Definitions IN Companies Ordinance 1984

DEFINITIONS
IN
COMPANIES ORDINANCE 1984
Article.
"articles"
means the articles of association of a company as
originally framed or as altered in accordance with the
provisions of any previous Companies Act, or of this
Ordinance, including, so far as they apply to the
company, the regulations contained in Table A in the
First Schedule;

Associated Companies
"associated companies"
• A company whose 20 % or more shares (up
to 50%) are held by another company shall
be considered an associated company of
that company.
Body corporate
"Body corporate" or "corporation“
It means a setup having separate existence distinct from
its member. In includes company incorporated in Pakistan
and out side Pakistan, but does not include the following
i. a corporation sole; or
ii. a co-operative society registered under any law
relating to such societies; or
iii. any other body corporate, other than a company
defined in this Ordinance, which the Federal
Government may, by notification in the official
Gazette, specify for this purpose.
Book and/or Paper
"book and paper", "book or paper" or "books of
accounts" include
– accounts, deeds, vouchers,
– registers, writings and documents maintained on paper or
computer network, floppy , magnetic cartridge tape, CD, rom
or any other computer readable media.
Chief Executive and Commission
• "chief executive", in relation to a company means an
individual who, subject to the control and directions of the
directors, is entrusted with the whole, or substantially the
whole, of the powers of management of the affairs of the
company, and includes a director or any other person
occupying the position of a chief executive, by whatever
name called, and whether under a contract of service or
otherwise;
• “Commission” means the Securities and Exchange
Commission of Pakistan established under section 3 of the
Securities and Exchange Commission of Pakistan Act, 1997
(XLII of 1997);]
Company
• "company" means a company formed and registered
under this Ordinance or an existing company;
• "company limited by shares" means a company having
the liability of its members limited by the
memorandum to the amount, if any, unpaid on the
shares respectively held by them;
• "company limited by guarantee" means a company
having the liability of its members limited by the
memorandum to such amount as the members may
respectively thereby undertake to contribute to the
assets of the company in the event of its winding up;

Court, Debenture and Director
• "the Court" means the Court having jurisdiction under
this Ordinance

• "debenture" includes debenture stock, bonds, 2[term
finance certificate] and any other securities, other than
a share, of a company, whether constituting a charge of
the assets of the company or not;
• "director" includes any person occupying the position

of a director, by whatever name called:

Document and Existing Company
• "document" includes summons, notice, requisition,

order, other legal process, voucher and register;
• "existing company" means a company formed and

registered under any previous Companies Act;

Financial Institution
• “financial institution” includes:–
i. a company or an institution whether established under any
special enactment and operating within or outside
Pakistan which transacts the business of banking or any
associated or ancillary business through its branches;
ii. a Moradabad, leasing company, investment bank, venture
capital company, financing company, housing finance
company, a non-banking finance company; and
iii. such other institution or company authorized by law to
undertake any similar business, as the Federal Government
may, by notification in the official Gazette, specify for the
purpose;]

Financial year, Form and Holding company
• "financial year" in relation to any body corporate,
means the period in respect of which any profit and
loss account or the income and expenditure account of
the body corporate, laid before it in general meeting, is
made up, whether that period is a year or not;
• "form" means a form set out in any of the schedules
as prescribed.

Listed Company and Member
• "listed" in relation to securities, means securities which have
been allowed to be traded on a stock exchange;
• "listed company", means a company or a body corporate or
other body whose securities are listed;
• "member" means, in relation to a company having share capital,
a subscriber to the memorandum of the company and every
person to whom is allotted, or who becomes the holder of, any
share, scrip or other security which gives him a voting right in
the company and whose name is entered in the register of
members, and, in relation to a company not having a share
capital, any person who has agreed to become a member of the
company and whose name is so entered;

Memorandum, Modarba and Officer
• "memorandum" means the memorandum of association of
a company as originally framed or as altered from time to
time in pursuance of the provision of any previous
Companies Act or of this Ordinance;
• "Modarba" and "Modarba company" have the same
meaning as in the Modarba Companies and Modarba
(Floatation and Control) Ordinance, 1980 (XXXI of 1980);
• "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,
does not include an auditor;
Previous Companies Act
• "previous Companies Act" includes any Act or Acts relating to

companies in force before the Indian Companies Act, 1866 (X of
1866), or the Acts repealed thereby, the Indian Companies Act.
1866 (X of 1866), the Indian Companies Act, 1882, (VI of 1882)
the Indian Companies Act 1913 (VII of 1913), or any law
corresponding to any of those Acts and in force in any of the
territories now constituting Pakistan before the extension of the
Companies Act, 1913 (VII of 1913), to such territories;

Private Company
• "private company" means a company which, by its
articles,—
i. restricts the right to transfer its shares, if any;
ii. limits the number of its members to fifty ;and
iii. prohibits any invitation to the public to subscribe for the
shares, if any, or debentures of the company:
Provided that, where two or more persons hold one or
more shares in a company jointly, they shall, for the
purposes of this definition, be treated as a single
member.
Prospectus and Public Company
• "prospectus" means any document described or issued
as prospectus, and includes any notice, circular,
advertisement, or other communication, inviting offers
from the public for the subscription or purchase of any
shares of a body corporate, or inviting deposits from
the public, other than deposits invited by a banking
company or a financial institution approved by the
Federal Government, whether described as prospectus
or otherwise;
• "public company" means a company which is not a
private company;
Registrar, Scheduled Bank and Secretary
• "registrar" means a registrar, an additional registrar, a
joint registrar, a deputy registrar or an assistant
registrar, performing under this Ordinance the duty of
registration of companies;
• "scheduled bank" has the same meaning as in the
State Bank of Pakistan Act, 1956 (XXXIII of 1956);
• "secretary" means any individual appointed to perform
the secretarial, administrative or other duties ordinarily
performed by the secretary of a company;
Security
• "security" means
– any share,
– scrip,
– debenture,
– participation term certificate,
– Modarba certificate,
– musharika certificate,
– term finance certificate bond,
– pre-organization certificate or
– such other instrument as the Federal Government may, by
notification in the official Gazette, specify for the purpose
Share and Ultra Vires
• Share means share in the share capital of a company;
– Share is a right to receive a certain proportion of profit made
by a company while it is a going concern and of the capital
when it is wound up.
• Ultra Vires means an act performed without any
authority to act on the subject.
Special Resolution
• "special resolution" means a resolution which has been
passed by a majority of not less than three-fourths of such
members entitled to vote as are present in person or by
proxy 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:
Provided that, if all the members entitled to attend and vote
at any such meeting so agree, a resolution may be proposed
and passed as a special resolution at a meeting of which not
less then twenty-one days notice has been given;
Subsidiary and Holding Company
• Meaning of "subsidiary" and "holding company". For
purposes of this Ordinance, a company or body
corporate shall be deemed to be a subsidiary of
another if—
i. that other company or body corporate directly or indirectly
controls, beneficially owns or holds more than fifty per cent
of its voting securities or otherwise has power to elect and
appoint more than fifty per cent of its directors; or
ii. the first mentioned company or body corporate is a
subsidiary of any company or body corporate which is that
other's subsidiary;
Where Ordinance is not applied
• Ordinance not to apply to certain corporations .-
Nothing in this Ordinance shall apply to—
i. a trading corporation owned or controlled by a

Province and carrying on business only within that
Province; or
ii. a co-operative society; or
iii. a university.
Non Trading Companies
• Application of Ordinance to non-trading companies
with purely provincial objects.-
• The powers conferred by this 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.
Ordinance to override memorandum..
• Ordinance to override memorandum, articles, etc..-
Save as otherwise expressly provided herein,—
a) the provisions of this Ordinance which come into force by virtue
of a notification under sub-section (3) of section 1 shall have
effect notwithstanding anything contained in the memorandum
or articles of a company, or in any contract or agreement
executed by it, or in any resolution passed by the company in
general meeting or by its directors, whether the same be
registered, executed or passed, as the case may be, before or
after the coming into force or the said provisions; and
b) any provision contained in the memorandum, articles, agreement
or resolution aforesaid shall, to the extent to which it is
repugnant to the provisions of this Ordinance, become or be
void, as the case may be.
Artificial Person
• It means that a company possesses separate
legal entity, identify and personality of its
own, apart form its share holders.
• It can borrow money, enter into contracts, and
hold property in its own name
• It can sue and can be sued by its share
holders.
Auditors
• Auditors are independent persons who
examine the accounts of the company and
report on the same.
• The express their opinion on the accounts and
also supposed to detect fraud, manipulations
of accounts aimed at concealment of true
financial position of a company.
Common Seal
• Every company must have a seal of its own,
called “Common Seal”.
– Directors must provide for its safe custody.
– it shall be affixed to share certificate and any other
instrument, only on the authority of a resolution
of directors.
Convention
• An agreement convention, or promise of two
or more parties, by deed in writing, signed and
delivered by which either of the parties
pledges himself to the other that something is
either done, or shall be done, or shall not be
done, or stipulates for the truth of certain
facts.
• In the broadest usage, it means any agreement
or contract.
Fiduciary and Fiduciary Behavior
• Fiduciary This term used to refer a person
having duties involving good faith, trust,
special confidence, and candor towards
others.
• Fiduciary Behavior it refers to the behavior in
good faith, trust, special confidence, and
candor towards others.
Incorporated Association
• Incorporation means the recognition of the
existence of a company, in the eyes of law as a
separate legal entity.
• IPSO FACTO
It means
a) By fact it self; or
b) By the mere fact
c) By the mere effect of an act or a fact
Limited Liability
• It means that the liability of the members of
the company to pay back the debts of the
company is limited up to the face value of their
shares.
• The fact of limited liability stems from the fact
of company being an artificial person.
Liabilities for repayments of loans tend to be
divided between company and the share
holders.
Par Value/ stated Value
• Par Value/ stated Value is the face or stated
value of a share or stock or bond is called par
value.
• Perpetual Succession means that a company
possesses permanent life which is not affected
by debt, insolvency, insanity or withdrawal of
any of its members.
Prima Facie
• Prima Facie it means
– At first sight
– On the first appearance
– Presumably
• Successor in Interest One who follows another in
ownership or control of property. In order to be a
successor in Interest a party must continue to retain the
same rights as original owner without change in owner
ship and there must be a change in form only and not in
substance and transferee is not a successor in Interest.
Successors and Team of Management
• Successors Those persons, other than creditors
who are entitled to a property of a deceased
under his will or succession statute.
• Team of Management Share holders, being the
entrepreneurs, are owners of the company and
as such have the right to manage the company.
But owing to their large number, they delegate
most of their managerial powers to their
elected representatives.
Team of Management
• Team of Management is constituted as
follows
– Chairman
– Chief Executive
– Board Of Directors
– Share holders
– Secretary
– Chief Accountant
– Managers and other functionaries
Upcoming
• Courts, SECP and Registrar
CORPORATE LAW
COURTS, SECP & REGISTRAR

CHAPTER # 2
COMPANIES ORDINANCE OF 1984
It Covers following
• What is a company?
• How is it registered?
• MOA & AOA.
• Company Debts.
• Debenture.
• Accounts, etc.
Ch 2 TOPICS COVERED
• Courts
• Company Benches
• Procedure of Court
• Appeals against Court Orders
• Securities & Exchange Commission of Pakistan
• Registrar
• Power of Registrar to call for information or explanation
• Seizure of Documents by the Regitrar
• Inspection of Books of Account by Registrar
COURTS
HIERARCHY OF COURTS IN PAKISTAN
• Supreme Court of Pakistan
• Federal Shariat Court of Pakistan

• High Court
• District and Session Court
• Special Tribunal and Courts
• Civil Courts
JURISDICTION OF COURTS [SECTION-7]
• Jurisdiction
means the right, power, or authority to administer justice by hearing and
determining controversies.
• The High Court has the jurisdiction under Companies Ordinance 1984.
– In some cases, Federal Government empowers Civil Courts to have

jurisdiction by the Ordinance.
• For the purposes of jurisdiction to wind up companies, the expression
"registered office" means the place which has longest been the registered office
of the company during the six months immediately preceding the presentation
of the petition for winding up.
CONSTITUTION OF COMPANY BENCHES
[SECTION 8]
• Bench is Forum of Justice comprising of Judges.
– There shall be one or more benches in each high court, each to

be known as company bench.
– To be constituted by the chief justice of high court.
– To exercise the jurisdictions under the company ordinance

1984.
PROCEDURE OF THE COURT [SECTION-9]
• All matters shall be disposed of and the judgment pronounced.

• Made within 90 days from date of presentation of the petition or
application to the court.
• Hear cases from day to day except in extraordinary circumstances.
• The hearing of matter shall not be adjourned except:
a) For sufficient cause to be recorded or

b) For more than 14 days at any one time or for more than 30
days in all.
APPEALS AGAINST COURT ORDES [SECTION-
10]
An appeal against the order of the High Court shall lie to the Supreme
Court but -------
• Not every company.
• Only companies with high paid up capital i.e. not less than one million
rupees.
• Where a company, ordered to be wound up has a paid up capital of
less than One million rupees or no share capital, such appeal shall lie to
the supreme court only if the supreme court grants leave to appeal.
POWER TO MAKE REFERENCE TO THE COURT
[SECTION-13]
• The Federal Govt or the Commissions may make reference to
the court on the matters which are of special significance
• Where a reference is made to the Court, the Court may make

such order as it may deem just and equitable under the
circumstances.
SECURITITES & EXCHANGE
COMMISSION OF PAKISTAN
DEFINITION
• Securities & Exchange Commission of Pakistan (SECP) is
– the apex regulatory body in the country.
– to regulate the corporate sector and the capital market.
– to ensure transparency and efficiency in the functioning of its financial
markets.
• One of the main function of the SECP is to incorporate

companies under the companies ordinance, 1984 (the
ordinance).
Certificate of Incorporation
CONSTITUTION/STRUCTURE
• Based in Islamabad.
• Minimum of 5 members & maximum of 7 members.
• Member of Commission are called “ Commissioners”.
• Head of Commission is called “Chairman”
• Chairman is appointed by Federal Govt. from the these Commissioners.
• Majority are appointed from Private Sector.

POWERS & FUNCTIONS [SECTION-12]
• SECP shall exercise such powers and functions as are conferred on it by the
companies ordinance 1984 or any other law
• The Federal Government may, by notification in the official Gazette, direct that
all or any of the powers and functions conferred on the Federal Government or
any of the officer of the Federal Government under any law shall, subject to such
limitations, restrictions or conditions, if any, as it may from time to time impose,
be exercised or performed by the Commission.
• The details of powers and functions of SECP has been provided in the below
mentioned link.
• http://www.secp.gov.pk/notification/pdf/2009/Delegation_powers.pdf
REGISTRAR
• A registrar, an additional registrar, a joint registrar, a deputy
registrar or an assistant registrar.
• Performing duty of registration.
• Under company Ordinance 1984.

RIGHTS, DUTIES & LIABILITIES OF
REGISTRAR
RIGHTS OF REGISTRAR DUTIES AND OBLIGATIONS OF REGISTRAR
1. Receive 5 copies of the statutory report 1. Keep register of mortgages and charges of
of a public company. the company.
2. Extend the period of holding AGM of all 2. Issue the certificate of Incorporation of
the companies other than listed companies.
companies to a maximum of 30 days.
3. Receive documents necessary for 3. Issue certificate of Commencement of
incorporation of a company and other business to the companies.
forms and reports.
4. Right to inspect books of account and 4. To rectify the registers regarding any change
other books and papers of a company. in:
I. Article of Association
II. Memorandum of Association
III. Any mortgage or charge
5. Enter the fact regarding the appointment of
receiver or manager of the company in the
register of mortgages and charges.
POWER OF REGISTRAR TO CALL FOR
INFORMATION OR EXPLANATION [SECTION- 261]
• When information can be called?

i. When the registrar is of opinion that any information,
explanation or document is necessary with respect to any matter.
• From whom information can be called?

i. From the company.
ii. Any of it’s past & present directors.
iii. Officers or auditors.

SECTION-261
• Manner & time for submission of information
i. Maybe called through a written order.
ii. Requiring to submit the information or explanation in writing within the period
specified in the order.
iii. The period specified should not be less than 14 days.
iv. Persons from whom information is called shall be duty bound to provide
information.
• Persons from whom information cannot be called
i. Directors, officers and auditors who ceased to hold office more than 6 years
before date of order shall not be compelled to furnish information.
SECTION-261
• When no information is submitted or if it is inadequate the registrar
i. May call for such books and papers as he considers necessary.
ii. The company and persons from whom such books and papers are called are duty
bound to produce the books and papers etc.
• Right to get Extracts
i. Obtain extracts from the books and papers and documents produced by him.
• Fairness of Information
i. If books/papers do not disclose a full and fair view of the matter or discloses an
unsatisfactory state of affairs.
ii. The register shall report in writing, the circumstances of the case to the SECP.
SEIZURE OF DOCUMENTS BY THE REGISTRAR
[Section-262]
• If the registrar believes that books or papers

To enter place where
relating to any company/office may be
books/papers are kept
destroyed, altered, falsified the registrar
shall seize such books and papers.
• Seizure only after obtaing permission from
the magistrtate.
• Auhtorise any officer subordinate to him.
To search that place
Not inferior in rank to an assistant registrar.
• Seized books etc shall be returned not later
that 30th day.
• Period of retenetion maybe extended by To seize such
SECP books/papers
INSPECTION OF BOOKS OF ACCOUNT BY
REGISTRAR, ETC [SECTION 231]
1. Registrar has the right to inspect the books and papers
of every company
2. Director or other employee of the company

1. Shall make such books of account, statement information etc
available as required by the Registrar.
2. Provide all information and a reasonable assistance as required
by the Registrar.
THANK YOU!
CHAPTER 3
TYPES OF COMPANIES
RECAP
LECTURE 2
In previous lecture we have covered the following topics
• Jurisdiction of the courts
• Company Benches
• Procedure of the court
• Appeal against court orders
• SECP (Security and Exchange Commission of Pakistan)
• Registrar
COMPANY
What is a Company
• Company ordinarily means an association of a number of
individuals formed for some common purpose.
– When a company is registered, it is clothed with a legal personality and has
the same rights and powers as a human being has.
– Its existence is distinct and separate from that of its members.
– The members may die or change but the company goes on till it is wound
up on the grounds mentioned in the ordinance.
• Thus a company is an artificial person.

– It can act only through some human agency called the board of directors.
– They control and administer the affairs of the company and act as its
agent.
– But they are not the agent of members of the company.
COMPANY
Definition Of a Company

• A company is an association of persons united fro a common
purpose
-Justice James
• A company is an association of many persons who contribute

money or money’s worth to a common stock and employs it in
some trade or business, and who share the profit and loss (as the
case may be) arising there from.
-James Stephenson
COMPANY
Definition Of a Company In Companies Ordinance 1984:
• A company is an association of persons

– registered under the law
– having a distinctive name,
– recognized as a separate legal entity,
– with a common capital contributed by its members
– comprising transferable shares of a fixed denomination,
– carrying limited liability and
– having a continuous existence and a common seal.
FEATURES OF A COMPANY
CHARACTERISTIC FEATURES OF A COMPANY
The various definitions quoted reflect the following characteristic features
that a company has:

Artificial person created by law
A company under the existing corporate law is an artificial legal person
• having an entity and personality distinct from the members of shareholders
constituting it.
• A company is a legal person because in law it is capable of having legal rights
and obligations just like a natural person.
• Like every other human being it can acquire and own property, transfer
property, enter into contracts and sue and be sued in its own name.
Independent legal entity
• Since a company is an entity separate from its members hence all

assets and liabilities in a business are its own.
• No member can claim any ownership rights in it during its

existence or winding up.
– This was first recognized judicially in the case of Salomon vs. Salomon and
company Ltd. In which the House of Lords held that the company was a
body corporate distinct from its members
Perpetual succession
• A company has a continued existence and its life is not affected by
– the death, lunacy, insolvency or retirement of its members.
• Members may come and go but the company continues its

operations as long as requirements of law are fulfilled.
Common seal
• A company must have a common seal for use as an emblem (logo,
insignia) in all legal documents.
• The common seal is used as a device as the signature of the
company.
– Any document bearing common seal of the company and duly signed by at
least two directors will be legally binding on the company
Limited liability
• Here the word liability refers to the liability of the shareholders towards the
company.
– This is limited to the value of the shares subscribed to or the amount of guarantee given by
them.
Separate ownership and management
• Being in a large number it is not advisable for the shareholders to run and
manage the company.
– Hence the law provides for the board of directors, elected by the members at their general
meeting to govern the affairs of the company
TYPES OF COMPANIES
Registered Companies
Companies limited by companies limited by Unlimited

shares guarantee companies
Having share Not having share

capital capital
Private company Public company
Single member Other then Listed company Unlisted company

company single member
company
TYPES OF COMPANIES
Registered Company
Registered companies are those companies which are registered in
Pakistan under the Companies Ordinance,1984 or any previous
companies act or ordinance.
These companies are further classified into following three broad
classifications.[15(2)]
• Company limited by shares
• Company limited by guarantee
• Unlimited company
TYPES OF COMPANIES
Company Limited by Shares:
It means a company memorandum of association limits the liabilities of

its members to the amount unpaid, if any, on the shares held by
them in the capital of the company.
– It is the most popular and important among the registered companies

– It is a company which keeps the liability of its members limited up to
the value of the shares purchased by them
– It is essential for such companies to use the word Limited at the end of
their names so that the people know the liability of its members is
limited
• Most of the industrial and commercial companies in Pakistan are registered
as companies limited by shares.
TYPES OF COMPANIES
Company Limited by Guarantee:
It means a company whose memorandum of association

limits the
• liabilities of its members to the amount as the members
may respectively undertake to contribute to the assets of
the company in the event of its winding up.
• This company may or may not have a share capital.
– In Pakistan company limited by guarantee use the words
(guarantee) Limited as the last words of their names
TYPES OF COMPANIES
Unlimited Company:
It is a company which is registered
– without limiting the liability of its members to the
extent of value of the shares held by them.
– In other words, in case if such companies there is no
limit of liability of members to contribute the assets
on a winding up.
– Now-a-days such type of companies are not found in
Pakistan.
On The Basis Of Articles Of Association
By virtue of provisions of articles, companies can further be

divided into the following categories
Private Company
Section 2(1)(28) defines a private limited company as a
company which by its articles:
A. Restrict the rights to transfer its shares, If any;

B. Limits the maximum number of its members to fifty; and
C. Prohibits any invitation to the public to subscribe for the
shares or debentures of the company
Public Company
It is a company which is not a private company. It is a
company which does not :
a. limits the maximum numbers of its members;
b. Restrict the right to transfer its shares, if any; and
c. Prohibit from inviting public to subscribe for the shares or
debentures of the company.
A public limited company can be formed with at least
3 members.
Difference between private and public company:
Public company Private company
1. A private company should have at
1. A public company should have at least two (2) members except single
least three (3) members in case of member company (SMC)
unlisted 2. Maximum members can not
And (7) members in case of listed exceed fifty (50) how however the
company. employee members are not
2. There is no restriction on the counted for the purpose of
maximum no of members deciding upper limit
3. A public company can invite 3. A private company cannot invite
subscription from general public subscription from general public
4. A public company can transfer its 4. Transfer of shares is restricted in
shares with out any restriction private company
5. A public company has to seek 5. No such certificate is required and
certificate for commencement of it can commence business just
business after is incorporation
Public Company Private Company
6. The public company has to raise 6. There is no requirement to raise
minimum subscription before minimum subscription.
obtaining certificate for 7. There is no requirement of filing
commencement of business. prospectus or statement in lieu of
7. A public company is required to file prospectus for a private company
the prospectus or a statement in lieu except when private company converts
of prospectus (SILOP) for obtaining the into public company
certificate for commencement of 8. Filing of accounts is not required by
business the private company if its paid up
8. A public company is required to file its capital is less than 7.5 million rupees
accounts with the registrar and also 9. No qualification is prescribed for an
with the commission if it is listed. auditor of a private company except
9. Auditors qualification is presented as when it has a paid up capital exceeding
chartered accountants. RS 3million.
10. A public company should have at least 10. A private company should have least
three (3)directors in case of unlisted two (2)directors except single member
company and seven (7)directors in company (SMC).
case of unlisted.
Public limited companies may further be classified
in two categories.
Listed Companies:
The companies whose securities are allowed to be treated
on a stock exchange are called listed companies.
Un-Listed Companies:
The companies whose securities are not allowed to be
treated on a stock exchange are called un-listed companies.
On the basis of company of shareholding:
On the basis of composition of share holding ,companies can be
classified in any of the following types
Holding company[section 3]:
It means a company or body which holds directly or in
directly more than fifty percent (50%)in the voting securities
of a company ,or has a power to elect and appoint more than
fifty percent (50%)of the directors of such other company
Subsidiary company[section 3]:
It means a company or a body corporate whose more than
fifty percent (50%) voting securities are held or controlled
directly or indirectly ,by some other company or such other
company has a power to elect and appoint more than fifty
percent of directors of such company
Associated companies [section 2(1)(2)]:
A company whose 20% or more shares
(upto50%) are held by another company shall be
considered an associated company of that
company (for complete definition of an
association company )
Associations not for profit [section 42]:
If the securities and exchange commission of Pakistan is satisfied
with an association which has been formed or is capable of being
formed as a limited company that it meets the conditions
specified by companies ordinance 1984 ,the companies may grant
a License and direct that the association be registered as a limited
company with out the addition of word “limited”,”(private )
limited ”or “(guarantee) limited” as the case may be, to its name
and the association may be registered accordingly
5.2 conditions specified by companies
ordinance,1984
a. Association should be formed for providing commerce art,
science, religion, sports, social services, charity or any other
useful object;
b. Association applies or intends to apply its profits, if any or
other income in promoting its objects; and
c. Association prohibits the payment of dividends to its
members.
5.3 The conditions and regulations in this regard issued or imposed
by the commission shall be binding on the association and may be
inserted in memorandum and articles of association or in one of
those documents on the direction of commission.
5.4 The association shall enjoy all privileges of a limited company
and be subject to all its obligations except using the word
“Limited”, “(Private) Limited” or “(Guarantee) Limited”, as the case
may be, as part of its name.
5.5 The license may be revoked by securities and exchange

commission of Pakistan and upon its revocation, the register shall
enter the word “Limited”, “(Private) Limited” or “(Guarantee)
Limited”, as the case may be, at the end of the name of
Association and Association will cease to enjoy all the exemptions
and privileges granted by SECP.
5.6 before the revocation of license, the commission shall give a
notice in writing to association of its intention and the
association shall be afforded the opportunity of submitting a
representation in this regard
5.7 the companies rules 1985 states that the above privileges are
available to public limited companies only and no private limited
company can be granted license under section 42.
TYPES OF COMPANIES
BY VIRTURE OF LEGAL FORM
By virtue of legal form companies can be classified in the following types
Statutory company
• The companies which are formed under special statutes are
called statutory companies .
• These are governed by the acts or ordinances through which
these are created.
– Examples of such type of companies are the State Bank of Pakistan, Small
Business Finance Corporation, Investment Corporation of Pakistan, etc.
TYPES OF COMPANIES
Chartered Company
• Chartered Companies are formed by the means of a special
charter granted by the head of state, or King or queen of the
crown.
• Normally these enjoy certain exclusive rights and privileges on
other association of persons.
– The east India Company and Charted Bank of England are examples of
such type of companies.
• Prior to the passing of modern companies legislation, these were
the only types of companies.
– Now they are relatively rare, except for very old companies that still
survive (of which there are still many, particularly many British banks)
Government Company
• A government Company is a company of which more than 50 percent
of the paid up capital is held by the government.
• A company which is subsidiary of a government company automatically
becomes a government company.
INCORPORATION OF
COMPANIES
Chapter # 04
RECAP
In Last lecture we have discussed

 Company (ITS meaning and
definition under companies ordinance
1984)
 Types of companies
 Differences between public and

private companies
Today’s lecture
we shall discuss
 Incorporation
 Meaning and explanation
 Obligation to be registered as company (section
14)
 Documents required to be submitted for
incorporation
 Conversion of private company into public
company and vice versa
 Carrying on the business with less than minimum
number of members
 Effect of incorporation
 Commencement of business under section 146
Incorporation
meaning
 Incorporation is actually giving legal
form to an association by
registering it
 Incorporation is the process of

legally declaring a corporate entity
separate from its members
Obligation to be registered as a
company
[SECTION 14] of the ordinace requires
 Any association, partnership or company
comprises of more then twenty persons
 Formed for profit for itself or for the

members
 Has an Obligation to get itself registered

as a company Under COMPANIES
ORDINANCE 1984
EXCEPTIONS
UNDER [SECTION 14(3)]
Question
In which cases the provisions of section 14 shall
not apply?
 Any society, body or association, other than a
partnership, formed under any other
Pakistani law
 A partnership of two or more joint families

where number of total members excluding
minors does not exceed twenty
EXCEPTIONS continued…….
 A partnership formed to carry practice as

lawyers, accountants or any other
profession where practice is a limited
liability
 A joint family carrying a joint business

PENALTY

If the provisions of section 14 are
not complied with ……..
 Every member of the association,
partner ship or company shall be
liable to a fine which may extend
to PRs. 5,000
 Also be personally liable for all

Documents for incorporation
For public company
in order to register a public company, documents required are,
1) Four copies of Memorandum & Article of association

 signed by each subscriber in the presence of at least
one witness
2) Form 1, which is declaration of compliance with the

requirements of companies ordinance 1984
 signed by any of the following,
i. Advocate of High or Supreme Court
ii. Person named as director in Article of
Association
iii. Member of ICAP or ICMAP Practicing in
Pakistan
3) Copy of treasury Challan
 as evidence of payment of registration
fee
4)Form 27,
 Contains list of persons consenting to act
as directors
5)Form 28,
 Contains consent of person to act as
directors and Chief Executive
Documents for incorporation
FOR PRIVATE COMPANY
In order to register a private company,
documents required are.
1) Four copies of Memorandum & Article of

association
 signed by each subscriber in the presence of at least
one witness
2)Form 1, which is declaration of compliance with
the requirements of companies ordinance 1984
 signed by any of the following,
i. Advocate of High or Supreme Court
ii. Person named as director in Article of Association
iii. Member of ICAP or ICAMAP practicing in Pakistan
3)Form 29,
 contains particulars of Directors,
Chief Executive etc
4)Copy of treasury Challan

 as proof of payment of
registration fee
Carrying a business with less than
Minimum number of member
UNDER [SECTION 47]

 If private company carries its business for
six months
 with members less than 2 or 3
 then on expiry date of period of six
months,
 Every member shall be severally liable for the
debts of the company contracted during that
time may be sued without joining in the suit
of any other member
Conversion of status of companies
Generally, following are the types of conversion of
companies:-

 PRIVATE COMPANY INTO PUBLIC
COMPANY;
 Public Company into Private Company

Conversion of private company into
public
Under [section 44]

No public company can convert
itself into private company except
 with the approval of Commission in
writing and conditions imposed by
commission
CONVERSION FROM PRIVATE COMPANY INTO PUBLIC

COMPANY
 Can only be done with the approval of Commission
in writing and conditions imposed by commission.
Section 45 of the Ordinance provides that a private
company may convert its status into a public company by
 Altering its articles of association
 The company shall file with the Registrar a
Prospectus or a statement in lieu of prospectus.
 No approval of any authority for the conversion of
status from a private company into public company
is required.
PROCEDURE FOR THE CONVERSION OF STATUS OF

COMPANY FROM PRIVATE COMPANY INTO PUBLIC
COMPANY

Following procedure is required for conversion of private
company into public company:-

 Step 1: The proposal for conversion of status of private
company into public company is firstly discussed and
approved by the Board of Directors.

 Step 2: 21 days notice accompanied with the proposed
special resolution is issued for convening the general
meeting of shareholders of the company .
 Step 3: Resolution for conversion of the status from Private Company
into Public Company and alteration in Articles of Association is placed
before the members which is carried as special resolution.
 A special resolution is to be passed by the majority of not less than
three-fourth, of such members entitled to vote as are present in person
or by proxy at a general meeting.
 There is significant difference in the Articles of both the types of

companies.
 Therefore; the Articles are required to be amended on change of the
status, especially restrictive clauses applicable on a private company are
to be deleted.
 Step 4: The Company shall increase its directors and shareholders if

they are less than the minimum number which are required for a public
company.

 Step 5: The company shall file the under-mentioned documents with
the registrar concerned:-
I. Form - 26 within 15 days of passing of special resolution.
II. Memorandum and Articles of Association. (Amended copy)
III.Prospectus or Statement in Lieu of Prospectus within 14 days of
passing of special resolution.
IV.Form – 3 (allotment of shares to new members / directors in case,
the new directors are not members of company)
V. Form – 27 i.e. list of persons consenting to act as directors.
VI.Form – 28 Consent to act as directors.
VII.Form - 29 (in case of increase of directors, if the company does not
already have three directors required for a public company)
VIII.
Bank challan evidencing the deposit of filing fee of the documents
in any of the designated banks branches

 Step 6: The registrar concerned shall issues a certificate
regarding conversion of status of private company into public
company and a filing certificate.

 Step 7: The Company may obtain a certified copy of
Memorandum and Articles of Association on payment of copying
fee of Rs. 500/- for the application submitted online and Rs.
1,000/- for the application submitted in the physical form.

 Step 8: The name of the company with the changed status i.e.
without the word “private” shall be mentioned in all letterheads,
bills, invoices, seal etc.

 Copies of Memorandum and Articles of Association are also
recorded with the alteration.

PROCEDURE FOR THE CONVERSION OF STATUS OF

COMPANY FROM Public COMPANY INTO private
COMPANY
Following procedure is required for conversion of public
company into private company:-

 Step 1: The proposal for the conversion of status of

a public company into private company is firstly
discussed and approved by the Board of Directors.

 Step 2: 21 days notice accompanied with the
proposed special resolution is issued for convening the
general meeting of the shareholders of the company.
 Step 3: Resolution for the conversion of status
from Public Company into Private Company and
alteration in Articles of Association is placed
before the members, which is carried as special
resolution.
 There is significant difference in the Articles of

both the types of companies.
 Therefore; the Articles are required to be
amended on change of the status; therefore the
same must be amended to change the status
especially the imposition of restrictions meant for
a private company.
 Step 4: Special Resolution on Form 26

along with
 Bank challan evidencing the deposit of

fee in any of the designated bank
branches shall be filed with the
registrar concerned within 15 days
passing company.
 Step 5: Application shall be sent to the Commission within 60 days
:
of the date of passing of the special resolution. Such application shall

be accompanied with the following documents:-
I. Form 2. (prescribed under the Rules)
II. Copy of Form 26 (Special Resolution).
III.Copy of the Memorandum and Articles of Association duly amended.
IV.Certified copy of the existing Memorandum and Articles of
Association.
V. Copy of latest audited Balance Sheet and Profit and Loss Account.
VI.Copy of minutes of the General Meeting.
VII.Bank challan evidencing the deposit of fee in any of the designated
bank branches, on account of application fee (Form-2)
VIII.
Affidavit that the contents of the application are true.
IX.Application must be in duplicate and a copy is required to be sent to
the registrar concerned under Rule 32 of the Rules.

 Step 6: The Commission gives approval for conversion of public company
into private company through an Order.
 Step 7: Certified copy of the order of the Commission is obtained by

depositing the fee as per schedule given in Annexure A for each copy and
the requisite court fee stamps.
 Step 8: Certified copy of the order along with amended copy of the
Memorandum and Articles of Association are filed with the registrar
concerned with bank challan evidencing the deposit of filing fee in any of
the designated branches

 Step 9: The registrar shall issue certificate on conversion of status of a
public company into a private company and the filing certificate in
respect of Special Resolution and Order of the Commission.
 The company may obtain a certified copy of the Memorandum and
Articles of Association on payment of copying fee
Effect of Incorporation
INCORPORATION HAS FOLLOWING EFFECTs

ON THE EXISTENCE OF THE COMPANY.
A COMPNY BECOMES,
 Separate legal entity

 Ability to own property
 Ability to incur its own liability
 Ability to sue and be sued
 Perpetual succession
Effect of Incorporation
Sec 16 (5)
…a body corporate…exercising all
the functions of an incorporated
company
 of suing and being sued and
 having perpetual succession…
 .with power to hold land
Separate legal entity
The company is a legal person [artificial]

having a distinct entity from its members
Cases:
 Salamon v Salamon
 Lee v Lee’s Air Farming
 Hew Sook Ying v Hiw Tin Hee @ Hew Hee
 People’s Insurance Co (M) Bhd
Ability to own property
A company can own property in its

own name
Cases:
 Macaura v Northen Assurance Co Ltd

 Abdul Aziz b. Atan
Ability to incur its own liability
 Liability of a company is unlimited
 Liability of members is limited, depends to the
type of company i.e. limited by shares or limited by
guarantee.
Cases
 Re Application By Yee Yut Ee
 Salamon v Salamon
Ability to sue and be sued
 A company can sue and be sued in its own name
 Any wrong done to the company, only the
company can take action
Case
 Foss v Harbottle
Perpetual succession
 A company shall exist until properly wound up or
struck off from the register.
 It’ s life span does not depend on the life of its
members.
Cases:
 Real Neol Tedman
 Abd Aziz Atan
Conclusiveness Of Certificate Of
Incorporation
Under [section 33]
 A certificate given by the registrar is the

proof of the incorporation
 The association is a company authorized

to be registered and duly registered
under this ordinance
Commencement Of Business
Under [section 146]
 A private company and a

company not having its share
capital can commence business
 immediately after the date of its
incorporation
 A public company can commence its
business after,
i. shares have been allotted in cash not less than
the minimum subscription
ii. every director has paid for the qualification
shares in cash taken or contracted to be taken
by him
iii. company has filed with a Registrar a statutory
declaration signed by Chief executive or one of
the directors and Secretary of the company
iv. company has filed prospectus or statement in
lieu of prospectus with the Registrar
v. company has obtained Certificate of
Commencement of Business from the Registrar
MEMORANDUM OF ASSOCIATION
RECAP OF LAST LECTURE
 Incorporation of companies
 Obligation on companies under section 14 to get themselves
registered
 Exceptions of Section 14
 Documents to be submitted by a private and public companies
for the process of incorporation.
 Conversion of status of companies
 Effect of Incorporation
 Commencement of business under section 146
INTRODUCTION
There are three basic legal documents issued by a company

these are.
I. Memorandum of association.
II. Article of association.
III. Prospectus.
INTRODUCTION
Memorandum of association is one of the basic documents of the

company.
 It is known as charter of the company.
 It sets out the limits outside which company cannot go,
 Memorandum of association defines the constitution of the
company.
 It contains the fundamental conditions upon which a company
is registered.
INTRODUCTION
Memorandum of Association is a public document,

and every person who deals with the company is
presumed to have a sufficient knowledge of its
contents and provisions.
Under Article [2(1)(22)]

“Memorandum of association of a company as originally
framed or as altered from time to time in pursuance of the
provisions of any previous Companies Act or of this
Ordinance”
General Definition
 Memorandum of association is a document which sets out
the constitution of a company
 It is the foundation upon which the structure of the
company is made
 It describes the scope of the companies activities and its
relation with outsides.
PURPOSE OF MEMORANDUM OF
ASSOCIATION
 Memorandum of association is the constitution of a

company
 It is the charter which defines the limitations of the power of

a company established under law
 It contains the fundamental conditions under which

company must be incorporated
 It determines the powers, objects and limits of the company

 It is the foundation on which the structure of the company
is based
 It states that the company can not go beyond its

Memorandum
 It enables the shareholders to know what is the permitted

range of enterprise
 It regulates the external affairs of the company

CLAUSES OF MOA
Clauses
Of
MOA
Association
or
Subscription
Capital Name
Registere
Liability d Office
Objects
CONTENTS OF MEMORANDUM OF
ASSOCIATION
 The Name Clause
 Domicile Clause / Registered Office
 The Object Clause
 The Liability Clause

 The Capital Clause
 The Association or Subscription Clause
 Format of Association and Subscription Clause
 Printing, signature etc. of Memorandum

NAME CLAUSE
The memorandum shall state the name of the company with the word,
 “limited”
 “(Private) limited”
 “(Guarantee)limited as the last word of the name of public, private

or guarantee limited company”
 NOTE
 Single Member Companies should have the last word as “(SMC-
Private limited” according to Single Member Companies Rule,2003
REGISTERED OFFICE
 Registered office clause is also known as Domicile

clause.
 Under the following clause the part of country is
mentioned in which the registered office of the
company is to be situated.
OBJECT CLAUSE
Object clause is the major portion of the memorandum

of association. It contains,
 Main object of the company
 Objects which company will undertake in the future


As the company cannot go beyond the objects
mentioned in its memorandum so any objects that
company can undertake in future should also be
includes in the object clause.
LIABILITY CLAUSE
This clause defines the extent of the liability of each

member. It states,
 Liability of member is limited
 Liability of member is unlimited or limited to the

guarantee given by each member
CAPITAL CLAUSE
The capital clause is applicable for the company which

has some share capital. It mentions,
 Amount of authorized capital with which the

company gets registered
 The number of shares of the company
 Also the nominal value of each share

SUBSCRIPTION CLAUSE
This clause provides that.
 Those who have agreed to subscribe to the

memorandum must signify their willingness to
associate and form of a company.
The memorandum of company limited by shares and

company limited by guarantee, each shall contain
different statements.
 Statement For Company Limited By Shares
We, the several persons whose names and addresses are

subscribed, are desirous of being formed into a company,
in pursuance of the memorandum of association, and we
respectively agree to take the number of shares in the
capital of the company set opposite to our respective
names
 Statement For Company Limited By Guarantee
We, the several persons whose names and addresses are

subscribed, are desirous of being formed into a company,
in pursuance of the memorandum of association
FORMAT OF SUBSCRIPTION CLAUSE
Present Father’s/H Nationality Occupation Usual Number of signature
name in usband residential shares
full (block full name address in taken by
letters) full each
subscriber
or agreed
to be
taken
Dated the… day of… 200X…

Witness to above signatures.
……………………….. (full name, father’s/Husband’s name)
Signature…….
Occupation…….
Full address…..
REQUIREMENTS OF MOA
Under [Section 19]
 Memorandum must be printed

 It should be divided into paragraphs
 Each paragraph should be consecutively (serially)
numbered
 It should be signed by the required number of subscribers
 (three in case of public company and one in case of
private company)
 Subscriber must sign in the presence of at least one
witness
REQUIREMENTS OF MOA
Under [Section 19]
 Signature of each subscriber must be attested by

witness
 Every subscriber must add his address, description and
occupation
 Witness should write his address, description and
occupation
 Memorandum must be stamped
CONDITIONS TO BE FULFILLED FOR THE
REGISTRATION OF MOA
Under [Section 30,31, 32 &33]
Memorandum shall be filed with registrar for registration.

The registrar shall register the MOA only if the following conditions are
fulfilled,
 Company is being formed for lawful purposes
 None of the objects stated is inappropriate or deceptive
 All legal requirements regarding registration are duly complied with
After the registration of MOA, registrar shall enter the name of the company
in the registrar of companies and issue certificate of incorporation.
ALTERATION IN MEMORANDUM
OF ASSOCIATION
Under [Section 21(1)]
Following the circumstances under which a company is enable to alter its

memorandum,
 To carry on its business more efficiently
 To attain the main purpose by improved means
 To change or enlarge the local area of its operation

 To carry on some other business which may be
combine with the existing business of the company
 To restrict or abandon any of the objects of the

company
 To amalgamate with any other company

PROCEDURE FOR AMENDMENT IN
The process of amendment of memorandum of
association is different for all the clauses,
THE NAME CLAUSE

Company can change its name in the following manner,
STEPS TO BE FOLLOWED
 Pass a special resolution
 Get written approval of Registrar of Joint Stock

Companies [Sec 39]
 An altered certificate of incorporation (Certificate of
Incorporation on change of Name) is issued by the registrar
[Section 40]
 Write the old name of the company along with the new
name on all documents for a period of one year from the
date of issue of certificate [Sec 40]
THE CAPITAL CLAUSE
 By passing an ordinary resolution, company may increase,

consolidate, sub-divide or cancel its share capital if authorized
by its articles of association
 Under [Sec. 94], company shall file a notice of alteration with

the registrar within 15 days
REGISTERED OFFICE CLAUSE
Following steps should be taken while altering registered office

clause,
 Pass a special resolution
 Obtain confirmation from SECP by filling petition within 60 days
 Give certified copies of order of Commission to the registrar of

old and new provinces within 90 days
 Request the registrar of the old province for transfer of file to

the registrar of new province
 Under (section 142), intimate to the registrar of the new

province on Form-21 within 28 days of change
THE OBJECT CLAUSE
While changing the object clause of the memorandum

of association, following steps must be taken,
 Pass a special resolution
 Obtain a confirmation from SECP by filling a petition

within 60 days of resolution
 File certified copy of the order of Commission with

the Registrar within 90 days of confirmation
 SUBSCRIPTION CLAUSE
The subscription clause never changes because the

subscribers remains the same throughout the life of
the company.
THE LIABILITY CLAUSE
 The liability clause cannot be changed because

company is formed on the basis of the limited liability.
While, transferring from limited liability company to
the unlimited liability company this clause is deleted.
ROLE OF SECURITY EXCHANGE
COMMISSION OF PAKISTAN IN
ALTERATION OF MOA
 The SECP may make an order confirming the alteration

[Section 22]
 The SECP may confirm the alteration of MOA either

wholly or in parts or may put some conditions on
alteration. [Section 22]
 The SECP may adjourn the proceedings of alteration if

considers necessary [Section 23]
 Certified copy of order of SECP confirming the
alteration along with the printed copy of altered
memorandum shall be filed with the Registrar
within 90 days of order [Section 24]
 Under [section.25], the alteration shall not be

effective if the certified copy of SECP’s order is
not filed within 90 days
The points discussed under MOA are
1. Definition of MOA
2. Contents of MOA
3. Alteration in MOA can be done in certain cases
4. Procedure for the amendment in MOA
5. Role of SECP in alteration of MOA

ARTICLES OF ASSOCIATION
DEFINATION
Sec 2(1)(1)(1) of the Company Ordinance, 1984 defines the

articles as the Articles of Association of a company as
originally framed or as altered in accordance with the
provisions of the law.
AoA are the:
 rules and regulations subordinate to the Memorandum of
Association.
 cannot go beyond the objects mentioned in the
memorandum.
 deals with the internal matters relation to the business of the
company.
CONTENTS
1. DEFiNiTIONS
Definitions
Business This clause contains:
Shares
Alteration of Capital • The definitions of the words and phrases
General Meetings and Board
Meetings
used in the articles.
Votes of Members
Directors
The Seal of the Company
Dividend and Reserve
Accounts and Audit
Notices
Indemnity
Arbitration
Winding up
CONTENTS
2. BUSINESS
Definitions
Shares
Alteration of Capital • The brief contents of the objects of the
Meetings
company.
Votes of Members
Directors
Accounts and Audit
Notices
Indemnity
Arbitration
Winding up
CONTENTS
3. SHARES
Definitions
Business This section contains the matters relating to:
Shares
Alteration of Capital The classes of shares ,Offer to and
Meetings
subscription by the general public ,the
Votes of Members procedure to be adopted for allotment,
Directors
issuance of original or duplicate and transfer
Dividend and Reserve of the shares.
Accounts and Audit
Notices
Indemnity
Arbitration
Winding up
CONTENTS
4. ALTERATION Of CAPITAL
Definitions
Business Following points to be mentioned in the
Shares
Alteration of Capital
articles of the company:
Meetings
Votes of Members  The powers of the company to alter its
Directors
share capital.
Dividend and Reserve  The procedure to be followed while
Accounts and Audit
Notices exercising this power.
Indemnity
Arbitration
Winding up
5. GENERAL MEETINGS AND
CONTENTS
Definitions
BOARD MEETINGS
Business
Shares Following points to be mentioned in the
Alteration of Capital articles of the company:
General Meetings and
Board Meetings
Votes of Members
Directors  The types of meetings of the company and
The Seal of the Company of the directors.
Accounts and Audit
Notices
Indemnity
 The rules and regulations in this
Arbitration connection.
Winding up
CONTENTS
6. VOTES OF MEMBERS
Definitions
Business The articles should contain:
Shares
Meetings
 The rules regarding the voting powers of
Votes of Members the members of the company
Directors
Accounts and Audit
 The procedure of the voting in the
Notices meetings of the company.
Indemnity
Arbitration
Winding up
CONTENTS
7. DIRECTORS
Definitions
Business The articles should contain:
Shares
Alteration of Capital 1. The number and the name of the first
Meetings
director.
Votes of Members 2. The qualifications of the subsequent
Directors
directors.
Dividend and Reserve 3. The appointment of directors.
Accounts and Audit
Notices 4. Filling of the casual vacancy in the office of
Indemnity
Arbitration
directors.
Winding up 5. The rules for fixation of the remuneration
of the directors.
6. Their powers and duties and the way in
which directors can be removed.
CONTENTS
8. THE SEAL OF THE COMPANY
Definitions
Business Following points should be mentioned in
Shares
the articles:
Meetings
Votes of Members  The rules regarding the safe custody of the
Directors
common seal of the company
Dividend and Reserve  The procedure to be adopted while affixing
Accounts and Audit
Notices it on the documents.
Indemnity
Arbitration
 The documents upon which the seal is to
Winding up be affixed and the record to be maintained
in this regard.
CONTENTS
9. DIVIDEND AND RESERVE
Definitions
Business Following points should be mentioned in
Shares
the articles:
Meetings
Votes of Members  The rules regarding the declaration and
Directors
payment of dividend (both the interim and
Dividend and Reserve the final).
Accounts and Audit
Notices  Transfer of any amount to various reserves.
Indemnity
Arbitration
 The utilization of such reserves.
Winding up
CONTENTS
10. ACCOUNTS AND AUDIT
Definitions
Business This section contains the rules and
Shares regulations regarding:
General Meetings and Board  The books of accounts to be maintained.
Meetings
Votes of Members  Their safe custody.
Directors
 The place where these books are to be
Dividend and Reserve kept.
Accounts and Audit
Notices  The inspection of books by the members.
Indemnity
 Preparation of financial statements.
Arbitration
Winding up  Approval of the accounts by the company.
 The appointments of the auditors of the
company and fixation of their
remuneration, etc.
CONTENTS
11. NOTICES
Definitions
Business This section contains the rules and
Shares
regulations regarding:
Meetings
Votes of Members  The notices to be issued to the members,
Directors
directors and the creditors of the
Dividend and Reserve company.
Accounts and Audit
Notices  The contents of such notices.
Indemnity
Arbitration
 Ways of giving the notices.
Winding up
CONTENTS
12. INDEMNITY
Definitions
Shares
Meetings
• The rules regarding the indemnity to or
Votes of Members by the company for damages.
Directors
Accounts and Audit
Notices
Indemnity
Arbitration
Winding up
CONTENTS
13. ARBITRATION
Definitions
Business
Shares
Alteration of Capital • The procedure to be adopted in case
Meetings
there is a difference of opinion between
Votes of Members the company and its members.
Directors
• The matters to be referred to arbitration.
Accounts and Audit
Notices
Indemnity
Arbitration
Winding up
CONTENTS
14. WINDING UP
Definitions
Business This section deals with:
Shares
Meetings
 The circumstances and the ways in which
Votes of Members a company can wound up the
Directors
The Seal of the Company  appointment of the liquidator.
Accounts and Audit
 The procedure to be adopted in disposal
Notices of assets, settlement of liabilities and
Indemnity
Arbitration
distribution of remaining assets among
Winding up the members of the company.
GENERAL PROVISONS REGARDING THE
ARTICLES
1. It is optional on the company limited by shares to get the
articles registered. But the registration of the articles of
association is necessary for a company limited by guarantee
and an unlimited company. [26(1)]
2. The articles of an unlimited company or a company limited by
guarantee (If both have a share capital) shall state the amount
of share capital with which the company proposes to be
registered. [26(3)]
3. The articles of an unlimited company or a company limited by
guarantee (If both have a share capital) shall state the number
of members with which the company proposes to be
registered. [26(4)]
GENERAL PROVISONS REGARDING THE ARTICLES
(Cont.)
4. The articles shall be printed, divided into paragraphs

numbered consecutively, signed by every subscriber to the
memorandum and dated. [S-27]
5. The articles and the memorandum, when registered , bind
company and its members to the same extent as if they
respectively had been signed by each member. [S-31]
6. Every copy issued after the date of the alteration in
memorandum or articles of a company shall contain such
alteration. Every company and its officer who contravenes this
provision shall be liable to a fine up to Rs. 1000/- for every copy
issued. [S-36]
GENERAL PROVISONS REGARDING THE ARTICLES
(Cont.)
• 7. Where the alteration is made after the date on which a

person became the member of a company and the alteration
requires him to take more shares than the number held by
him at the date of such alteration, the member shall not be
bound to take such shares as are required by such alteration.
However, if the member agrees in writing either before or
after the alteration he is bound to fulfill his agreement. [S-34]
• 8. Every company, upon the request and payment of a
prescriber amount by its member, shall supply within a period
of fourteen days a copy of the memorandum and articles of
the company. [S-35]
ALTERATION OF ARTICLES [SECTION 28]
Alteration in any clause of the articles can be made only if the

same is permitted by the memorandum and the Ordinance.
The company may alter its articles by passing a special
resolution. Where the alteration affects the substantive rights
or liabilities of members or a class of members, It can be
carried out only if at least three-fourth of the affected
members or class of members vote in favor of such alteration.
THANK YOU FOR
ATTENTION!
Legal Documents Of JSC
Memorandum Of Association
Definition : Memorandum of association of the company is its charter and defines
the limitations on the powers of the company established under the act
OR
It contains the fundamental conditions upon which alone the company is allowed to be
incorporated. These conditions are introduced for the benefits of the creditors and outside
public as well as of the shareholders.
Purpose : it is most stable and life giving document of a company. The purpose of it is to
enable the shareholders creditors as well as those who deal with it to know the powers of
company beyond which it cannot do anything.
Contents Of Memorandum
• Name : A public company must add the word Limited with its name.
A private company must add the word Private Limited with its name.
A company limited by guarantee must add the word Guarantee Limited with its name .
A single member company must use the word SMC-Private Limited with its name.
The name should not resemble the name of other existing company.
• Head office : This clause state the province and area where the registration
office of the company will be situated full address of the registered office must
be communicated to the registrar within 28days of incorporation.
• Capital clause : This clause state the amount of authorized capital with which the
company is registered and its division into shares of fixed amount , It state the limit of
capital beyond which the company cannot issue shares unless it alters its Memorandum.
• Liability clause : It states the nature of the liability of members in a company
Limited by shares
Limited by guarantee
Unlimited liability
• Object clause : It states the nature of business. If company doesnot work according to
its object then this action will be considered as illegal
• Association clause
All promoters give their consent to :
I. Form a particular company
II. Purchase allocated shares
III. Work for better prospectus
Joint Stock Company
Subscribers to the MOA : In case of public company there must be atleast 3 subscribers
and in private company at least 1 subscriber to memorandum.
Alteration : A company make an amendment in its memorandum by following the

prescribed legal procedure. According to
• Change of name : Special resolution Approval of registrar Issue of new certificate,
• Change of situation and objects : The alteration must be confirmed by the Exchange
Commission Of Pk
• Change liability : this clause cannot altered
• Change in capital : within 15days after passing resolution a notice must be sent to
registrar.
Printing and signing : it should be printed and divided into different paragraphs. Each
paragraph should be numbered and signed by its promoters.
Article OF Association:
Definition : The Articles Of Association is a document regulating the rights of members of
the company among themselves and the manner in which the business of the company shall
be conducted.
Articles are responsible for the good conduct of whole management . This document never
includes any such rule or regulations which is against the memorandum.
Contents Of AOA
• Capital and its division into shares.
• Different types of capital.
• Values of shares and their transfer
• Method for the change in capital
• Rights of shareholders.
• Conversion of shares into stock.
• Name and number of directors.
• Rights and duties of directors.
• Methods to call the meeting.
• Methods to call the meeting.
• Voting powers of shareholders
• Appointment of directors and auditors.
• Accounts and their audits.
• Distribution of profit and reserve capital
• Methods of selling shares.
• Seal of company.
 Printing and signing : it should be printed and divided into different paragraphs. Each
paragraph should be numbered and signed by its subscriber.
 Alteration : According to sec28 of Companies Ordinance 1984 the shareholders of the
company can change the articles by passing resolution but this change should not be
against the memorandum
Company Management –
Shareholders
Definition of Shareholders: A shareholder is a person who holds shares
in a company.
Member: A person whose name appears on the register of members.
Formation of Membership: A person may become a member of a company by the
following ways:
• Signatory to Memorandum
• Allotment
• Transfer
• Transmission
• Qualification Shares
Rights of Shareholders:
• Individual Rights
• Collective Rights
Shareholders
Individual Rights: Individual member enjoys the following rights:
• To receive notice of the general meeting of the company
• He can freely take part in the policy making process of the directors
• To receive dividends on the shares
• To transfer shares in possession
• He can inspect company books and record as per provision of the articles
• To share in assets of the company on its liquidation
• To receive annual reports of directors
• To collect copies of Memorandum and Articles of Association
• To collect copy of minutes of the general meeting
• To receive a copy of statutory report 21 days before the statutory meeting
• To vote in meeting
• To receive share certificates and duplicate copy on payment of fee
• To appeal to commission if the company fails to hold annual general meeting in time
Shareholders
Collective Rights: Following are the group rights of the members
• To approve dividends as recommended by the directors.
• To elect directors of the company.
• To appoint auditors of the company.
• To approve issue of shares at discount.
• To fix remuneration of directors.
• To alter the Memorandum and Articles of Association.
• To allow directors for the sale of assets and the other property.
• To capitalize profits and issue of bonus shares.
• To commence a winding u by the court.
• To remove any auditor of a company.
• To winding up a company voluntary.
• To appoint investigators for investigating the business matters.
Shareholders
Liabilities of Shareholders:
• To take shares after allotment is made by the company.
• To pay money due on shares when the company make call.
• To follow decisions taken by majority of the shareholders.
• To pay balance due on shares to liquidator when the company is wound up.
Directors
Definition of Director: Director is one of the group of persons entrusted
with overall direction of a corporate affairs
OR
Any person occupying the position of a director by whatever named called
Power of Directors: Directors get power sec(196)

• To call shareholders in respect of money due on their shares.
• To issue shares to applicants.
• To issue debentures or participation term certificates.
• To borrow moneys otherwise than on debentures.
• To invest funds of the company in shares or debentures of other companies.
• To give loans to any individual or institution.
• To authorized a director to make a contract for sales purchases or supply of goods
• To approve annual half yearly or other periodical accounts as are required.
• To approve bonus to the employees.
• To incur capital expenditures exceeding Rs. 20,000/- on any single item.
Directors
Liabilities Of Directors:
Civil Liability:
• Liable to pay compensation to company and creditors for untrue statement in the
prospectus.
• Liable for exceeding their authority.
• Liable to outsiders for secret profits made by them.
Criminal Liability: Directors are liable to punishment of imprisonment and fine for untrue
statement in prospectus failing to keep register.
Unlimited Liability: The liability of directors may be limited or unlimited. The Memorandum
of company may provide that the liability of the directors is unlimited.
Managing Agent: Managing agent is a firm or company entitled to the management of the
whole affairs of a company. He works under the control and direction of the directors.
Bar On Appointment: Sec (206) appointment of managing agents by all the companies
whether incorporated within or outside pk. There is exception to a company controlled by the
Federal or Provincial Gov.
Joint Stock Company
Definition: It is an incorporated association enjoys the advantage of having large
number of members who contribute money to a common pool for running large
undertakings. The interest or share of each member can be purchased sold and transferred
without the consent of other members
OR
A voluntary organization which is an artificial person created by law having limited liability of
its members and a perpetual succession with its capital divide into transferable shares and
which has a common seal.
Characteristics of Joint Stock Company:

 Voluntary Association of Persons: A company is a voluntary association of persons
joining hands with a common motive
 Artificial Person: A company is called artificial person it comes into existence through
the law. The creditors can recover their debts from the company but cannot sue individual
members. Law confers on it the power to do all acts that a person can do provided the
acts are in accordance with the objects and scope as set out in its memorandum
 Separate Legal Entity: The company in law is in itself a person . It has a legal separate
entity. Its existence is separate from that of its shareholders. Its assets are separate from
Joint Stock Company
 Limited Liability: The liability of each shareholder is limited upto the value of the share
purchased by him. Personal assets of the shareholders are not responsible for debts of
the company
 Distinctive Name: Every company should have its own name which should not be
similar to with the name of other existing company
 Common Seal: The company is an artificial person created by law it therefore cannot
sign documents for itself . The law has provided the use of seal with the name of the
company engraved on it. This seal has the effect of a signature
 Transfer of Shares: Shares of joint stock company are freely transferable and the
company is not concerned with who buy the shares. The company is responsible to
maintain an accurate record of shareholders
 Common Capital: Total capital of a company is divided into shares. The total
capital and a value of shares are mentioned in memorandum of association.
Large number of people invest in terms of shares in a joint stock company that’s
why it is called as Common Capital
 Perpetual Succession: Life of a company is not effected by any change in it’s members.
As a legal entity the company exists separately from the persons who compose it. Once it
is created It continues indefinitely until it is wound up by following prescribed legal
Joint Stock Company
OR

▪ Voluntary Association of Persons: A company is a voluntary association of persons
▪ Artificial Person: A company is called artificial person it comes into existence through
▪ Separate Legal Entity: The company in law is in itself a person . It has a legal separate
Joint Stock Company
▪ Limited Liability: The liability of each shareholder is limited upto the value of the share
the company
▪ Distinctive Name: Every company should have its own name which should not be
▪ Common Seal: The company is an artificial person created by law it therefore cannot
▪ Transfer of Shares: Shares of joint stock company are freely transferable and the
▪ Common Capital: Total capital of a company is divided into shares. The total
▪ Perpetual Succession: Life of a company is not effected by any change in it’s members.
Joint Stock Company
OR

Joint Stock Company
the company
Joint Stock Company
OR

Joint Stock Company
the company
Registration of a firm
Effects of Non-Registration:
Under sec (69)
• Suit by Partner: A partner of unregistered firm cannot file a suit against the firm or any
partner of the firm to enforce any right arising from the contract. One partner can sue
other partners for criminal act. If partner steals the property of firms any partner can file
a suit
• Suit by Firm: An un registered firm cannot file a suit against third party for enforcement
of any right arising from contract. But he can be filed for criminal acts against any
responsible person
• Suit by Firm Against Partner: The firm cannot use any partner for the enforcement of
any right arising from a contract
• Suit by Third Party: A third party can file suit against the firm or its partner to enforce
its right
• No Claim for Adjustment : A firm cannot claim adjustment of the amount exceeding
Rs.100 payable and receivable by the firm
Joint Stock Company
Definition: It is an incorporated association enjoys the advantage of having large number of
members who contribute money to a common pool for running large undertakings. The
interest or share of each member can be purchased sold and transferred without the consent
of other members
Key Features of the Joint Stock Company:

Formation: A company is a corporate body. It enjoys a separate entity of its own which is
distinct from its members. It can be set up by following the procedure laid down for this
purpose under the law. The formation of a company passes through 4 stages 1) promotion, 2)
incorporation, 3) subscription, 4) commencement
Financing: A company limited by shares raises capital by issuing of a prospectus, general
public is invited to purchase the shares of the company. The company, through wide publicity,
is able to collect necessary capital
Control: According to the Co. Law, the ultimate control of the company affairs lies with the
shareholders, they exercise their power of control in the AGM of the company. They review
Joint Stock Company
Management: The shareholders are the owners of the company, cannot take part in the
company’s management, they entrust the management to a board of directors elected by
them. The board administers the internal affairs and the management of the company. The
shareholders are the risk bearers and the directors are the risk takers
Duration: A company enjoys continuous existence as it is not effected by the transfer, death
or insolvency of its members. The members may come and leave, its continuity is not
effected until dissolved by a process of law
Double Taxation: The company is subject to double taxation. First the tax is levied on the
profit of the company, secondly the shareholders pay the tax on the dividends received
Irredeemable Share Capital: The share capital is the capital collected by subscription to
the shares of the company. The capital is non refundable except in the case of winding up
and reduction of capital
Joint Stock Company
Advantages of Joint Stock Company:
 Greater Permanency: The life of joint stock company is very stable as compared to
partnership. The existence of company is not affected by a death insolvency insanity of
shareholders. The shareholders may come and go but the company still there so its enjoys
greater permanency.
 Transferability of Shares: Easy transferability of shares provides liquidity to the
stockholders and stability to the company. The company does not return the share money
before its winding up but a shareholder can withdrawal his investment at any time by
selling his shares to another investor
 Limited Liability: The liability of each shareholder is limited upto the value of the share
purchased by him. Personal assets of the shareholders are not responsible for debts of the
company
 Larger Financial Resources: The company can raise larger capital by selling shares to
unlimited number of shareholders the company divided the share capital into shares of
small denominations in order to attract capital from large number of investors for starting
big business
 Better Management: The company can maintain a team of management equipped with
Joint Stock Company
 Ease of Expansion: Rapid and substantial expansion requires substantial capital and
superior management a company has almost unlimited opportunities for expansion as
long as investors are willing to buy the additional shares
 Research & Development: A company can organize extra funds for research &
development programs through other organization and also help in raising the living
standards of people
 Diffused Risk: There may be as many shareholders as the number of stocks of a
company each having an insignificant stake in the total risk. The risk is divided into
large number of shareholders
 Creates Investment Opportunities: The company has proved as a device to mobilize
small and scattered savings in the economy for establishment of big business projects. Not
only the economy growths its also provide earning to people in the form of dividends and
gains through increases in market value of the shares.
 Regulated by Law: Formation of company as well as its working is sufficiently regulated
by law that ensures proper working of the company and protection of interest of its
members
 Democratic Organization: The management of the company is carried on by the
elected board of directors, the shareholders discuss business matters, ordinary
Joint Stock Company
Disadvantages of Joint Stock Company:
 Complicated Formation: The formation of the company is a complicated legal process,
preparation of legal documents necessary for the formation and their registration, these
formalities are the significant additional burden for the management
 Double Taxation: The company is subject to double taxation. First the tax is levied on the
profit of the company, secondly the shareholders pay the tax on the dividends received
 Separation of Ownership from Control: In company the shareholders are real
investors are not allowed to take part in the operations of the business so this results in
lack of personal interest in efficiency and waste
 Delay in Decision Making: A company cannot make important decisions as freely and
quickly as compare to the sole proprietorship business, the decision making process is the
time taking activity as it requires the AGM for this purpose, this may result the loss of the
business
 Lower Credit Standing: A company can offer its business assets only as a security against
loans, it makes credit worthiness of the company less than the partnership or
proprietorship form of business
 Government Regulations: The Govt frames rules & regulations for protection of
Joint Stock Company
Disadvantages of Joint Stock Company:
 Accumulation of wealth: The company is operate on large scale so it raise capital
through different sources and earn huge profits so the wealth gets accumulated in the
hands of few people. A few people get control over large amount of wealth .
 Monopoly: The company large structure allow to control the market sometimes
companies form combinations to create monopoly.
 Encourage Speculation: the company encourages speculation in the stock exchange the
speculators increase or decrease the price of shares for short term gains the stock
exchange fails to provide stable investment opportunities to the investors.
 Influencing Government Decisions: A large sized companies influence the gov trade
and investment policies . Companies can influence monetary decisions of the state bank. It
can increase the prices of goods in the market and creat political problems for the gov.

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DEFINITIONS

• "director" includes any person occupying the position

• "document" includes summons, notice, requisition,

• "existing company" means a company formed and

• "previous Companies Act" includes any Act or Acts relating to

i. a trading corporation owned or controlled by a

• The powers conferred by this Ordinance on the Federal

COURTS, SECP & REGISTRAR

• Supreme Court of Pakistan

• Federal Shariat Court of Pakistan

– In some cases, Federal Government empowers Civil Courts to have

– There shall be one or more benches in each high court, each to

– To be constituted by the chief justice of high court.

– To exercise the jurisdictions under the company ordinance

• All matters shall be disposed of and the judgment pronounced.

a) For sufficient cause to be recorded or

• Where a reference is made to the Court, the Court may make

• One of the main function of the SECP is to incorporate

• Minimum of 5 members & maximum of 7 members.

• Member of Commission are called “ Commissioners”.

• Head of Commission is called “Chairman”

• Chairman is appointed by Federal Govt. from the these Commissioners.

• Majority are appointed from Private Sector.

• A registrar, an additional registrar, a joint registrar, a deputy

registrar or an assistant registrar.

• Performing duty of registration.

• Under company Ordinance 1984.

• When information can be called?

• From whom information can be called?

ii. Any of it’s past & present directors.

iii. Officers or auditors.

i. Maybe called through a written order.

iii. The period specified should not be less than 14 days.

• If the registrar believes that books or papers

1. Registrar has the right to inspect the books and papers

2. Director or other employee of the company

available as required by the Registrar.

2. Provide all information and a reasonable assistance as required

• Thus a company is an artificial person.

• A company is an association of many persons who contribute

• A company is an association of persons

• Since a company is an entity separate from its members hence all

• No member can claim any ownership rights in it during its

• Members may come and go but the company continues its

Separate ownership and management

Companies limited by companies limited by Unlimited

Having share Not having share

Private company Public company

Single member Other then Listed company Unlisted company

• Company limited by shares

• Company limited by guarantee

It means a company memorandum of association limits the liabilities of

– It is the most popular and important among the registered companies

Company Limited by Guarantee:

It means a company whose memorandum of association

By virtue of provisions of articles, companies can further be

A. Restrict the rights to transfer its shares, If any;

5.5 The license may be revoked by securities and exchange

In Last lecture we have discussed