Company Law

Company
"Company" means a company formed and registered under this Ordinance or an
existing company.
Court
"The Court" means the Court having jurisdiction under the Companies Ordinance.
Director
"Director" includes any person occupying the position of a director, by whatever
name is called.
Document
"Document" covers summons, notices, orders, vouchers, and registers issued under
the Companies Ordinance or any law. These can be stored electronically or in any
retrievable form.
Existing company
means a company formed and registered under any previous Company Act.
Financial Institution -
"Financial institution" includes:—
(a) A company or institution, operating within or outside Pakistan, engaged in
banking or related activities through its branches.
(b) A modaraba, leasing company, investment bank, venture capital company,
financing company, housing finance company, a non-banking finance
company; and
(c) Other institutions or companies authorized by law to conduct similar business,
as specified by the Federal Government through official Gazette notification.
Financial Year
"Financial year" for a company is the period when its profit and loss or income and
expenditure accounts are prepared and presented in a general meeting, regardless
of whether it's a full year.
Form
"Form" means a form set out in any of the schedules as prescribed.
Holding Company
"Holding company" means a holding company as defined in section 3 of the
Companies Ordinance, 1984.
Listed
"Listed" in relation to securities, means securities which have been allowed to be
traded on a stock exchange.
Listed Company
"Listed company" means a company or a body corporate or other body whose
securities are listed.
Member
If a company has share capital, a shareholder owns shares in that company. Without
share capital, a shareholder is someone listed in the company's membership
register.
Memorandum
The "memorandum" refers to the initial document outlining a company's purpose and
structure. It can be amended over time in accordance with company law.
Modaraba
"Modaraba" and "modaraba company" have the same meaning as in the Modaraba
Companies and Modaraba (Floatation and Control) Ordinance, 1980.
Officer
"Officer" includes any director, chief executive, managing agent, secretary or other
executive of the company, howsoever designated, but, save in sections 205, 220 to
224, 260, 261, 268, 351, 352, 412, 417, 418, 474 and 482 of the Companies
Ordinance, 1984 does not include an auditor.
Participatory redeemable capital
"Participatory redeemable capital" means such redeemable capital as is entitled to
participate in the profit and loss of a company.
Previous Company Act
Includes any Act or Acts relating to companies in force before the Indian Companies
Act, 1866 (X of 1866).
Prospectus
It refers to any document, such as a prospectus, notice, circular, or advertisement,
inviting the public to subscribe or purchase shares or debentures of a company, or
inviting public deposits, excluding those invited by approved banking or financial
institutions.
Register
It's the official list of a company's members, which also covers debenture-holders
and holders of other securities, whether kept in physical or digital formats, including
floppy disks or computer networks.
Registrar
It refers to a registrar, additional registrar, joint registrar, deputy registrar, or assistant
registrar responsible for registering companies under the Companies Ordinance.
Scheduled Bank
"Scheduled bank" has the same meaning as in the State Bank of Pakistan
Act, 1956.
Secretary
"Secretary" means any individual appointed to perform the secretarial, administrative
or other duties ordinarily performed by the secretary of a company.
Share
Means share in the share capital of a company.
Special resolution
A special resolution is passed when at least three-fourths of the members present (in
person or by proxy) at a general meeting, with at least 21 days' notice given for the
proposal, vote in favour. Alternatively, if all members agree, a resolution can be
passed as a special resolution with at least 21 days' notice.
Stock Exchange
"Stock exchange" means a stock exchange registered under the Securities and
Exchange Ordinance, 1969.
Company, meaning and Scope of
A company is a separate legal entity that can sue and be sued independently of its
shareholders. Unlike partnerships, it can have multiple members who can transfer
ownership without others' approval. Once incorporated, it becomes a corporation
with continuous existence and its own identity distinct from its members. The term
"company" in the ordinance must be strictly interpreted according to its definition,
except when context requires otherwise.
Principal Characteristics of a Company
1. Company has a separate and distinct personality from its members which
constitute it.
2. Upon incorporation it becomes an artificial legal person. enjoying similar rights
and owing similar obligations as a natural person.
3. Company, as a corporate person, is entitled to own and hold property as
distinct from its members.
4. As a juristic person distinct from its members. it has perpetual succession.
5. Shares in the capital of the company are generally freely transferable.
Application to non-trading Companies
The powers conferred by the Companies Ordinance on the Federal Government or
the Commission shall, in relation to companies which are not trading corporations
and the objects of which are confined to a single Province. be the powers of the
Provincial Government.
Large Associations and Partnerships prohibited
Section 14(1) of the Companies Ordinance, 1984 states that any association,
partnership, or company with more than 20 members must register as a company for
business activities. This rule applies not only to initial formation but also to ongoing
operations. If the number of members exceeds 20 later on, the association becomes
illegal.
Illegal Association
An association or partnership breaking these rules is illegal and has no legal status.
It can't be dissolved under the Companies Ordinance, even if it's unregistered. The
law doesn't acknowledge unregistered associations under Section 14.
Effect of Illegal Association
If an association becomes illegal, it doesn't qualify as a valid partnership under the
Partnership Act and doesn't receive any benefits from the Companies Ordinance
since it's not registered as a company. The consequences of an illegal association
are as follows:
1. One member cannot sue another member in respect of any matter connected
with the association.
2. Any member or outsider cannot maintain a suit against the association for it
cannot contract any debt.
3. Cannot enter into any contract.
4. Such association has no legal recognition as a jural unit,
5. Every member is punishable with fine upto Rs.5,000 (Section 14)
Categories/Classification of Companies
The Companies Ordinance allows for the registration of four types of companies.
According to Section 15(2), a company formed under Section 15(1) can be with or
without limited liability. that is to Say
(a) a company limited by shares, or
(b) a company limited by guarantee, or
(c) an unlimited company,
(d) association not for profit.
Company limited by Shares
The main registration type is a company limited by shares. Members acquire shares,
and their liability is limited to the unpaid amount on those shares. These can be
private or public companies.
Company limited by Guarantee
These companies have limited liability, meaning members commit to contribute a
specific amount in case of liquidation, as stated in the memorandum of association.
They can have a share capital or not. In the case of share capital, members are also
liable for unpaid shares.
Unlimited Company
These companies have unlimited liability for their members, akin to an ordinary
partnership. Members are personally responsible for all company debts incurred
during their membership. While offering perpetual succession and registration
advantages, unlimited companies are rare. Notably, a member's liability ends one
year after leaving the company.
Association not for profit
Under Section 42, a nonprofit association can register with limited liability without
adding "Limited," "(Private) Limited," or "(Guarantee) Limited" to their name, given
they obtain a licence from the authority. The conditions for dropping "Limited" are as
follows:
(a) The promoters should prove certain specified facts to the satisfaction of the
Federal Government.
(b) The association not for profit should be capable of being formed as a limited
company.
(c) The association, not for profit, is formed for promoting commerce, art.
science, religion, charity, or any other useful object.
 (d) A licence is granted by the Federal Government.
(e) This company would obtain previous approval of the Federal Government for
altering its object clauses.
(f) The company would insert in the memorandum and/or articles the conditions
and regulations imposed in the licence if so directed.
(g) The memorandum of such a company states that its income and property
must solely serve the promotion of its objectives. No portion can be paid or
transferred, directly or indirectly, as dividends, bonuses, etc., to its members.
Upon registration, the association will have all the privileges and obligations of a
limited company, except for using the word "limited" in its name, publishing its name,
and sending member lists to the Registrar.
If the Federal Government revokes the license, the Registrar will add the word
"limited" to the end of the association's name in the register. Consequently, the
association will lose the exemptions and privileges granted by the license.
Holding and Subsidiary Company
A company which holds, either directly or through a nominee, the whole of, or a
controlling interest in the share capital of one or more companies.
Subsidiary Company
Company shall be a subsidiary of another company if (i) more than fifty percent of
voting securities are directly or indirectly controlled, owned or held by another
company: (ii) more, than fifty per cent. of its directors are to be appointed or elected
by, another holding company: and (iii). the subsidiary is a subsidiary of any company
or body corporate which is that other's subsidiary.
Private Company
A private company is a company which, by its articles, restricts in right the transfer of
its shares, limits the number of its members to fifty, and prohibits any invitation to the
public to subscribe for the shares or debentures of the company.
A private company enjoys the following privileges:
(i) Two signatures to the memorandum are sufficient to form a private company.
(ii) It need not offer further shares, in the first instance to existing members.
(iii) There is no requirement for it to hold statutory meeting
(iv) It need not have more than two directors.
(v) It may allow disproportionate voting rights.
Breach of essential requirements will extend a company to loss of the privileges.
Public Company
A private company is one that, according to its articles, limits the transfer of its
shares, caps its membership at fifty, and forbids any public invitation to subscribe for
its shares or debentures. Means a company which is not a private company.
"Redeemable capital" refers to funds raised through instruments like participation
term certificates, musharaka certificates, or term finance certificates, excluding
ordinary shares. These instruments represent investments in the company's capital,
with terms specified in agreements or by the Federal Government.
MODE OF FORMING A COMPANY
Public Company
Seven or more people can form a public company by signing a memorandum of
association and fulfilling registration requirements under the Companies Ordinance.
If a public company's membership falls below seven and it continues business for
over six months in this state, every member aware of the situation is individually
liable for the company's debts during that period and can be sued without needing to
join other members in the lawsuit.
Private Company
Two or more people can form a private company by signing a memorandum and
meeting registration requirements under the Companies Ordinance. If a company's
membership falls below two and it continues business for over six months in this
state, every member aware of the situation is individually liable for the company's
debts during that period and can be sued without needing to join other members in
the lawsuit.
Management of Companies and Powers of Directors
A company is a legal entity and acts through its directors. The directors manage its
business and have the authority to incur expenses for promoting and registering the
company. They can exercise powers not specifically reserved for the general
meeting by law, the articles, or special resolution. Regulations made in a general
meeting cannot override valid actions taken by the directors. A limited company can
raise funds by issuing shares or borrowing money:-
Shares and Debentures
Share.—A share is your slice of a company's ownership. It gives you rights and
responsibilities, like getting a cut of profits and assets if the company closes. Only
fully paid shares can be given out.
Debentures.-A debenture is a document that acknowledges a debt or creates one. It
acts as evidence for a loan and provides security for repayment. Typically, it has two
parts: (1) the main body containing the bond and charge, (2) and the conditions
attached. It covers various securities like bonds, debenture stock, etc., excluding
company shares, whether they're secured against company assets or not.
Issuance of securities outside Pakistan
No company shall, except with the prior approval of the Commission issue any
security outside Pakistan.
Company and Partnership, points of distinction
A partnership may be distinguished from a company in the following particulars:—
(1) A company is a distinct person; but a firm is not distinct from the several
persons who compose it.
(2) In a partnership, the firm's property is owned by the individuals, while in a
company, it's owned by the company itself.
(3) A partner cannot contract with his firm, whereas a member of a company can.
 (4) In a partnership, a partner cannot transfer their share without the consent of
other partners, while in a company, shares can be freely transferred.
(5) A partner's liability is always unlimited, whereas that of a shareholder may be
limited either by shares or a guarantee.
Chartered Company
A chartered company is an association with investors or shareholders that is
incorporated and granted rights by royal charter for the purpose of trade, exploration,
or colonization, or a combination of these.

Jurisdiction Of Courts
Court, Meaning of
The Court means the court having Jurisdiction under the Companies
Ordinance, 1984
The Cour means the court having Jurisdiction under the
Companies
Ordinance, 1984
Jurisdiction of Court
Section 7 confers jurisdiction to High Courts for matters explicitly covered by the
Companies Ordinance, like winding up proceedings. Parties seeking remedy under
the Ordinance must apply to the designated Court, usually the High Court. While the
High Court typically has jurisdiction where the company's registered office is, the
Federal Government can authorize other Civil Courts. In winding up cases,
jurisdiction is based on the location of the company's registered office for the
preceding six months. Proceedings are not invalidated if conducted in a Court other
than the High Court or a designated Court. The Chief Justice can establish a
Company Bench within the High Court.
Procedure of Company Court
Cases brought before the Company Court must be resolved within ninety days from
the date of filing, following a summary procedure. The Court will hear the case daily,
with adjournments only for recorded reasons, not exceeding fourteen days at once or
thirty days total.
Appeal
The right of appeal against an order, decision or judgement of the Company Court is
available under the following circumstances:
(i) An appeal can be made to the Supreme Court if the company ordered to be
wound up has a paid-up capital of at least one million rupees.
(ii) If the company being wound up has paid-up capital below one million rupees or
no share capital, an appeal to the Supreme Court needs leave. Otherwise, it's
automatic.
INCORPORATION OF COMPANIES
If a group of more than twenty people wants to start a business to make money, they
must register as a company. Anyone who is part of such a group without registering
may be fined up to five thousand rupees and will be responsible for all the debts of
the business.
Nothing in section 14, Companies Ordinance 1984 shall apply 10:-
(a) any society, body or association, other than a partnership formed or
Incorporated under any other Pakistan law; or
(b) a joint family carrying on joint family business, or
(c) a partnership of two or more joint families where the total number of members
of such familics, excluding the minor members, does not exceed twenty or
(d) If you want to start a partnership for professions like law or accounting, where
you can't operate as a limited liability company according to the laws, you can
do so.
Registration of a Public Company
Documents to be filed before incorporation
● The Memorandum of Association, which is a document stating the type of
company (limited by shares, limited by guarantee, or unlimited), must be
signed by at least seven people.
● Articles of association, if any, in the case of a company limited by Mates,
signed by at least seven persons.
● A company limited by guarantee or an unlimited company must file articles of
association signed by at least seven persons.
● A company limited by shares, adopting. "Table A' in its entirety, need not file
any specific article, but such fact must be endorsed on the memorandum.
● A statement confirming that all legal requirements for registration have been
met.
● Original copies of receipt of challans relating to payment of duty as share
capital and the prescribed filing fee.
Documents to be filed after incorporation
● List of persons who have consented to act as directors of the crops along with
their consent within seven days of issuance of certificate incorporation.
● Notice of location of the company's registered office within eyes days after the
date of incorporation.
● Prospectus on, or before the date of its publication.
Registration of a Private Company
The following documents are to be filed by a private company desire to be
incorporated:
(i) Memorandum of association.
(li) Articles of association.
(iii) Statutory declaration.
(iv) Notice of location of registered office.
Certificate of Incorporation
The certificate of incorporation is an important legal document a company receives
when its memorandum is registered with the Registrar of Companies. It includes the
date of issue, the company name, and the Registrar's seal. Think of it like the
company's birth certificate. Once issued, the company becomes a separate legal
entity from its members.
Legal Effect of Certificate of Incorporation
From the date on the certificate of incorporation, the subscribers of the
memorandum, along with any others who become members later, form a corporate
body. They can carry out all the functions of a registered company, with continuous
existence, a common seal, and member liability in case of liquidation.

The certificate of incorporation is proof that all the registration requirements under
the law have been met, making the association an authorized and duly registered
company.