Companies Act – Definitions:

• Associated companies – if a person who is owner or a partner or director of a company or

undertaking, or who, directly or indirectly, holds or controls shares carrying not less than
twenty percent of the voting power in such company or undertaking, is also the owner or
partner or director of another company or undertaking, or directly or indirectly, holds or
controls shares carrying not less than twenty percent of the voting power in that company
or undertaking;
o Under common management or control or a subsidiary
o If the undertaking is a modaraba managed by the company
• Substantial shareholder – nominal value equal to or more than 10% of issued share cap
o Enables the person to 10% or more voting power at the general meeting of the
company
• books of account” include records maintained in respect of— (a) all sums of money received
and expended by a company and matters in relation to which the receipts and expenditure
take place;
(b) all sales and purchases of goods and services by the company;
(c) all assets and liabilities of the company; and
(d) items of cost in respect of production, processing, manufacturing or mining activities;
• financial year - means the period in respect of which any financial statement of the company
or the body corporate, as the case may be, laid before it in general meeting, is made up,
whether that period is a year or not
• Net worth – means the amount by which total assets exceed total liabilities
• Ordinary resolution – resolution passed by a simple majority
• Private company – means a company which by its articles –
o Restricts the right to transfer its shares
o Limits the no. of member to 50
o Prohibits any invitation to public
• Public sector company – means a company, public or private, directly or indirectly
controlled, beneficially owned or not less than 51% of the voting securities or voting power
of which are held by the Govt; includes a public sector association not for profit, licenced
under section 42
• Redeemable capital – includes sukuk and other forms of finances obtained on the basis of
participation term certificate (PTC), musharika certificate, term finance certificate (TFC) or
any other security or obligation not based on interest
• Special resolution - means a resolution which has been passed by a majority of not less than
three-fourths of such members of the company entitled to vote as are present in person or
by proxy or vote through postal ballot at a general meeting of which not less than twenty-
one days’ notice specifying the intention to propose the resolution as a special resolution
has been duly given

Mode of Forming a Company:

Three or more persons Public company

Two or more persons Private company
One person Single member company
May be a company with or without limited
liability
 - A company limited by shares
- A company limited by guarantee
- An unlimited company

Continues to carry on the business with shortage of members after 180 days shall be liable for
payment of whole debts

16. Registration of memorandum and articles – There shall be filed with the registrar an application
on the specified form containing the following information:

• Declaration by a person named as director in articles that compliance with the Act will be
ensured
• MOA to be signed by all subscribers
• Company limited by shares (not necessary to submit AOA) whereas company limited by
guarantee or an unlimited company require AoA signed by subscribers
• An address for correspondence
• On registration of memorandum, the registrar shall issue a certificate of incorporation
• Can appeal to commission if registration of memorandum is refused. An order of
commission shall be final and can’t be contested in any court.

17. Moneys payable by subscriber to be debt and be payable in cash within 30 days from the date of
incorporation

27. Memorandum of a company Public limited company – ”Limited”

limited by shares Private – (Private) Limited
Single member company – (SMC-Private) Limited

Province in which the company is situated

Principal line of business

- Object clause at serial no. 1

An undertaking

Liability of the members is limited

Amount of share capital with which the company

proposes to be registered

(b) no subscriber to take less than one share

(c) each subscriber to write no. of shares opposite to
his name
Limited by guarantee (Guarantee) Limited

Province in which the company is situated

Principal line of business

- Object clause at serial no. 1

An undertaking
 Liability of the members is limited
The amount each member contributes to the assets
in the event of winding up

IF SHARE CAPITAL - Amount of share capital with

which the company proposes to be registered
29. Unlimited company Unlimited

Province in which the company is situated

Principal line of business

- Object clause at serial no. 1

An undertaking

Liability of the members is unlimited

IF SHARE CAPITAL - Amount of share capital with

which the company proposes to be registered

30. Borrowing powers to be a part of memorandum

32. Alteration of memorandum by special resolution

- Change in registered office

- Change in principal line of business
- Adopt business activity which requires license

Alteration to not take place as long as it is confirmed by the Commission. Principal line of business
change doesn’t require confirmation.

Amended memorandum to be filed within 30 days

35. No member to be bound by the alteration

36. Registration of articles – signed by the subscribers; sets out regulations for the company

In case of an unlimited company or a company limited by guarantee:

- If share capital – shall state amount of share capital

- No share capital – shall state the number of members

38. Alteration of articles:

- By special resolution

- where the alteration affects rights – shall be carried out only if a majority of 3/4th members
affected by it vote for it.

- altered copy to be filed within 30 days

39. Copies to be provided on request within 14 days

42. Licensing of associations with charitable and not for profit objects – a
 - limited company
- for promoting commerce, art, science, religion etc
- such company – to apply the company’s profit and other income in promoting its objects
and prohibits the payment of dividends to the company’s members
- to be registered as a public limited company without addition of the word Limited of the
expression (Guarantee) Limited
- Can revoke license: in case of default in filing with the registrar its annual returns for
preceding 2 consecutive financial years; number of members reduced below 3; not in
operation for 1 year

43. Revocation of License:

- the company to stop all its activities except the money owed to it

- not to receive donations

- assets to be transferred to other company licensed under section 42 within 90 days of revocation;
further the members and officers cant hold office in the other company for a period of 5 years

- Board to submit a compliance report within 15 days to the registrar -> within 30 days of acceptance
of report, winding up proceedings to start

- LEVEL 2 PENALTY FOR SECTION 42 AND 43

45. Provision as to companies limited by guarantee

- may have share capital

- not having share capital means that people other than members cant have part in divisible profits
of the company

57. Prospectus: to be signed by the director or proposed director of the company has been filed with
the registrar

58. A company having share capital shall issue only fully paid shares which may be of different
classes and kinds.

59. variation (abrogation, revocation or enhancement) in shareholder rights possible through

alteration in articles

- Not less than 10% of class of shareholders aggrieved by the variation can apply to the court within
30 days of the resolution to cancel the resolution.

131. Statutory meeting of company –

- Every public company having a share capital within a period 180 days from the date at which it is
entitled to commence business or within nine months from the date of incorporation whichever is
earlier hold a general meeting of member to be called the STATUTORY MEETING.

- if first AGM is decided to be held earlier then no statutory meeting is required

- statutory meeting notice to be sent 21 days before along with the statutory report

- statutory report to state:

• The total number of shares allotted

 • The total amount of cash received by the company
• Abstract of receipts
• Names address and occupation of directors, chief executive, secretary, auditors and legal
advisers of the company and any changes which have occurred since the date of the
incorporation
• Particular of any contract
• Underwriting contracts
• Commission or brokerage paid or to be paid
• Brief account of the state of the company and business plan
• Report of the auditors
• Statutory report to be submitted to the registrar after being sent to the members
• The provisions of this section shall not apply to a public company which converts itself from
a private company after one year of incorporation

132. Annual general meeting:

- within 16 months from the date of incorporation and thereafter once in every calendar year within
a period of 120 days following the close of its financial year.

- in case of a listed company, to be held in the town in which the registered office of the company is
situated

- video link to be provided (7 days before to those holding 10% of the PUC)

- 21 days notice to be sent (also to the commission in case of listed company, to members and
published in English and Urdu atleat in one issue each of a daily newspaper having nationwide
circulation)

- doesn’t apply to single member company

- level 2 penalty for listed company, level 1 for others

133. Calling of extra ordinary general meeting

- all general meetings of a company except for statutory meeting or AGM to be called extra ordinary
general meetings

- The board may at any time call the meeting to consider any matter which requires approval of the
company in a general meeting.

- requisition made by the members:

• In case of company having share capital, the requisition is to be made representing not less
than 1/10th of the total voting power
• In case of not having share capital, not less than 1/10th members

- Requisition to state the objects of the meeting, signed by the requisitionists and deposited at the
registered office of the company

- if the board doesn’t call the meeting within 21 days, the requisitionist may call the meeting
themselves within 90 days from the date of the deposit of the requisition.
- expenses to be reimbursed if incurred to the requisitionist by the company and the sums so paid
shall be deducted from any fee or other remuneration payable to such of the directors who were in
default in calling the meeting.

- Notice of an extra ordinary general meeting shall be served to the members a/c to section 55

134. Provisions as to meetings and votes:

- notice of the meeting specifying place and the day and hour of the meeting along with the
statement of business to be transacted to be given to:

• Every member
• Every director
• To any person who is entitled to a share in consequence of the death or bankruptcy of a
member
• To the auditors of the company

- in case of an AGM, all business to be transacted shall be deemed special other than:

(a) the consideration of financial statements and the reports of the board and auditors;

(b) the declaration of any dividend;

(c) the election and appointment of directors in place of those retiring; and

(d) the appointment of the auditors and fixation of their remuneration

- members can participate personally or through video link

- chariman of the board to preside as the chairman at every general meeting; if he inst available, any
one of the directors to be the chairman, if directors are also not present, then the members may
choose one of the members to be the chairman

- fractional votes not taken into account during voting

- In the case of a company limited by guarantee and having no share capital, every member
thereof shall have one vote.

- decision is recorded in the relevant minutes book and signed by the sole member or sole director as
the case may be

135. Quorum of general meeting:

- public listed company not less than 10 members present personally or through video link who
represent not less than 25% of the of the total voting power

- any other company having share capital, 2 members present personally or through video link who
represent not less than 25% of the of the total voting power

- not having share capital, as provided in articles.

*within half an hour if quorum is nit present and the meeting is called upon the requisition of
members shall be dissolved.

In any other case it shall be adjourned to the same day in next week.
If at adjourned meeting quorum is not present, the members present personally or through video-
link being not less than two shall be a quorum, unless the articles provide otherwise.

153. Ineligibility of certain persons to become director.

- minor, unsound mind, adjudicated as an insolvent and his application is pending, undischarged
insolvent, convicted, debarred from holding such office, lacking fiduciary behavior and declaration
has been made in court in the past 5 years, doesn’t hold NTN (exemption can be granted),

is not a member- this doesn’t apply in case of (i) a person representing a member which is not a
natural person, (ii) a whole time director who is an employee of the company, (iii) chief executive (iv)
a person representing a creditor,

declared as defaulter, engaged in the business of brokerage or is a spouse of such person, or is a

sponsor, director, or officer of a corporate brokerage house. (these clauses shall be applicable only
in case of listed companies)

154. Minimum no. of directors of a company:

- single member company to have atleast one director.

- private company shall have not less than 2 directors

- public company other than a listed company shall have not less than 3 directors

- listed company shall not have less than 7 directors

*public interest companies shall be required to have female representation on their board

*only a natural person shall be a director.

155. Number of directorships –

- Max 7 (need to check)

157. First directors and their term:

- to be decided by the subscribers of the memorandum

- the first director is to hold office until the election of directions in the first AGM

158. Retirement of directors:

- retirement on first AGM; in case of subsequent directors on expiry of term of office (3 years)

- AGM or extraordinary meeting not to be delayed by more than 90 days for this case.

- commission can direct to hold the meeting for election of directors on the expiry of period

159. Procedure for election of director:

- notice of the meeting shall state: the number of directors fixed, the names of the retiring directors

- those who wish to be elected should file with the company their intention in not later than 14 days
before the meeting
- this should then be transmitted to the member not later than 7 days before the meeting. Notice to
be published in English and Urdu in each issue; daily newspaper, wide circulation.

- company having share capital shall elect directors in the following manner:

a member shall have such number of votes as is equal to the product of the number of voting shares
or securities held by him and the number of directors to be elected;

(b) a member may give all his votes to a single candidate or divide them between more than one of
the candidates in such manner as he may choose; and

(c) 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.

161. Term of office of directors:

- 3 years

- term for company limited by guarantee and not having share capital may be a period less than 3
years

- any casual vacancy needs to be filled up and the person appointed shall serve the office for the
remainder of the term.

162. Fresh election of directors:

- a member having acquired, after the election of directors, the requisite shareholding to get him
elected as a director on the board of a company, may require the company to hold fresh election of
directors in accordance with the procedure laid down in section 159

- board not to hold fresh elections later than 30 days receipt of requisition received.

163. Removal of directors:

- resolution in a general meeting remove director

- Provided that a resolution for removing a director shall not be deemed to have been passed if the
number of votes cast against it is equal to, or exceeds—

(a) the total number of votes for the time being computed in the manner laid down in sub-section
(5) of section 159 divided by the number of directors for the time being, if the resolution relates to
removal of a director appointed under sections 157, 161 or section 162 or where the directors
were elected unopposed; or

(b) the minimum number of votes that were cast for the election of a director at the immediately
preceding election of directors, if the resolution relates to removal of a director elected in the
manner provided in sub-section (5) of section 159.

164. Nominee directors

- nominated by the company’s creditors or other special interest by virtue of contractual

arrangements

- can be someone from the federal of provincial government

165. Certain provisions not to apply to directors representing special interests:

- they aren’t subject to removal, elections, term of the office etc.

- special interests directors include –

(a) directors nominated by a body corporate or company or any other entity owned or controlled,
whether directly or indirectly, by the Federal Government or as the case may be, a Provincial
Government on the board of the company in which such body corporate or company or entity has
made investment;

(b) directors nominated by virtue of investment made by the Federal Government or as the case
may be, a Provincial Government or the Commission on the board; or

(c) directors nominated by foreign equity holders on the board or any other body corporate set up
under a regional co-operation or other co-operation arrangement approved by the Federal
Government.

(2) For the purpose of nominating directors referred to in clause (a), (b) and (c), the number of votes
computed in the manner laid down in sub-section (5) of section 159 as are proportionate to the
number of votes required to elect the director if they had offered themselves for election, shall
stand excluded from the total number of votes available to the nominating body at an election of
directors, which may be proportionate to their voting power required to elect directors at an
election of directors of a company.

(3) A director nominated under sub-section (1) shall hold office during the pleasure of the
nominating body

186. Appointment of first chief executive:

- the name of the first chief executive to be decided by the subscribers of the memorandum

- he holds the office up to the first AGM or if a shorter time period is fixed by the subscribers.

- the government to have the power to nominate chief executive of public sector company

187. Appointment of subsequent chief executive:

- Within fourteen days from the date of election of directors under section 159 or the office of the
chief executive falling vacant, as the case may be, the board shall appoint any person, including an
elected director, to be the chief executive, but such appointment shall not be for a period
exceeding three years from the date of appointment:

Provided that the chief executive appointed against a casual vacancy shall hold office till the
directors elected in the next election appoint a chief executive

- Chief executive to be eligible for reappointment

- Government to have power to nominate chief executive of a company where majority of
directors is nominated by the Government

188. Terms of appointment of chief executive:

- the terms and conditions of appointment of a chief executive shall be determined by the board or
the company in general meeting in accordance with the provisions in the company’s articles

- The chief executive shall if he is not already a director of the company, be deemed to be its director
and be entitled to all the rights and privileges, and subject to all the liabilities, of that office.
190. Removal of chief executive:

The board by resolution passed by not less than three-fourths of the total number of directors for
the time being, or the company by a special resolution, may remove a chief executive before the
expiration of his term of office notwithstanding anything contained in the articles or in any
agreement between the company and such chief executive

The Government or an authority or a person authorized by it shall have the power to remove chief
executive of a company where more than seventy-five percent of the voting rights are held by the
Government.

256. Investigation:

- (a) on the application of the members holding not less than one tenth of the total voting power in a
company having share capital;

(b) on the application of not less than one tenth of the total members of a company not having share
capital;

(c) on the receipt of a report under sub-section (5) of section 221 (inspection of books and account
by commission) or on the report by the registrar under sub-section (6) of section 254 (power of
registrar to call for info);

- before making an order of investigation, opportunity of being heard is provided.

257. Investigation of company’s affairs in other cases

1)Without prejudice to its power under section 256, the Commission—

(a) shall appoint one or more competent persons as inspectors to investigate the affairs of a
company and to report thereon in such manner as the Commission may direct, if—

(i) the company, by a special resolution, or

(ii) the Court, by order,

declares that the affairs of the company ought to be investigated;

Circumstances for investigation:

- Intent to defraud creditors

- Persons concerned in formation or management guilty of fraud
- Depriving members of reasonable returns
- Members not given all info wrt to company affairs
- Any shares allotted for inadequate consideration
- Affairs not being managed a/c to sound business principles
- Financial position of the company is such as to endanger its solvency

258. Serious Fraud Investigation

- The persons appointed as inspectors or investigation officer under sub-section (1) shall have all
powers of investigation officer under this Act, the Securities and Exchange Commission of Pakistan
Act, 1997 (XLII of 1997) and Code of Criminal Procedure, 1898 (Act V of 1898),

- it is satisfied that the matter is of public importance or it is in the interest of public at large, request
the concerned Minister-in-Charge of the Federal Government to form a Joint Investigation Team to
be headed by a senior level officer of the Commission, not below the rank of additional director,
and may include any person mentioned in sub section (1) along with Gazetted officer of any
Federal law enforcement agency, bureau or authority for providing assistance in investigating the
offence under this section and the direction of the concerned Minister-in-Charge of the Federal
Government under this section shall be binding and any person who fails to comply with such
directions, offence punishable with simple imprisonment of 30 days or fine 100,000 Rupees

259. Inspector to be a court for certain purposes:

(2) A person appointed as inspector under sections 256, 257 and 258 shall, for the purposes of his
investigation, have the same powers as are vested in a Court under the Code of Civil Procedure,
1908 (Act V of 1908), while trying a suit, in respect of the following matters, namely—

(a) enforcing the attendance of persons and examining them on oath or affirmation;

(b) compelling the discovery and production of books and papers and any material objects; and

(c) issuing commissions for the examination of witnesses;

and every proceeding before such person shall be deemed to be “judicial proceeding” within the
meaning of sections 193 and 228 of the Pakistan Penal Code, 1860 (Act XLV of 1860).

284. Mergers:

- scheme of amalgamation to be approved by board of each company

- each resolution provides that—

(i) the shares of each transferor company, other than the transferee company, will be cancelled
without payment or other consideration; and

(ii) the board is satisfied that the transferee company will be able to pay its debts as they fall due
during the period of one year immediately after the date on which the amalgamation is to become
effective and a declaration verified by an affidavit to the effect will be filed with the registrar; and

(iii) the person or persons named in the resolution will be the director or directors of the transferee
company.

- board to give written notice to every secured creditor not less than 21 days before the
amalgamation

- resolution approving the amalgamation to constitute an amalgamation proposal that has been
approved

293. Modes of winding up:

- By court
- Voluntary
- Subject to supervision of the court

301. Circumstance in which a company may be wound up by court:

- by special resolution resolved that the company would be wound up by court

- default made in delivering the statutory report to the registrar or in holding statutory meeting

- default in holding any two consecutive AGMs

- annual returns for 2 years not submitted

- number of members reduced

- unable to pay its debts

- if the company is: (i) carrying fraudulent activities (ii) business prohibited by law (iii) conducting
business in an oppressive manner (iv) run and managed by people who fail to maintain proper and
true accounts (v) managed by people who fail to comply with the act, MOA or AOA

- if being a listed company it ceases to be such company

- if the court is of the opinion

- if the company ceases to have a member

- if the sole business of the company is the licensed activity and it is revoked

- if a licence granted under section 42 to a company has been revoked or such a company has failed
to comply with any of the provisions of section 43 or where a company licenced under section 42 is
being wound up voluntarily and its liquidator has failed to complete the winding up proceedings
within a period of one year from the date of commencement of its winding up; or

- if a listed company suspends its business for a whole year.

83. Further issue of capital:

- directors decided to increase share capital of the company

- shares to be offered to: to persons who, at the date of the offer, are members of the company in
proportion to the existing shares held by sending a letter of offer subject to the following conditions,
namely—

(i) the shares so offered shall be strictly in proportion to the shares already held in respective kinds
and classes;

(ii) the letter of offer shall state the number of shares offered and limiting a time not being less than
fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not
accepted, shall be deemed to have been declined;

(iii) in case of listed company – can renounce shares

(iv) if the whole or any part of the shares offered under this section is declined or is not subscribed,
the directors may allot such shares in such manner as they may deem fit

Provided that a public company may reserve a certain percentage of further issue for its employees
under “Employees Stock Option Scheme” to be approved by the Commission in accordance with the
procedure and on such conditions as may be specified.

(b) subject to approval of the Commission, to any person, in the case of public company on the basis
of a special resolution either for cash or for a consideration other than cash:

(6) Notwithstanding anything contained in this Act or any other law for the time being in force or the
memorandum and articles, where the authorized capital of a company is fully subscribed, or the un-
subscribed capital is insufficient, the same shall be deemed to have been increased to the extent
necessary for issue of shares to the Government, a scheduled bank or financial institution in
pursuance of any obligation of the company to issue shares to such scheduled bank or financial
institution.

130. Annual return:

- every company having share capital (not having share capital), once in each year, prepare and file
with the registrar an annual return containing the particulars in a specified form as on the date of
the annual general meeting or, where no such meeting is held or if held is not concluded, on the last
day of the calendar year.

- submit within thirty days from the date of the annual general meeting held in the year or, when no
such meeting is held or if held is not concluded, from the last day of the calendar year to which it
relates:

(5) Nothing in this section shall apply to a company, in case there is no change of particulars in the
last annual return filed with the registrar:

Provided that a company, other than a single member company or a private company having paid
up capital of not more than three million rupees, shall inform the registrar in a specified manner
that there is no change of particulars in the last annual return filed with the registrar.

183. Powers of board: The board shall exercise the following powers on behalf of the company, and
shall do so by means of a resolution passed at their meeting, namely:—

- issue shares

- issue debentures, redeemable capital

- to borrow moneys otherwise than on debentures;

(d) to invest the funds of the company;

(e) to make loans;

(f) to authorise a director or the firm of which he is a partner or any partner of such firm or a private
company of which he is a member or director to enter into any contract with the company for
making sale, purchase or supply of goods or rendering services with the company;

(g) to approve financial statements;

(h) to approve bonus to employees;

(i) to incur capital expenditure on any single item or dispose of a fixed asset in accordance with the
limits as may be specified:

(j) to undertake obligations under leasing contracts exceeding such

amount as may be notified;

(k) to declare interim dividend; and

(l) having regard to such amount as may be determined to be material (as construed in Generally
Accepted Accounting Principles) by theboard—

(i) to write off bad debts, advances and receivables;

(ii) to write off inventories and other assets of the company; and
(iii) to determine the terms of and the circumstances in which a law suit may be compromised and a
claim or right in favour of a company may be released, extinguished or relinquished.

(m) to take over a company or acquire a controlling or substantial stakein another company;

(n) any other matter which may be specified

(3) The board of a company shall not except with the consent of the general meeting either
specifically or by way of an authorisation, do any of the following things, namely.—

(a) sell, lease or otherwise dispose of the undertakings or a sizeable part thereof unless the main
business of the company comprises of such selling or leasing; and

Explanation.—For the purposes of this clause-

(i) “undertaking” shall mean an undertaking in which the
investment of the company exceeds twenty percent of its net
worth as per the audited financial statements of the preceding
financial year or an undertaking which generates twenty
percent of the total income of the company during the
previous financial year;

(ii) the expression “sizeable part” in any financial year shall mean twenty five percent or more of the
value of the assets in that class as per the audited financial statements of the
preceding financial year;

(b) sell or otherwise dispose of the subsidiary of the company;

(c) remit, give any relief or give extension of time for the repayment of any debt outstanding against
any person specified in sub-section (1) of section 182.

453. Prevention of offences relating to fraud,

money laundering and terrorist financing .−
(1)Every officer of a company shall endeavor to prevent the commission of any fraud, offences of
money laundering including predicated offences as provided in the Anti-Money Laundering Act, 2010
(VII of 2010) with respect to affairs of the company and shall take adequate measures for the purpose.

(2) Whosoever fails to comply with the provisions of this section shall be liable to punishment of
imprisonment for a term which may extend to three years and with fine which may extend to
one hundred million rupees:

Provided further that the punishment provided under this section shall be in addition to any
punishment attracted due to active involvement of such officer in commission of an offence of
money laundering under Anti-Money Laundering Act, 2010 (VII of 2010).

509 – Repeal and savings: except Part VIIIA consisting of sections 282A to 282N