Companies Law

Introduction
Companies
law was enacted
in 1984. It relates
to companies and
Types
certain of
other
Companies
associations. on
the It extends
Basis to of
LiabilityPakistan.
whole
1.HighCompany
courts
limited
Types
have byof
jurisdiction
to Shares
Companies
resolveon all the
issues The
Basis ofpertaining
Liability
to company
2. Company
companies in
thewhich placekeeps
limited atby
the
Guarantee
which liability
the
of
registered its
Theoffice
members
company
of the company is is
limited
further up sub-
situated. to
the
divided nominal
Supreme into
 value
two kinds.
court has the of
shares(a)
appellate
purchased
Companies by
Types
jurisdiction. of
them.by on
Companies
limited
the2. Basis
Company of
limited
Liability
guarantee, by
Guarantee
2.
having Company
a share
Types
limited
capital.The of by
Companies
company with
Guarantee on
thelimited
Basis of ofits
liability
(b)
Liability
Liability
of
Companies
members its is
Unlimited
members
limited by to
to
Types
Company
the amount of
Companies
each on
Liability the
the of extentthemof
Basis
hasof
ofLiability
guarantee,
the not
unpaid
Association
members
undertaken Not to for
having
amount ofshare
Profit
payis in the
capital.
event Under
unlimited. ofby
shares
Types It held
of means
Companies
Sec-42,
winding up these
of
Liability
them plus oftheits
on the Basis of
“association
the
the company.is
members
Liability
not
property for
limited
amount to
Association
profit” Not
of the canfor
guaranteed by
Profit be registered
sharehold
them. theMostly
as Thesein a
ers
 associations
company
company are
amount such by
registered
withwelllimited
as as
companies
authority areafter
liability.
Types their
of Companies
in the
beingbusinesssatisfied
However,
on guaranteed
the Basis
personal by of
about
such
Liability
property anthe
them. KSEof non-
following
association
Association
can Not
be for
profit making
conditions:-
does nottoadd
Profit used
nature.(a)
the(c)
pay off words
the
(Guarantee)
Types Association
of Companies
limited
Association
debts of is
orwill
on Limited,
thebeingNumber
(private)
LSE of
formed to
apply
the
(Guarantee) its
Members limited promote
company. or
1. commerce, Private
(guarantee) art,
profits,
Such to
Limited
Company
science,
limited
promote
companies to its
and (a) ISE It can
their names.
objects.
are rare
(Guarantee)
be formed by
Types religion,
these(d)
of Companies sports, on
Limited
at least
orNumber
any otherof
Permission
the days.
useful two
are would
Members examples
persons.
be
1. granted object.
Private
of (b) such The
(b)
Company It will
companies.
number of
not
subject
(e) pay
It mustto
members to
dividends must
have at leastits
certain two
conditions
directors.
not exceed
members.
which(f) A private
fifty.
 (c) Through
binding
form its own on
its Article of
association
Articles andof
Types of Companies on
Association.
Association,
the would
Number be itof
(g) A
restrict
Members the
included
private in its
company
transfer ofPrivate
1. documents.
is not required
Company its
to send
shares. copies of
(h) It must
profit
(d) & loss
It
use the word
account and
Types cannot invite
of Companies
(private) limited
balance
the sheettoto
public
on the Number (as
or unlimited of
the authority,
maypurchase
Members be its
stock
shares exchange
andat
2. Public Company
applicable)
and the
debentures.
the(a)end Itof can its
registrar.
be
name.formed by at
Types least
of(j) Companies
To form a
on theprivate
Number sevenof
persons.
company, only
Members
two(b) signatories
2. Public Company
Maximum
to (e) theIt must
number
memorandum
have atof least of
members
association does
seven are
not have any
required.
directors.
 (c) Its shares
company may
are freely not to
decide
Types of Companies
transferable.
formNumberits own
on the of
(d)
Articles It can
of
Members
invite the public
Association but
2. Pubic Company
to purchase
adopt
to (h) its
Table
It must
shares
“A” . and
use the word
debentures.
of(g)Companies
Types (public) limited A
on theorpublic
Basis company
of
unlimited Other
(as
is required
Classifications
may be to
send copies
1. applicable) Holding of
at
profitend
Company
the & lossof its
account
A
name. company and is
balance
said(f) To sheet
to form betoa
Types the of Companies
authority,
holding
on thepublic
Basis company,
of Other
stock
company exchange
seven of the
Classifications
and the
other
2. signatories when
Subsidiary it
to
registrar.
holds
the more than
Company
50%A company
memorandumof the is
share association
of
said capital
to of
be
the required.
are
subsidiary other
company ofor the
company it
has got control
 over company
other the
constitution
holds more of
than
Types oftheCompanies
board on
of
50% ofofits share
the Basis Other
directors
capital of the
or
Classifications
other company.
3. controls the
Associated
composition
Company of
its When
board ofa
directors.
company is not
Types subsidiary
of Companies on
the Basis
company of ofOther
the
Classifications
other but works
4. Foreign
in closeCompany
contact
withA some
company
other
which
company, it isis
incorporated
called associated
outside
company Pakistan or
and carries on
associated
business
undertaking. in
Pakistan through
its branches is
called a foreign
company.
Important Documents

Memorandum of
Association

Article of Association
Memorandum of
Certificate of
Association
Incorporation
It is the most
important document as
Prospectus
it forms the charter of
the company.
It is the statutory
deed of the company. of
Memorandum
It contains the
Association
fundamental
It determinesconditions
the
upon whichbetween
relationship alone the
the
company is
company and granted
other
incorporation.
persons outside the
It is a document
company.
which explainsviolates
If a company the
 powers
the and objects of
Memorandum of
the company. it
Association, is
Its onevoid.
Contents
absolutely of the
It ofmain
cannot
purpose
ratifiedis even
Memorandum
be to provide
of
by the
informationconsent
Association
unanimous to outsiders
of all
about
the Name the permitted
shareholders. of
range
company of activities
Alterations of the
to MOA is
acompany.
Words like
difficult job.limited,
To alter it,
(private) limited,
passing
Contents of special
of
(guarantee)
resolution
Memorandum
limited etc. shall be of and
permission
placed as lastofword
Association authority
of is
must.
the Limitation
name of
of
company,clause
liability as the case
mayWhether
be. the
Place ofof the
liability its
Contents of
registeredis office
members limited by
Memorandum of
shares, and / or
The province
Association
guarantee (and where
part of Pakistan up to
the Capital
what extentclauseoffice
registered each
member
In case
is situated.is responsible)
a company is
OR
limitedwhether
by shares
Objects the
ofonly
the
liability
companyTheis unlimited and
division thereof
property
into shares of of a thefixed
The objectives of
members
amount. in company
the company and the
as well as their
territories property
to which can
personal
limited by guarantee only
they extend.
be usedofto
Details thepay off
amount
the
Contents
each debts contributes
member of the of
company.
to the assets of theof
Memorandum
Capital
company
Association in clause
the event of
its being
In case wound up while
Capital aclausecompany
helimited
is is a member
by shares to pay
only of
debtsIn /case a guarantee
liabilities of the
company withcosts
company, a share
The amount of /
capital / expenses of
charges
share capital with
Contents
windingThe amount up of share
and of
which the company
Memorandum
capital
adjustments
proposes
with
of
to rights beofof
which
company
Association
the proposes to be
contributories.
registered.
registered.
Capital clause
The divisions thereof
In case of an unlimited
into shares of a fixed
company
amount.
ContentsThe amount of share of
Details
capital of the amount
with which company
Memorandum
each member contributes of
proposes to be registered.
Association
to the assets ofthereof
The divisions the
company
into in theofevent
Association
shares offixed
aClauseits
being wound up while he is
and Subscription
amount.
a member to pay of
Subscribers debts to
agree /
Association Clause
liabilities
take the of the company,
number of shares
and
costs Subscription
/ charges / expenses
set Subscribers
opposite to MOA their
(2 in
of winding
respective up
names. company and
case of
adjustments private
Such ofsubscriptions
rights of
the contributories.
contains:-
company) declare through
The clause
association names of
that they
subscribers
Articles
desire of Association
to form a company in
pursuanceAddress of the
It is theof the
second
MOA. most
subscribers
important document
Description of theto
be filed with registrar of
subscribers
companies.
Nos of shares each has
subscribed
It is a document which
explains the rules and
Article of Association
regulations of the
If a company does
company for the purpose
anything beyond the
of its internal
scope of AOA (but
management.
within MOA), it is not
It determines the
void and can be easily
relationship between the
ratified subsequently
company of Article
Contents and of its
by a special resolution.
members and as among
Association
Alterations to AOA is
theMethods to increase,
members
possible and can be
themselves.
reduce or alter the capital.
done byTerms passing ofa
special resolution and
appointment,
intimation
remuneration,todelegation
registrar
of companies.
of authority, etc of
secretary, manager,ofif any.
Formation own
AOA is not mandatory
of share capital.
for public limited
Declaration of
companies.
Contents
dividend of They rules
and Article
canof
adopt the
Association
regarding its Table “A” in
payment.
firstMatters
Rulesschedulerelating toofto
relating
appointment,
accounts, lawpowers,
company audit, and duties,
need
charging
notqualification,
of depreciation
file removal,
it separatelyand
remuneration
creation of etc. ofetc.
reserves, Chief
with registrar.
Executive.
Methods of securing
loans. Matters relating to
Prospectus of managing
appointment
Rules regarding
After
agent,
common
obtaining
termseal
of office,
of powers,
the
certificate
duties
company. of
and remuneration
incorporation,
where permitted.
Procedure a
of winding
public
up company
the company.
may invite general
public to subscribe
Prospectus
to the
Thecapital of the
invitation to
company the
purchase and share
for
thisthe debentures
or purpose of a
aprospectus
company is the is
issued. characteristic
main
Prospectus is
of a prospectus.
any Its such
main
advertisement,
notice
follows:- or
information
To inform the public by
Prospectus
which
that the general
a company has
c) To present
publicestablished.
been is invited for a true
the purchase
To convinceand of the thecertified
shares that
public record, the or through
debentures
company which of the
provides a shares
company and on
the best opportunity debentures
the
terms
for have
Contents investment
of been
and placed
Prospectus
conditions
because itbefore
The following has the the public
matters
contained
honest and for
must be stated inin sale.
it.
efficient
d) To public
Only
directors.
Prospectus:- declare that
companies
The main the object
responsibility
can of the
issue
company. of the matters
prospectus.
Names, provided
addressesin and the
Contents
occupationsof ofProspectus
the
prospectus directors
lies on
whoNumber
have signed
the
ofMOA minimum
and alsoof
directors
qualification
the nos ofofshares
shareholder
purchasedto
become a the company.
director.
by them.
by them.
The
The amount payable
details of on the
the interest
application and
of the shareholder allotment
in propertyof
shares.
and profit of the company.
Names
The names,and addresses
description,of
those sellers
addresses andwhoioccupations
sold any
property to the managers
of the directors, company.and The
 managing agents and the
cash,
amountsharesofor debentures.
remuneration
The to limit
available them. of minimum
Contents
subscription on whichofthe Article of
Association
shares can be allotted.
Methods to increase, reduce or
alter the capital.
Terms of appointment,
remuneration, delegation of
authority, etc of secretary, manager,
if any.
Contents of Article of
Rules relating to issue of share
Association
capital.
Matters relating to appointment,
Declaration of dividend and rules
powers, duties, qualification,
regarding its payment.
removal, remuneration etc. of Chief
Rules relating to accounts, audit,
Executive.
charging of depreciation and
Matters relating to appointment
creation of reserves, etc.
of managing agent, term of office,
Methods of securing loans.
powers, duties and remuneration
Rules regarding common seal of
where permitted.
the company.
Procedure of winding up the
company.