Corporate And Regulatory

Code of Corporate Governance, 2003 (Pt. 2 of 2)

Status: In force


(d)          facilitating the external audit and discussion with external auditors of major observations arising from interim and final audits and any matter that the auditors may wish to highlight (in the absence of management, where necessary);

(e)          review of management letter issued by external auditors and management's response thereto;

(f)           ensuring coordination between the internal and external auditors of the insurance company;

(g)          review of the scope and extent of internal audit and ensuring that the internal audit function has adequate resources and is appropriately placed within the insurance company;

(h)          consideration of major findings of internal investigations and management's response thereto;

(i)            ascertaining that the internal control system including financial and operational controls, accounting system and reporting structure are adequate and effective;

(j)           review of the insurance company's statement on internal control systems prior to endorsement by the Board of Directors;

(k)          instituting special projects, value for money studies or other investigations on any matter specified by the Board of Directors, in consultation with the Chief Executive and to consider remittance of any matter to the external auditors or to any other external body;

(l)            determination of compliance with relevant statutory requirements;

(m)         monitoring compliance with the best practices of corporate governance and identification of significant violations thereof; and

(n)          consideration of any other issue or matter as may be assigned by the Board of Directors.

Reporting Procedure

(xxxiv)    The Audit Committee of an insurance company shall appoint a secretary of the Committee. The secretary shall circulate minutes of meetings of the Audit Committee to all members, directors and the CFO within a fortnight.

Internal Audit

(xxxv)   There shall be an internal audit function in every insurance company. The head of internal audit shall have access to the chair of the Audit Committee.

(xxxvi)   All insurance companies shall ensure that internal audit reports are provided for the review of external auditors. The auditors shall discuss any major findings in relation to the reports with the Audit Committee, which shall report matters of significance to the Board of Directors.

External Auditors

(xxxvii)   No insurance company shall appoint as external auditors a firm of auditors, which has not been given a satisfactory rating under the Quality Control Review programme of the institute of Chartered Accountants of Pakistan.

(xxxviii)  No insurance company shall appoint as external auditors a firm of auditors which firm or a partner of which firm is noncompliant with the International Federation of Accountants' (IFAC) Guidelines on Code of Ethics, as adopted by the Institute of Chartered Accountants of Pakistan.

(xxxix)   The Board of Directors of an insurance company shall recommend appointment of external auditors for a year, as suggested by the Audit Committee. The recommendations of the Audit Committee for appointment of retiring auditors or otherwise shall be included in the Directors' Report. In case of a recommendation for change of external auditors before the elapse of three consecutive financial years, the reasons for the same shall be included in the Directors' Report.

(xl)         No insurance company shall appoint its auditors to provide services in addition to audit except in accordance with the regulations and shall require the auditors to observe applicable IFAC guidelines in this regard and shall ensure that the auditors do not perform management functions or make management decisions, responsibility for which remains with the Board of Directors and management of the insurance company.

(xii)        All insurance companies are required to change their external auditors every five years. If for any reason this is impractical, an insurance company may at a minimum, rotate the partner in charge of its audit engagement after obtaining the consent of the Securities and Exchange Commission of Pakistan.

(xlii)       No insurance company shall appoint a person as the CEO, the CFO, an internal auditor or a director of the insurance company who was a partner of the firm of its external auditors (or an employee involved in the audit of the insurance company) at any time during the two years preceding such appointment or is a close relative, i.e. spouse, parents, dependents and nondependent children, of such partner (or employee).

(xliii)      Every insurance company shall require external auditors to furnish a Management Letter to its Board of Directors not later than 30 days from the date of audit report.

(xliv)      Every insurance company shall require a partner of the firm of its external auditors to attend the Annual General Meeting at which audited accounts are placed for consideration and approval of shareholders.

(xlv)       The appointment of external auditors shall, however, be subject to the provisions of section 48 of the Insurance Ordinance, 2000.

Actuary

(xlvi)      The Board of Directors must ensure that an appointed actuary must not be;

(a)          A person who is, or at any time during the preceding three years was a director, other officer or employee of the company.

(b)          A person who is a partner of, or in the employment of, a director, officer or employee of the company;

(c)           The spouse of the director of the company;

(d)          The person who is indebted to the company.

(e)          Compliance with the Code of Corporate Governance

(xlvii)     All insurance companies shall publish and circulate a statement along with their annual reports to set out the status of their compliance with the best practices of corporate governance set out above (Annexure IV).

(xlviii)    All insurance companies shall ensure that the statement of compliance with the best practices of corporate governance is reviewed and certified by statutory auditors, where such compliance can be objectively verified, before publication by insurance companies.

(xlix)      Where the Securities and Exchange Commission of Pakistan is satisfied that it is not practicable to comply with any of the best practices of corporate governance in a particular case, the Commission may, for reasons to be recorded, relax the same subject to such conditions as it may deem fit.

Annexure IA

APPLICABLE TO LISTED INSURANCE COMPANIES

Clause reference

Brief Description

Manner of enforcement

Effective date

(i)

Responsibilities, powers and functions of the Board of Directors.

Mandatory

Immediate.

(ii)

Internal Control.

Mandatory

Immediate.

(iii)

Annual reviews and compli­ance procedures.

Mandatory

Immediate.

(iv)

Auditors and Actuaries not to hold shares.

Mandatory

Immediate.

(v)

(vi)

(vii)

Committees.

Mandatory

Immediate.

(viii)

Appointment   of   external auditors.

Mandatory

When next appointment of auditors is due.

(ix)

Actuary.

Mandatory

Immediate.

(x), (xi) & (xii)

Compliance with code of cor­porate governance.

Mandatory

For financial statements covering year beginning on or after January 1, 2003.

Annexure IB

APPLICABLE TO INSURANCE COMPANIES OTHER THAN LISTED INSURANCE COMPANIES

Clause reference

Brief Description Manner of enforcement

Effective date

(i)

Representation of independent voluntary nonexecutive directors on the Board of Directors of insurance companies.

When next election is due.

(ii)

Filing of consent by Directors.   Mandatory

When next election is due.

(v)

Tenure of office of directors.

Mandatory

Immediate.

(vi), (vii) & (viii)

Responsibilities and, powers and functions of the Board of Directors.

Mandatory

Immediate.

(ix)

Internal Control.

Mandatory

Immediate.

(x)

(xi)

(xii)

Meeting of the Board of Dir­ectors.

Mandatory

Immediate.

(xiii)

Significant issues to be plac­ed for decision by the Board of Directors.

Mandatory

Immediate.

(xiv)

Orientation Courses.

Mandatory

Immediate.

       (XV)

Appointment, removal of CFO and Company Secretary.

Mandatory

Immediate.

(xvi)

(vii)

Qualification of CFO and Company Secretary.

Mandatory

Immediate.

(xviii)

Requirement for CFO and Company Secretary to attend Board meeting.

Mandatory

Immediate.

(xix)

The Director's report to the shareholders.

Mandatory

For financial statements covering year beginning on or after January 1, 2003.

(xx)

(xxi)

(xxii)

Frequency of financial reporting.

Mandatory

Immediate.

(xxiii)

Annual reviews and compli­ance procedures.

Mandatory

Immediate.

(xxiv)

(XV)

Responsibility for financial reporting and corporate com­pliance.

Mandatory

Immediate.

(xxvi)

Auditors and Actuaries not to hold shares.

Mandatory

Immediate.

(xxvii), (xxviii), (xxix), (xxx), (xxxi), (xxxii), (xxxiii), & (xxxiv)

Committees.

Mandatory

Immediate.

(xxxv) & (xxxvi)

Internal audit.

Mandatory

Immediate.

(xxxvii), (xxxviii), (xxxix), (xl) & (xlv)

Appointment of external au­ditors.

Mandatory

When next appointment of auditors is due.

(xii)

Rotation of external audi­tors/ actuaries.

Mandatory

When next appointment of auditors is due.

(xlii)

Appointment of a partner or employee of the external au­ditors in a key position with­in the insurance company.

Mandatory

Immediately for new ap­pointments.

(xliii)

Management letter issued by external auditors.

Mandatory

Immediate.

(xliv)

Attendance of external audi­tors/actuaries at the annual general meeting.

Mandatory

Immediate.

(xlvi)

Actuary.

Mandatory

Immediate.

(xlvii), (xlviii), & (xlix)

Compliance with code of cor­porate governance.

Mandatory

For financial statements covering year beginning on or after January 1, 2003.

Annexure II

To be attached with the consent to act as Directors/Chief Executive under section 184 of the Companies Ordinance, 1984

DECLARATION WITH CONSENT TO

ACT AS DIRECTORS

See clause (ii)

Name of Company

To

Insurance Division,

Securities and Exchange Commission of Pakistan

Along with the consent to act as director(s) of , I/we declare that I/we am/are aware of the duties and powers of directors under the Companies Ordinance, 1984; Insurance Ordinance, 2000 and , memorandum and articles of association  and have read the relevant provisions contained therein.

Verified that the above is true to the best of my/our knowledge and belief and that nothing has been concealed.

Date :    Signature

Place :   (Name in block letters)

NIC:       Number

1.            Insert name of the company.

2.            Insert name of any other relevant law or strike out if not applicable.

Note.  The declaration need not be

Signed before a Magistrate or an officer competent to administer oaths; or Stamped as an affidavit.

Annexure III

SECRETARIAL COMPLIANCE CERTIFICATE

See clause (xxv)

Name of Company

To,

Insurance Division,

Securities and Exchange Commission of Pakistan

                I of being the Secretary of certify, to the best of my knowledge and belief, that I am qualified to be appointed as the Company Secretary of an insurance company and that the' secretarial and corporate requirements of the Companies Ordinance, 1984, memorandum and articles of association of have been duly complied with for the year ended and that nothing has been concealed or withheld in this regard.

Date: 

Place: 

Signature

(Name in block letters) NIC Number

1.            Insert name of the company.

2.            State exceptions in case of noncompliance.

Notes.  The declaration need not be :

Signed before a Magistrate or an officer competent to administer oaths; or Stamped as an affidavit.

Annexure IV

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE

See clause (xlvii)

Name of Company

Year Ended

This statement is being presented to comply with the Code of corporate governance for Insurance Companies for the purpose of establishing a framework of good governance, whereby an Insurance company is managed in compliance with the best practices of corporate governance.

The Company has applied the principles contained in the Code in the following manner :

1.            The directors have confirmed that none of them is serving as a director in ten or more listed companies.

2.            All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company. A DFI or an NBFI or, being a member of stock exchange, has been declared as a defaulter by a stock exchange.

3.            A casual vacancy occurring in the Board on was filled up by the directors within days thereof.

4.            The Company has prepared a 'Statement of Ethics and Business Practices'; which has been signed by all the directors and employees of the Company.

5.            The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.

6.            All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive directors, have been taken by the Board.

7.            The meetings of the Board were presided over the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.

8.            The Board has established a system of sound internal control, which is effectively implemented at all levels within the company. The company includes all the necessary aspects of internal control given in the code.

9.            The Board arranged orientation course (s) for its directors during the year to apprise them of their duties and responsibilities.

10.          The Board has approved appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment, as determined by the CEO.

11.          The directors' report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.

12.          The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board.

13.          The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.

14.          The Company has compiled with all the corporate and financial reporting requirements of the Code.

15.          The Board has formed under writing/claim settlement/reinsurance & coinsurance committee (s).

16.          The Board has formed an audit committee. It comprises members, of whom are nonexecutive directors including the chairman of the committee.

17.         The meetings of the committees were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code. The terms of reference of the audit committee have been formed and advised to the audit committee for compliance.

18.          The Board has setup an effective internal audit function/or has out sourced the internal audit function to who are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company and they (or their representatives) are involved in the internal audit function on a full time basis.

19.          The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review programme of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan.

20.          The statutory auditors or the persons associated with them have not been appointed to provide other services and the auditors have confirmed that they have observed IFAC guidelines in this regard.

21.          The actuary appointed by the company has confirmed that he or his spouse and minor children do not hold shares of the company.

22.          The Board ensures that the appointed actuary complied with the requirements set out for him in this code.

23.          We confirm that all other material principles contained in the Code have been complied with except for the following, towards which reasonable progress is being made by the Company to seek compliance by the end of next accounting year.

 

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