ARTICLES OF ASSOCIATION

OF
LAHORE STOCK EXCHANGE (GUARANTEE) LIMITED

Article 1. Table "A" Not to Apply

The regulations in Table "A" in the First Schedule to the Companies Ordinance, 1984 shall not
apply to the Exchange except as reproduced herein or as required by law.

Article 2. INTERPRETATION

In these Articles, unless the context or the subject matter otherwise requires:

a) "Board" means a meeting of the Directors of the Exchange duly called and constituted or
as the case may be the Directors assembled at a Board.

b) "Exchange" means the Lahore Stock Exchange (Guarantee) Ltd.

c) "Month" means calendar month according to the English Calendar.

d) "Member" means any individual or partnership or a body corporate registered in the

Register of Members of the Exchange.

e) "Corporate Member" means a member which is a company incorporated under the

Companies Ordinance, 1984, a body corporate or a statutory corporation, incorporated
under any other law of Pakistan for the time being in force.

f) "Nominee Director" means "a person nominated by a corporate member of the Exchange
to represent it before the Exchange in accordance with these Articles."

g) "Director" means the member of the "Governing Board of Directors."

h) "Managing Director" means the "Chief Executive of the Exchange."

i) "General Manager" means "the person appointed to perform the duties of a General
Manager as specified in these Articles".

j) "Secretary" includes "any person appointed to perform the duties of a Secretary as

specified in these Articles".

k) "Office" means the Registered office for the time being of the Exchange.

l) "Ordinance" means the Companies Ordinance, 1984 or any modification or re-enactment

thereof for the time being in force.

m) "Chairman" means the "Chairman of the Exchange."

n) "Seal" means the common or official seal of the Company.

o) "Section" means section of the Ordinance.

p) Words importing masculine gender include the feminine gender.

q) Words importing singular numbers include the plural numbers and vice versa.
r) Expression referring to writing shall unless the contrary intention appears, be construed
as including references to printing, telex, telegram, lithography, photography and other
modes of representing or reproducing words in a visible form.

s) The head notes are inserted for convenience and shall not effect the construction of
these Articles.

II. MEMBERS

A. Number
3. Number.

The number of Members of the Exchange, for the purpose of registration, is declared to
be 200.

4. Increase of Number.

The Exchange in general meeting may, by ordinary resolution, from time to time,
determine the maximum number of Members of the Exchange not exceeding two
hundred (200). The Exchange in general meeting may, by special resolution, increase the
number of Members beyond 200.

B. Admission
5. Power to Frame Rules.

Upon these Articles coming into force the Board shall, in accordance with these Articles,
frame rules and regulations regarding the admission, expulsion and suspension of
Members. The Board shall, subject to the approval of the Corporate Law Authority, have
the power to alter, add to, repeal or substitute the said rules and regulations, or any of
them, as it may consider necessary or desirable in the interests of the Exchange.

6. Application in Accordance with Rules.

(a) No application for membership shall be entertained unless it is in conformity with

the rules and regulations pertaining thereto as framed by the Board or amended
by it from time to time.

(b) Every person who applies for the membership of the Exchange, other than a
person who has been nominated and such nomination has been accepted or
approved by the Board in accordance with the Article 21, shall deposit with his
application an entrance fee, as may be fixed from time to time in the general
meeting. Such fee shall become the property of the Exchange and shall be non-
refundable.

7. (i) Eligibility.

i) No person, other than a Corporate Member, shall be eligible to be a Member if:

a) he is less than twenty one (21) years of age;

b) he is not a citizen of Pakistan;

c) he has been adjudicated an insolvent or has suspended payment or has

compounded with his creditors;

d) he has been convicted of an offence involving fraud or breach of trust;

e) he has been at any time expelled by this or any other Stock Exchange;

f) he has been previously refused admission to membership, unless a

period of one year has elapsed since the date of such rejection;

g) he is a lunatic or a person of unsound mind;

h) he has not had experience in the business of securities for a period of

not less than two years' provided that the Board may waive this
requirement relating to experience in the business of securities of such
person is in respect of means, integrity and background, considered by
the Board to be otherwise qualified for membership.

7.(ii) A Corporate Member must fulfill the following requirements of membership:

a) be a company or a statutory corporation or a body corporate;

b) have a minimum issued, subscribed and paid-up capital of Rs. 10 million which
minimum limit may be increased by the Directors, to be effective after being
approved by the Members in general meeting and notified in the official Gazette;

c) in the case of statutory corporation or a body corporate to which Section 183 of

the Ordinance applies, the membership application shall be accompanied by a
"no objection" from the Federal or a Provincial Government, as the case may be;

7.(iii) a) It shall be possible for a Member being an individual or a partnership to convert

its membership to a Corporate Membership without paying an additional
admission and entrance fee;

b) Provided that National Investment Trust Ltd., a company incorporated under

Companies Ordinance, 1984, and Investment Corporation of Pakistan, a
statutory corporation incorporated under the Investment Corporation of Pakistan
Ordinance, 1966 (Ordinance VI of 1966) shall not be eligible to apply for or
become members of the Exchange;

c) Where a member converts into corporate membership or resigns from his

membership in favour of and for nominating a Corporate Body and of which he
simultaneously becomes a nominee to represent such corporate body as a
member of the Exchange, his resignation and his consequent nomination by the
corporate body shall not affect his office of the Chairman and/or a Director, which
he may be holding at the time of his resignation in favour of such corporate body.
Additionally, the tenure of such individual membership will be taken into account
for determining the seniority of such corporate membership for the purpose of
election or co-option to Board under Article 66 herein below.

d) A corporate body which becomes a member of the Exchange, may nominate one
of its Directors to represent its membership of the Exchange and such nominee
shall become eligible for being elected as the Chairman and/or a member of the
Governing Board of Directors.

8. Conditions of Continued Membership.

A Member shall at all times maintain a net capital balance in the capital account of an
amount which is:
a) in the case the Exchange in the previous calendar year, had on the cash counter
a turnover of securities, other than bonus vouchers, exceeding one crore in
number, not less than Rupees fifty thousand (Rs. 50,000/) or such other balance
as may from time to time be required by law; and

b) in any other case, not less than Rupees fifteen thousand (Rs.15,000/-) or such
other balance as may from time to time be required by law;

provide that a Member who is also a member of any other stock exchange shall maintain
a net capital balance of not less than Rupees fifty thousand (Rs. 50,000) or such other
balance as may from time to time be required by law;

provided further that, in the case of a partnership firm the amount of the net capital
balance to be maintained shall be the amount obtained by multiplying such balance as
may be required for a Member of the Exchange by the number of such partners of the
firm as are Members of the Exchange.

9. Capital Balance to be Maintained.

The membership of a Member or of Members who are partners in a partnership firm and
who are in active business shall become suspended as soon as the net capital balance
falls short of the amount specified in the preceding Article and shall remain so suspended
until the net capital balance is increased so as not to fall short of that amount.

Every Member shall report to the Exchange weekly that he or the firm of which he is a
partner had, at all times during the week to which the report relates, a net capital balance
of an amount not less than that specified in the preceding Article and shall forthwith
inform the Exchange if, at any time, such balance falls short of the amount.

10. Recommendation.

A candidate for admission must be recommended by two Members of at least two years
standing each and none of whom should be member of the Board. The recommenders
must have such personal knowledge of the candidate and of his past and present
circumstances as shall satisfy the Board.

11. Notice of Application.

A notice of each application for admission with the names of the recommenders shall be
posted on the notice board of the Exchange for not less than fifteen (15) days prior to the
day on which the Board is to elect Members.

12. Objections.

A Member intending to object to the admission of a candidate shall communicate the

grounds of his objection to the Board by letter within fifteen (15) days of the posting of the
notice referred to in the preceding Article. Any such communication shall be deemed
privileged and confidential.

13. Scrutiny by Membership Committee.

No application shall be admitted as a Member unless and until his application has been
scrutinized by the Membership Committee and a positive recommendation, certified in
writing by the Committee Chairman, has been accepted by the Board.

14. Personal Appearance.

A candidate for admission and his recommenders shall, if required by the Board or
Membership Committee, appear personally before any meeting of the Board or
Membership Committee, as the case may be and shall answer all questions which may
be put to them.

15. Admission by Ballot.

The admission of all new Members shall be by ballot of the Board. A candidate shall be
duly elected if approved in accordance with Article 83.

16. Power to Reject.

The Board may, in its absolute discretion, reject any application for admission without
assigning any reason therefor.

17. Misrepresentation.

The Board may, in accordance with Article 83, expel a Member if in its opinion he has in
or at the time of his application for admission to membership or during the course of the
inquiry preceding his admission:

i) made any willful misrepresentation; or

ii) suppressed any material information required of him as to his character and
antecedents; or
iii) has directly or indirectly given false particulars or information or made a false
declaration.

18. Time of Admission.

A newly elected Member shall, upon receipt of intimation of his election, pay such fee as
may be determined from time to time by the Board any duly confirmed by the Members in
general meeting, and, upon payment thereof, he entitled to receive a membership
certificate or card.

19. Notification.

When a member is admitted as provided in the preceding Article a notice of such

admission shall be pasted on the notice board of the Exchange alongwith the name of the
individual/partnership/Corporate Member with the address of the principal place of
business/registered office of such member.

C. Rights in Membership

20. Membership Not Assignable.

A Member shall not assign, mortgage, pledge, hypothecate or charge his right of
membership or any rights or privileges attached thereto and no such attempted
assignment, mortgage, pledge, hypothecation or charge shall be effective against the
Exchange for any purpose nor shall any right or interest in any membership other than
the personal right or interest of the Member therein be recognized by the Exchange. The
Board may, in accordance with Article 83, expel any member who acts or attempts to act
in violation of the provisions of this Article.

21. Nomination.

a) A member of not less than two years standing who desires to resign may nominate a
person otherwise eligible under the rules for admission to membership of the
Exchange as a candidate for admission in his place.

b) A member of not less than two years standing, who desires to resign, may with the
sanction of the Board, nominate his father, his mother, own son, own daughter,
spouse, brother, brother’s spouse, brother’s son, sister, sister’s spouse, sister’s son,
otherwise eligible under the rules for admission to membership of the Exchange as a
candidate for admission in his place. The nomination of above stated relations, would
be exempt from the payment of nomination free prescribed by the Board from time to
time.

c) Notwithstanding the provisions of sub-class (a) hereof, the Board may, in their
unfettered and absolute discretion, allow any Member, irrespective of the period of
his membership, to resign his membership of the Exchange with liberty to nominate a
person otherwise eligible under the rules for admission to membership of the
Exchange as a candidate for admission in his place.

d) Any member, during the tenure of his membership, may nominate in writing executed
before the Chairman, Vice Chairman, or Secretary of the Exchange or sent to the
Office, duly supported by an affidavit, any other eligible person to become a member
upon his death. Such nomination shall be subject to acceptance by the Board. In the
absence of such nomination the representatives of the deceased Member may, with
the sanction of the Board, nominate one of themselves or any other eligible person
for admission in the place of the deceased member.

e) A fee of Rs. 1,000/- shall be paid by a member elected on the nomination of a

member who wishes to resign, except a legal heir, nominated by a deceased
member who will not be required to pay the election fee.

f) The manager of the estate of a member, who is of unsound mind may, with the
sanction of the Board, nominate himself or any other eligible person for admission in
place of such member.

g) The Board may, in its discretion, without assigning any reason whatsoever therefore,
refuse to accept or approve any nomination.

h) In the event of the Board accepting any nomination, the original member shall cease
to be a member and the nominated member shall become a member in his place
from the date of acceptance.

i) When any member dies or is of unsound mind, all his debts and other liabilities to any
member, to the extent that the same shall have been admitted by the Board, shall be
paid and satisfied or otherwise secured by the person nominated by the deceased
member under his will or testamentary writing or by his legal representative or by the
manager of the estate of the person of unsound mind before exercising his right of
nomination.

j) If the person nominated by the deceased member under his will or testamentary
writing or his legal representatives or the Manager of the estate of the member of
unsound mind, shall unable to pay and satisfy or otherwise secure such debts and
liabilities, his right of membership, shall be disposed of by the Board and the
proceeds thereof applied in the following order of priority to the following purposes,
namely:

i) the payment of all debts, fines, moneys and other charges due and payable
by such member to the Exchange or the Clearing House;

ii) The payment and satisfaction of all debts, obligations and claims arising from
all contracts or engagements made subject to the rules of the Exchange, to
the extent that the same shall have been admitted by the Board, and if such
proceeds shall not be sufficient to pay and satisfy such debts, obligations and
claims in full, they shall be paid and satisfied pro-rata; and

iii) The payment to the person nominated by the deceased member under his
will or testamentary writing or to his legal representatives or the manager of
the estate of the member of unsound mind appointed as aforesaid of the
surplus, if any, of such proceeds upon the execution by him or them of such
release or indemnity as the Board may require.

k) A right of membership which under any Articles, rule of regulation for the time being,
in force is forfeited to or vests in the Exchange, shall belong absolutely to the
Exchange, free of all rights, claims, or interest of such member or any person
claiming through such member or in his insolvency, and the Board shall be entitled to
deal with or to dispose off the said right of membership as the Board may think fit. If
the Board sells such right of membership the same proceeds thereof , shall in the first
place be applied as provided in sub-clause (j) and the surplus, if any, of such
proceeds shall form part of the funds of the Exchange.

l) In case nominations made under sub-clause (d) and (f) are not acceptable to the
Board, the Board may make such other arrangements as it thinks necessary.

m) When accepted by the Board nominations shall carry all rights and privileges as a
member, including any right to the use of, or claim upon, or any interest in any
property or funds of the Exchange.

D. Partnerships

22. Partnership with Non-members prohibited

No partnership of members shall be formed for the purpose of transacting business on the
Exchange except between :

a) a) any two or more members; or

b) b) a member and his spouse, son, daughter, father and mother; or

c) c) two or more members and their spouses, sons, daughters, fathers and mothers

23. Suspended members

A Member shall not form a partnership with a suspended member whilst the latter is under
suspension.

24. Partner in one firm only

No person shall at the same time, be a partner in more than one partnership firm.

25. Permission.

No member shall form a partnership or admit a new partner to an existing partnership or

make any change in the name of an existing partnership without the prior approval of the
Board.

26. Board Sole Judge of Partnership

The Board shall be the sole judge as to what constitutes a partnership within the meaning of
these Articles and its decision shall be final

27. Information

Every application for permission, shall be accompanied by such information as may be

required by the Board.

28. Withdrawal of Permission

The Board, in its discretion, may at any time, in accordance with Article 83 and after giving
reasons therefor, terminate any partnership by withdrawing any permission which is may
have given and the partners so affected shall conform to such directions as the Board may
make.

29. Notification of Changes

The members of a partnership must forthwith communicate to the Exchange in writing under
the signatures of all the partners or surviving partners any change in such partnership either
by dissolution or death or retirement of any partner.

30. Register of Partnerships

A register of partnerships shall be maintained by the Exchange, in which, shall be entered the
names of partnerships and, the names and addresses of the partners and any change in
such partnerships or names together with the relevant dates. Such register shall be open to
inspection by members, without payment, therefore, during the working hours of the
Exchange.

31. Fictitious or Misleading Names

The Board shall refuse to allow a partnership under a name which is fictitious or misleading.

32. Printing of Names

A partnership firm shall state on all communications and circulars relating to Stock Exchange
business and on all contract notes the name of the firm and the names of all partners therein.

33. Liability of Member Partners

All members who are partners of a firm which is guilty of any act or omission which if done by
an individual member, would render any such member liable to expulsion, suspension or any
other penalty, shall be liable to be expelled, suspended or penalized as the case may be.
Business by a partnership firm shall be done in the name of the firm and, all the partners of
the firm shall be liable jointly and severally in respect of all dealings of the firm.
34. Bargains with Individual Partners

A member shall not transact any business or make any bargain for and on behalf of a partner
of a partnership firm and, such partnership firm shall not be liable for any business transacted
or any bargain made, by a member in the name of only one of the partners of a partnership
firm.

35. Partnership Dissolved on Default

The default of a partnership firm shall ipso facto dissolved the partnership and should the
member partners of such firm when re-admitted desired to renew the partnership they shall
apply for permission to the Board as provided above.

35 (a) Corporate Member

A Corporate member shall communicate to the Secretary in writing, signed by the Chairman
of its Board of Directors or Chief Executive, the names of all its directors and all its
shareholders, bi-yearly, as on 30 June, and 31 December in each calendar year, and shall
communicate in writing immediately all changes herein and shall be bound to supply such
other, further, or additional information as is or may be required under the hand of the
Secretary of the Exchange, including and in particular, information relating to all notices and
proceedings. The Secretary of the Exchange shall also keep and maintain a register of
Corporate Members and shall also keep and maintain and a register of Corporate members
and shall enter therein the particulars of incorporation and address of registered office,
relevant particulars of the “annual report and accounts” and names of the directors for the
time being and record of all changes of directors and the shareholders bi-yearly i.e. as the
30th June and 31 December, in each calendar year.

E. Dues, Fees and Changes

36. Subscriptions and Fees

Every member shall pay, at such time or times and in such manner as the Board shall direct,
such admission and entrance fees and such annual subscription or other fees and charges
as may, from time to time, be determined by the Board provided that such subscription fees
or charges shall become effective on confirmation by the members in general meeting.

37. Liability for Fees

A member who shall for any reason ceases to be a member of the Exchange, shall
nevertheless remain liable for, and shall pay to the Exchange, all monies which at the time of
his ceasing to be member shall have been due by him to the Exchange or to the Clearing
House.

38. Failure to Pay

If a member fails to pay his subscription, fees, charges or other monies, other than the
obligations arising out of the Exchange transactions under Article 39 which may be due by
him to the Exchange, within two months after notice in writing has been served upon him by
the Exchange, he may be suspended by the Board until he makes payment and if within a
further period of six months he fails to make such payment, he may be expelled by the Board
in accordance with Article 83.
F. Default

39. Defaulter

The Board may by a Resolution passed by not less than two third of its number provided,
declare a member who fails to meet his obligations to the Clearing House to be a Defaulter. A
member who is declared a defaulter as aforesaid, shall at once cease to be a member of the
Exchange and as such cease to enjoy any of the rights and privileges of membership, but the
right of his creditor members and non-members out of bonafide Exchange transactions
against him, shall remain unimpaired. Such decision of the Board to declare the member a
Defaulter will take effect forthwith and need not be referred to the members in General
Meeting,

40. Membership on Default

A member’s right of membership shall lapse to and vest in the Exchange immediately he is
declared a defaulter.

41. Re-admission

A defaulter may apply for re-admission in accordance with the procedure for admission as
hereinabove provided save that his application, in addition to scrutiny by the Membership
Committee, shall be scrutinized by a Defaulters committee, to be set up by the Board, which
shall investigate his conduct and accounts. The Defaulters Committee may recommend to
the Board on which terms and conditions (relating to security, undertakings etc.) the defaulter
may be admitted.

42. Defaulter Ineligible for Office

A member who has been declared a defaulter at any time, shall not be eligible to be elected
or appointed a member of the Board or of any committee or as an office bearer of the
Exchange.

G. Termination of Membership

43. When membership ceases

1. No member, other than a Corporate Member, shall continue as such if:

a) he ceases to be a citizen of Pakistan;

b) he is adjudicated adjudged an insolvent or has suspended payment or

has compounded with his creditors; or

c) he is convicted by a High Court of an offence involving fraud or breach

of trust or a High Court upholds such a conviction;

d) he is declared a lunatic or a person of unsound mind;

2. The membership of a Corporate Member shall, ipso facto, cease (a) on the passing
of the resolution in the case of voluntary winding up, or (b) on the passing of winding
up by a court, or (c) it is convicted by a High Court of an offence involving fraud or
breach of trust or a High Court upholds such a conviction by a lower court.

44. Effect of ceasing to be Member

When a Member ceased to be such under the provisions of the preceding Article, it shall be
as if such member has been expelled by the Board and, in that event, the provisions relating
to expulsion, as hereinafter provided, shall apply to such member.

45. Resignation

a member wishing to resign from the membership of the Exchange, shall serve on the
Exchange a month’s written notice to that effect, shall be posted on the notice board of the
Exchange.

46. Objection to Resignation

Any member objecting to any resignation that has been so notified shall communicate the
grounds of his objection to the Board, in writing, within fourteen (14) days of the posting of
such notice.

47. Accept or refuse Resignation

The Board may accept the resignation of a member either unconditionally or on such
condition as it may think fit or may refuse to accept such resignation and in particular may
refuse to accept such resignation until it is satisfied that all outstanding transactions with such
Member have been settled.

III. MEMBERS’ MEETINGS & PROCEEDINGS

A. General Meetings

48. Annual General Meeting

A general meeting to be called annual general meeting, shall be held once at least in every
year within a period of six months following the close of the Exchange’s financial year and,
not more than fifteen months after the holding of its last preceding annual general meeting as
may be determined by the Directors.

49. Other Meetings

All general meetings of the Exchange other than the annual general meeting shall be called
extraordinary general meetings.

50. Extra-ordinary Meetings

The Directors may whenever they think fit, call an extraordinary general meeting, and
extraordinary general meetings shall also be called by the Directors on the requisition of
Members representing one-tenth of the total number of Members on the date of deposit of the
requisition provided that, if the Directors do not call such a meeting within twenty one (21)
days of the requisition, the requisitionists may proceed to call the meeting themselves in
accordance with the provisions of these Articles. If at any time they are not within Pakistan
sufficient Directors capable of acting to form a quorum, any Director of the Company may call
an extraordinary general meeting in the same manner as nearly as possible as that in which
meetings may be called by the Directors.

B. Notice and Proceedings

51. Notice of meetings

Twenty-one day’s notice at least (exclusive of the day on which the notice is served or
deemed to be served, but inclusive of the day for which notice is given), specifying the place,
the day and the hour of the meeting and, in case of special business, the general nature of
that business, shall be given in the manner provided by the Ordinance for the general
meeting, to such persons as are, under the Ordinance or the regulations of the Exchange,
entitled to receive such notices from the Exchange; but the accidental omission to give notice
to, or the non-receipt of notice by, any member shall not invalidate the proceedings at any
general meeting.

52. Special Business

All business shall be deemed special that is transacted at an extraordinary general meeting
and, also all that is transacted at an annual general meeting with the exception of the
consideration of the accounts, balance sheet and the reports of the Directors and auditors,
the election of the Chairman and Directors, the appointment of and the fixing of the
remuneration of, the auditors.

53. Quorum

No business shall be transacted at any general meeting unless a quorum of members is

present at that time when the meeting proceeds to business. Twenty-five (25) percent of the
total existing membership shall constitute a quorum.

54. Effect of Quorum not being Present

If within half an hour from the time appointed for the meeting a quorum is not present, the
meeting, if called upon the requisition of members, shall be dissolved; in any other case, it
shall stand adjourned to the same day in the next week at the same time and place, and, if at
the adjourned meeting a quorum is not present within half an hour from the time appointed for
the meeting, the members present, being not less than two, shall be a quorum.

55. Chairman of Meeting

The Chairman of the Exchange, shall preside as chairman at every general meeting of the
Exchange but if at any meeting he is not present within fifteen minutes after the time
appointed for the meeting, or is unwilling to act as chairman, the Vice Chairman shall be
elected as chairman, and if he is not present or willing to act as chairman, one of the
Directors shall be elected as chairman and if none of the Directors are present or willing to
act as chairman, the members present shall choose one of their number to be chairman.

56. Adjournment

The chairman, may with the consent of any meeting at which a quorum is present (and shall if
so directed by the meeting), adjourn the meeting from time to time but no business shall be
transacted at any adjourned meeting other than the business left unfinished at the meeting
from which the adjournment took place. When a meeting is adjourned for ten days or more,
notice of the adjourned meetings shall be given as in the case of an original meeting. Save as
aforesaid, It shall be necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.

57. Voting.

At any general meeting a resolution put to the vote of the meeting shall be decided on a
show of hands unless a poll is (before or on the declaration of the result of the show of
hands) demanded. Unless a poll is so demanded, a declaration by the chairman that a
resolution has, on a show of hands, been carried, or carried unanimously, or by a
particular majority, or lost, and an entry to that effect in the book of the proceedings of
the Exchange shall be conclusive evidence of the fact, without proof of the number or
proportion of the votes recorded in favour of, or against, that resolution.

58. Poll.

A poll may be demanded by any five or more Members. If a poll is dully demanded, it
shall be taken by secret ballot and the result of the poll shall deemed to be the resolution
of the meeting at which the poll was demanded.

59. Time of Taking Poll.

A poll demanded on the election of chairman or on a question of adjournment shall be

taken at once.

60. Casting Vote.

In the case of an equality of votes, whether on a show of hands or on a poll, the

chairman of the meeting at which the show of hands takes place, or at which the poll is
demanded, shall have and exercise a second or casting vote.

C. Votes of Members
61. Right to Vote.

Subject to the restrictions for the time being on defaulters and disentitled Members, as
herein provided, on a show of hands or on a poll every member shall have one vote.

62. Disentitled Members.

A Member shall not be entitled to be present or to vote or otherwise participate in any

general meeting, including one for the election of Directors, if he is in default of payment
of arrears of the Exchange such as Annual Membership Fee, room rent, electricity and
telex charges and any and all other dues. Only Members whose subscriptions or dues
have been paid up to the preceding 30 September shall be entitled to be present at or
participate in any general meeting or to participate in the election of Directors.

The Board shall, by 30 October of each year, scrutinize and determine the list of
Members who are disentitled under this Article and shall intimate the same to such
disentitled Members under registered cover within a week of such scrutiny. Any such
disentitled Member who clears his dues and arrears before 30 November of that year
shall have his name removed from the said list and shall be entitled to exercise his right
to attend, participate in and vote at general meetings.

Provided that, all Members who have paid their dues on or by 15 January 1986 shall be
entitled to vote at the first general meeting to be held under these Articles.

63. Suspended Members and Defaulters.

A Member who has been declared a defaulter or has been suspended by the board shall
not be entitled to be present or to vote at any general meeting.

IV. MANAGEMENT AND ADMINISTRATION

A. Board of Directors
64. Governing Board of Directors.

64-A (1). The Board of Directors (the "Board") of LSE shall be constituted as follows: -

a). Five directors to be elected from amongst the members by the general body of LSE.

b). Four non-member directors to be nominated and appointed by the Commission from
professionals including but not limited to non-member securities market experts, lawyers,
chartered accountants, investment bankers, I.T. experts, management experts, in
consultation with such professional bodies as the Commission may consider appropriate
e.g. Management Association of Pakistan (MAP), Institute of Chartered Accountants of
Pakistan (ICAP), the Institute of Cost and Management Accountants of Pakistan
(ICMAP), Pakistan Banks Association, Investment Banks Association of Pakistan,
Modaraba Association of Pakistan, Leasing Association of Pakistan and Mutual Funds
Association of Pakistan.

c). The Managing Director of LSE shall, by virtue of his office, be a director on the Board.

(2). The Chairman of LSE shall be elected by the Board from amongst the non-member
directors appointed in accordance with 64-A (1)(b) above. The Managing Director shall
not participate in the election of Chairman.

(3). The position of Vice Chairman of LSE shall be abolished.

(4). No director of LSE shall participate in any discussion and/or vote on any matter if he has
any interest, pecuniary or otherwise, in such matter which could reasonably be regarded
as giving rise to a conflict of interest between his duty to honestly discharge his functions
as a director of LSE and his other professional and/or business occupation.

B. The Chairman shall be the Chairman of the Board and shall exercise such powers and
functions of the Chairman as are expressly conferred by these Articles.

C. All the elected, nominated, appointed and co-opted Directors including the Chairman;
Vice Chairman shall retire on 31st December every year.

D. A member who has been elected for a consecutive period of two years in one office i.e
Chairman, Vice Chairman, or Director, shall not be eligible to contest elections for a third
consecutive term to the same office. However, he shall be eligible to contest election for
another office for a period of one year.

E. The nominated, appointed and co-opted Directors shall have the same rights and
privileges as the elected Directors of the Exchange.

65. Election of Directors.

The Board shall, unless there are exceptional circumstances, cause to be held elections
of Directors, in the manner herein provided, before the end of December of every year
but, in the presence of exceptional circumstances, in no event later than the first week of
February in the following year.

66. Eligibility for Election.

No member shall be eligible for election to the post of Director, if he has not been a
member for a period of one year immediately preceding the date of elections.
67. Ballot.

The election of Directors shall be by ballot, of which not less than twenty-one (21) days
notice has been given by the Board.

68. Filing of Nominations.

Nomination for election to the office of Director, Vice Chairman and Chairman shall be
filed with the Secretary of the Exchange not less than fifteen (15) days before the date of
election. Nomination papers must be proposed and seconded by two Members and
must also indicate the consent, in writing, of the candidate.

69. Notice of Candidates.

The Secretary of the Exchange shall, at least seven (7) days prior to the date of
elections, post a notice on the notice board of the Exchange listing all candidates for
elections alongwith their proposers and seconders.

70. Insufficient Candidates.

If the number of candidates does not exceed the number of Directors to be elected no
ballot shall be necessary and the candidates listed in accordance with the preceding
Article shall be deemed elected. If the number of candidates is fewer than the number of
Directors to be elected the newly elected Directors shall fill the remaining vacancies
within thirty days of their election.

71. Number of Votes.

A Member shall have such number of votes as is equal to the number of Directors to be
elected but shall not give more than one vote to any single candidate.

72. Scrutinizers.

The Board shall appoint four members of the Exchange, not being Directors, two of
whom shall act as scrutinizers at the election and they shall report the result of the
elections to the Exchange and to the Board.

73. How Directors Elected.

The candidate who gets the highest number of votes shall be declared elected as
Director and then the candidate who gets the next highest number of votes shall be so
declared and so on until the total number of Directors to be elected has been so elected.

74. Invalid Election

Subject to Article 70, if at any ballot for the election of Directors no valid election has
been made the retiring Board shall remain in office until a valid election shall have been
made. Provided, however, that fresh elections shall be held as soon as is practicable and
in any case, not later than sixty (60) days from the date of the invalid election.

75. Deleted

76. Deleted

77. Filling of Vacancy.

The Board may co-opt an eligible person as a temporary Director if a vacancy of an
elected Director is created during the year. The Director so co-opted shall hold the office
st
for the remaining period upto 31 December.
78. Remuneration of Directors.

The remuneration to be paid to any Director for attending the meetings of the Directors or
committee of Directors shall from time to time be determined by the Board of Directors in
accordance with law.

B. Powers and Duties of Directors

79. General Management Powers.

The business of the Exchange shall be managed by the Directors, who may pay all
expenses incurred in promoting and registering the Exchange, and may exercise all such
powers of the Exchange as are not by the Ordinance or by these regulations, required to
be exercised by the Exchange in general meeting, subject nevertheless to the provisions
of the Ordinance or to any of these regulations, and such regulations being not
inconsistent with the aforesaid provisions; as may be prescribed by the Exchange in
general meeting but no regulation made by the Exchange in general meeting shall
invalidate any prior act of the Directors which would have been valid if that regulation had
not been made.

80. Minute Books.

The Directors shall cause minutes to be made in books provided for the purpose of:

a) all appointments of officers made by the Directors;

b) the names of the Directors present at each meeting of the Directors and
of any committee of the Directors;
c) all resolutions and proceedings at all meetings of the Exchange and of the
Directors and of committees of Directors;

any every Directors present at any meeting of Directors or committee of Directors shall
sign his name in a book to be kept for that purpose.

C. Disqualifications of Directors

81. Disqualifications of Directors.

(1) No Directors of the Exchange, or Company or firm under the control of such
Director, shall have any business dealing with the Exchange or enter into
contracts with, or do any work for, the Exchange. For the purposes of this Article
the Board shall be the sole judge as to what constitutes a “business dealing”. The
Directors in question shall not vote at any meeting in which the Board is
exercising its jurisdiction under this Article, and if he does so vote, his vote shal
not be counted.

(2) No person shall become a Director of the Exchange if he suffers from any of the
disabilities or disqualifications mentioned in Section 187 and, if already a
Director, shall ipso facto cease to hold such office from the date he becomes
disqualified or disabled under Section 188. The office of a Director shall also be
vacated ipso facto if:
a) he or his firm, suspends payment or is adjudicated insolvent, or if he or
his firm compounds with his or its, as the case may be, creditors;

b). by notice in writing, resigns his office, or

c). is concerned or interested in or participates in the profit of any contract

with or work done for the Exchange.

D. Proceedings of Directors

82. Meetings of Directors.

The Directors may meet together for the despatch of business, adjourn and otherwise
regulate their meetings, as they think fit. Except as provided in Article 83, all questions
arising at any meeting shall be decided by a majority of votes. In case of an equality of
votes, the Chairman shall have and exercise a second or casting vote. The Chairman
may at any time and shall upon the request, in writing, of any three Directors, summon a
meeting of Directors. It shall not be necessary to give notice of a meeting of Directors to
any Directors for the time being absent from Pakistan.

82-A Call of meetings.

The Secretary shall, upon the request of the Chairman of the Managing Director or any
five Directors, convene a meeting of the Board.

83. Certain Decisions.

All decisions of the Board in respect of the admission or expulsion of Members shall be
taken by a resolution passed by not less than two third of its number, provided that such
decision of admission or expulsion, except in respect of a default under Article 39 shall
become effective upon confirmation of the Members in the General Meeting.

84. Quorum of Directors Meetings.

The quorum of the meeting shall be 1/3rd of the number of Directors.

.

85. Chairman of Directors’ Meeting.

The Chairman shall act as chairman of the meetings of Directors. If at any meeting the
Chairman is not present within fifteen (15) minutes after the time appointed for holding
the same or is unwilling to act as chairman, the Vice-Chairman shall act as Chairman and
if he is not present or is unwilling to act as Chairman, the Directors present may choose
one of their number to be Chairman of the meetings.

86. Validity of Directors Acts.

All acts done by any meeting of the Directors or of a committee of Directors, or by any
person acting as a Director, shall, notwithstanding that it be afterwards discovered that
there was some defect in the appointment of such directors or persons acting as
aforesaid, or that they or any of them were disqualified, be as valid as if every such
person had been duly appointed and was qualified to be a Director.

87. Resolution in Writing.

A resolution in writing signed by three-fourths (3/4) of the total number

Of Directors for the time being entitled to receive notice of a meeting of the Directors shall
be as valid and effectual as if it had been passed at a meeting of the Directors duly
convened and held.

88. Voting.

A member of the Board shall be entitled to take part in the proceedings but it shall not be
competent to him to vote:

a) on any question in which he is personally interested, the chairman

of the meeting being the final judge whether he is so interested or not; or

b) on the final decision in respect of any inquiry or dispute on which a decision has
been given by a committee of which he has been a member except that no
member of the Board shall be so disqualified by reason of his being or having
been a member of a committee which has made prior examination or
investigation of the subject under consideration for the purpose of submitting a
report; or

c) on the decision in respect of any inquiry or dispute unless he has been present at
every meeting of the Board at which there has been a hearing of the inquiry or
dispute.

89. Overrule of Decisions.

Any decision duly taken by the Board shall be binding upon the same Board, during its
term in office, unless overruled by it by a resolution passed by two-thirds (2/3) of its
number.

90. Deleted

91. Deleted

92. Deleted

93. Managing Director.

a) The Board shall appoint a qualified and experienced person as a whole time paid
Managing Director who shall function as the Chief Executive of the Exchange. The
appointment of Managing Director shall be made for such period, not exceeding
three years at a time, and on such terms and conditions as the Board may determine.
The persons so appointed shall not engage himself in any business, profession or
vocation directly or indirectly including trading or dealing in shares and securities
during the period he holds the office. The Managing Director shall be liable to
dismissal or removal from his office with three fourth of the total number of Directors
or by special resolution passed in a General Meeting.

b) A person shall not be eligible for appointment as Managing Director If he is a member

of any Exchange.

c) The Managing Director shall have the executive powers to run, superintend and
effectuate the day-to-day operations, administration and general management of the
Exchange, implement decisions and direction of the Board, enforce Articles of
Association, Rules & Regulations and Bye-Laws of the Exchange and exercise such
other powers, functions and authority as may be delegated or entrusted to him by the
Board from time to time. He shall also have the general charge and control over the
employees of the Exchange, including the General Manager.

d) In the absence of Managing Director, his powers and functions may be delegated or
entrusted to General Manager by the Board upon such conditions and with such
limitations as it may deem fit.

e) Subject to directions of the Board, Managing Director shall be the authorized

representative of the Exchange for the Corporate Law Authority/Securities and
Exchange Commission, other governmental agencies and authorities, institutions,
general public and outsiders on all matters and affairs of the Exchange.

f) The Managing Director shall also have the powers in the matters which concern
disciplining of trading and members’ activities under the Articles of Association, Bye-
Laws and Rules and Regulations of the Exchange.

g). The Managing Director shall be appointed, removed and terminated with the prior
approval of the Commission and for this purpose the term "removal and/or
termination" shall include "non-renewal of his contract".

h). The Board of Directors shall not delegate their authority relating to operational
matters to any director except the Managing Director.

94. General Manager, Secretary etc.

a) The Board, in consultation with Managing Director, shall appoint General

Manager, Secretary other executives and members of staff who shall not be the
members of the Exchange.

b) The General Manager under the general control and direction of

The Managing Director shall perform such functions and duties as may be
entrusted or delegated to him by the Board or the Managing Director. He shall
maintain and have charge over the books, records and papers of the Exchange
and conduct all correspondence on behalf of the Exchange and the Board, and
shall counter-sign all cheques or payment of money. The General Manager and
Secretary shall report to the Managing Director on all day to day matters
concerning the management of the affairs of the Exchange.

c) The General Manager and Secretary shall, unless otherwise directed by the
Board, attend all meetings of the Exchange or of the Board and shall keep proper
record and minutes of proceedings of such meetings.

d) All members of the Exchange, their partners, employees and representatives

shall give to the Managing Director, General Manager and Secretary all such
information as may be required for official purposes of the Exchange or of the
Board. All such members, partners, employees and representatives shall attend
such meetings of the Board or any committee as the General Manager or
Secretary may request to attend.

95. Deleted

96. Deleted

97. Deleted
98. Deleted

99 List of Members.

The Secretary shall publish and maintain a list of Members to be forwarded to any
applicant upon request.

100 Notice Board.

No notice, communication or announcement shall be posted on the notice board of the

Exchange except through or under the authority of the Exchange.

101 Deleted

102. Deleted

G. Committees

103 Membership Committee.

There shall be a Membership Committee comprising of Board members to scrutinize all

applications for new membership.

104 Other Committees.

The Directors may from time to time and at any time constitute a Committee or
Committees, including Defaulters Committee, consisting of two or more persons, whether
Directors or Members, as they think fit, to undertake any functions and responsibilities
entrusted to it/them by the Directors. Any committee so formed shall, in the exercise of
the powers so delegated, conform to any restrictions that may be imposed on it by the
Directors.

105 Convenor of Committee Meetings.

A committee may elect a convenor of its meetings, but, if no such convenor is elected, or
if at any meeting the convenor is not present within fifteen (15) minutes after the time
appointed for holding the same or is unwilling to act as convenor, the members present
may choose one of their number to be convenor of the meeting.

106. Proceedings of Committee members.

A committee may meet and adjourn as it thinks proper. Questions arising at any meeting
shall be determined by a majority of votes of the members present. In case of an equality
of votes, the convenor shall have and exercise a second or casting vote.

H. Removal of Directors

107. Removal of Directors.

1) A Director elected by the Members, including the Chairman, may be removed by

a special resolution of the Members passed at a general meeting.

2) A Director appointed under Article 75 may be removed by the Board in

accordance with Article 83.
V. DISCIPLINARY PROCEEDINGS

108. Board’s Jurisdiction.

The Board may, by a resolution passed by two-third (2/3) of its number, expel or suspend
and/or fine and/or censure and/or warn and /or withdraw any of the membership rights of
a Member if he be guilty of contravention, non-compliance, disobedience, disregard or
evasion of any of the Rules. Bye-laws and Regulations of the Exchange or of any
resolutions, orders, notices, directions or decisions or rulings of the Exchange or the
Board or of any committee or officer of the Exchange authorized in that behalf or of any
conduct, proceeding or method of business which the Board in its absolute discretion
deem dishonorable, disgraceful or unbecoming of a Member of the Exchange or
inconsistent with just and equitable principles of trade or detrimental to the interests,
good name or welfare of the Exchange or prejudicial or subversive to its objects and
purposes. Provided that, where the Board is exercising its power of expulsion, such
expulsion shall become effective in accordance with Article 83.

109. Offenses by Partners, Agents etc.

The Board may, by a resolution passed by two-third (2/3) of its number, expel or suspend
and/or fine and/or censure and /or warn the partner of a Member or his attorney, agent,
clerk or employee for any act or omission which if done or omitted by the Member would
subject him to the same penalties. Provided that, where the Board is exercising its power
of expulsion, such expulsion shall become effective in accordance with Article 83.

110. Member’s Responsibility for Partners, Agents etc.

A Member shall be fully responsible for the acts and omissions of his partnership firm and
of his partners, attorneys, agents, clerks and employees and shall be liable therefor.

111. Members and Others to Testify.

A Member shall appear before and cause his partners, agents, attorneys, clerks and
employees to appear and testify before the Board, Chairman, committee or officer of the
Exchange authorized in that behalf and shall produce and cause to be produced such
books, correspondence, documents, papers and records or any part hereof which may be
deemed relevant or material to any matter under inquiry or investigation.

112. No Legal Representation.

No person shall have the right to be represented by professional counsel, attorney or

advocate in any investigation or hearing unless the Board or committee so permits.

113. Explanation.

A Member shall be entitled to be summoned before the Board and afforded an

opportunity for explanation before being penalized but the findings of the Board shall be
final and conclusive.

114. Imposition of Penalties.

The penalty of suspension, withdrawal of all or any of the membership rights, fine,
censure or warning may be inflicted singly or conjointly by the Board.

115. Failure to Pay Fines and Penalties.

If a Member fails to pay any fine or penalty imposed on him within the period stipulated
by the Board he may be suspended by the Board until he makes payment and if within a
further period of thirty days he fails to make such payment he may be expelled by the
Board in accordance with Article 83.

116. Consequences of Suspension.

The suspension of a Member shall have the following consequences :

a) the suspended member shall during the term of his suspension be deprived of and
excluded from all the rights and privileges of membership including the right to attend
and vote at any meeting of the Exchange but he may be proceeded against by the
Board for any offence committed by him either before or after his suspension and the
Board shall not be debarred from taking cognizance of and adjudicating on or dealing
with any claim made against him by other Members;

b) the suspension shall not affect the rights of Members who are creditors of the
suspended Members;

c) the suspended Member shall be bound to fulfill contracts outstanding at the time of
his suspension;

d) the suspended Member shall not during the term of his suspension make any bargain
or transact any business with or through a Member provided that he may with the
prior permission of the Board close transactions outstanding at the time of his
suspension;

e) no Member shall have any business dealings with a suspended Member during the
term of his suspension except with the prior permission of the Board.

117. Consequences of Expulsion.

The expulsion of a Member shall have the following consequences:

a) the expelled Member shall forfeit to the Exchange his right of membership and all
rights and privileges as a Member including any right to the use or any claim
upon or any interest in any property or funds of the Exchange but any liability of
any such Member to the Exchange shall continue and remain unaffected by his
expulsion;

b) the expulsion shall create a vacancy in any office or position held by the expelled
Member;

c) the expulsion shall not affect the rights of the Members who are creditors of the
expelled Member;

d) the expelled Member shall be bound to fullfil transactions outstanding at the time
of his expulsion and he may with the prior permission of he Board close such
outstanding transactions with or through a Member;

e) no Member shall have any business dealings with the expelled Member except
with the prior permission of the Board.

118. Notice of Penalty.

Notice shall be given to the Member concerned and to the Members in general by a
notice on the notice board of the Exchange of any penalty imposed on a Member. The
Board may in its absolute discretion and in any manner it thinks fit notify or cause to be
notified to the Members or to the public that any person who is named in such notification
has been penalized. No action or other proceedings shall in any circumstances be
maintainable by such person against the Exchange or the Board or any member of the
Board or any officer or employee of the Exchange for the publication or circulation of
such notification and the application for membership or registration as a partnership shall
operate as license and this Article shall operate as leave to print, publish or circulate such
advertisement or notification and be pleadable accordingly.

VI. THE SEAL

119 Common Seal.

The Directors shall provide a common seal of the Exchange which shall not be affixed to
any instrument except by the authority of a resolution of the Board or by a committee of
Directors authorized in that behalf by the Directors, and two Directors or one Director and
the Secretary of the Exchange shall sign every instrument to which the common seal is
affixed.

VII. ACCOUNTS AND AUDIT

120 Books of Account.

The Directors shall cause to be kept proper books of account as required under Section
230.

121. Place where Accounts Kept.

The books of account shall be kept at the Office or a such other place as the Directors
shall think fit and shall be open to inspection by the Directors during business hours.

122. Inspection by Members.

The Directors shall from time to time determine whether and to what extend and at what
time and places and under what conditions or regulations the accounts and books or
papers of the Exchange or any of them shall be open to the inspection of Members not
being Directors, and no Member (not being a Director) shall have any account and book
or papers of the Exchange except as conferred by law or authorized by the Directors or
by the Exchange in general meeting.

123. Financial Year of Exchange.

The Exchange may, as the Board determines, close its accounts at the end of the fiscal
year or at the end of the calendar year.

124. Scheduled Bank.

The accounts of the Exchange shall be kept in a scheduled bank(s).

125. Annual Accounts.

The Directors shall as required by Sections 233 and 236 cause to be prepared and to be
laid before the Exchange in general meeting such income and expenditure accounts and
balance sheets duly audited and reports as are referred to in those sections.
126. Balance Sheet and Income and Expenditure Accounts.

A balance-sheet, income and expenditure account, and other reports referred to in the
preceding Article shall be made out in every year and laid before the Exchange in the
annual general meeting made up to a date not more than six months-before such
meeting. The balance sheet and income and expenditure account shall be accompanied
by a report of the auditors of the Exchange and the report of Directors.

127. Copy of Accounts to be Sent to Members.

A copy of the balance sheet and income and expenditure account and reports of
Directors and auditors shall, at least twenty-one days preceding the meeting, be sent to
the persons entitled to receive notices of general meetings in the manner in which notices
are to be given as hereinafter provided.

128. Exchange to Invest in Government Securities.

The Exchange shall utilize its income for promoting its objects or any of them and any
money set apart or not utilized shall not exceed twenty-five per cent (25%) of its income
or Rupees ten thousand (Rs.10,000), whichever is less. Any excess amount will be
invested in Government securities or in NIT units under intimation to the Central Board of
Revenue.

129. Audit.

Auditors shall be appointed and their duties regulated in accordance with Section 252 to
255. No person shall be appointed as an auditor of the Exchange unless he is a
chartered accountant.

VIII. NOTICES

130. Notice to Members etc.

Notice shall be given by the Exchange to Members and auditors of the Exchange and
other persons entitled to receive notice in accordance with Section 50.

IX. WINDING UP

131. Dissolution.

In the event of the dissolution of the Exchange, its assets left after meeting its liabilities, if
any, shall be transferred to another institution, trust or fund approved under Section 47(1)
(d) of the Income Tax Ordinance, 1979 or an other law for the time being in force under
intimation to the Central Board of Revenue within three (3) Months of the dissolution.

X. INDEMNITY

132. Indemnification.

Every office or agent for the time being of the Exchange may be indemnified out of the
assets of the Exchange against any liability incurred by him in defending any
proceedings, whether civil of criminal, arising out of his dealings in relation to the affairs
of the Exchange, except those brought by the Exchange against him, in which judgement
is given in his favour or in which he is acquitted, or in connection with any application
under Section 488 in which relief is granted to him by the court.

XI. AMENDMENTS

133. Amendments.

No amendment shall be made in the Memorandum or Articles of Association or the

Rules, Regulations and Bye-laws of the Exchange without the prior approval of the
Corporate Law Authority or the Federal Government as the case may be.

XII. ARBITRATION
(Amended : CLA’s approval awaited)

134. Arbitration Committee.

The Board shall, in its first meeting after completion in accordance with Article 75, or as
soon thereafter as possible, appoint an Arbitration committee comprising of three (3) to
ten (10) of the past Presidents/Vice Presidents of the Exchange, at least one (1) of whom
shall be a past President.

135. Arbitration.

Whenever any difference arises between the Exchange on the one hand and any of the
Members, their executors or administrators on the other hand, touching the true intent or
construction, or the incident or consequences of these Articles or of the statutes, or
touching anything there or thereafter done, executed, omitted or suffered in pursuance of
these Articles or of the statutes or touching any breach or alleged breach of these
Articles, or any claim on account of any such breach or alleged breach, or otherwise
relating to the premises, or to these Articles or to any statute affecting the Exchange or to
any of the affairs of Exchange, every such difference shall, as a conditions precedent to
any other action at law be referred, in conformity with the Arbitration Act. 1940, or any
statutory modification thereof any rules made thereunder, to the decision of the
Arbitration Committee established as per Article 134, and such decision shall be final and
binding on the parties being formed into an Association in pursuance of these Articles of
Association.