Institute of Cost and Management Accountants
The Institute offered a comprehensive proposals for the
benefit of leasing business in Pakistan. Technical and professional improvements
offered by ICMAP have been incorporated, in spirit in the S.R.O 663 (I)/2000
dated September 25, 2000.
Under the rules, the leasing companies are required to raise
their capital to Rs. 200 million, in order to provide a base large enough to
operate profitably maintaining economy of scale.
Relaxation has been provided in the rules with regard to debt
equity ratio (60:40) and current ratio (1:1) requirements with a view to
facilitating the small entrepreneurs who are considered the main beneficiaries
of leasing operations.
It would be compulsory for every leasing company to become a
member of the Leasing Association of Pakistan and adopt its code of conduct.
According to sub-section (ii) of Section 7, a leasing company shall appoint its
chief executive and at least one of the directors having senior management level
experience in financial sector preferably in leasing sector for at least five
Section 7 (iii) of terms and conditions of operations
prescribe the qualification of its chief accounting officer who is a chartered
accountant or a Cost and Management Accountants or a person having Masters'
Degree in Commerce or Business Administration with finance specialization and
experience of at least five years of accounting in a responsible position.
Section 7 (vii) of these Rules defines the verification and
audit procedure of financial exposures.
While granting any facilities, that total facilities availed
by any borrower or lessee from Non-Bank Financial Institutions and Banks does
not exceed ten times of the equity of the borrower or lessee and obtain copy of
accounts relating to the business of each of its borrower/lessee for analysis
and record in the following manner, namely.
(a) Where the exposure exceeds
Ten million rupees.
Accounts duty audited by:
(i) the practising chartered accountant; or
(ii) the practising Cost and Management Accountant in case of a
borrower or lessee other than a public company or a private
company which is a subsidiary of a public company.
(b) Where the exposure exceeds
two million rupees but does not exceed ten million
Accounts duly signed by the borrower or
and counter-signed by:-
(i) the Internal Auditor of the leasing company; or
(ii) a chartered accountant; or
(iii) a Cost and Management Accountant in
case of a borrower other than a public
company or a private company which is a subsidiary of a
(c) Where the exposure exceeds
one million rupees but does not exceed two million
Accounts duly signed by the borrower of
(d) Where the exposure does not
exceeds one million
Such documentary evidence of the means
and Investment of the borrower or lessee as may be determined by
the management of
Section 8(1) Prescribes limits on exposure according to which
Liabilities, excluding contingent liabilities of a leasing company shall not
exceed seven times of its equity during first two years of its operations and
ten times of the equity in the subsequent years.
Section 8(2) states that Contingent liabilities of a leasing
company shall also not exceed seven times of its equity during the first two
years of its operations and ten times of the equity in the subsequent years.