1

NATURE OF COMPANY
Historical Background
The word company
originated from the Latin word companio which
means companion. The word
company was first used in
association. The word corporation is derived from the Latin1553 for a business
word corpus which
means body. The world's oldest
in 578 in Japan.
company was Kongo Gumi that was established
Originally. companies were only established
through royal a charter or
an Act of the parliament. Examples of chartered
India Company. Dutch East India
companies are the British East
Company and Bank of England established in
1600. 1602 and 1694 respectively. The British
parliament enacted the Joint StockK
Companies Act. 1844 which allowed incorporation through a simple procedure. It
introduced the concept of a
company as a separate legal person.
The first company law in India was the Joint Stock Companies Act, 1850.
It described the procedure of
registration of companies and the transfer of shares
without the consent of other members. The Joint Stock Companies Act, 1857
introduced the concept of limited liability. The benefit of limited liabilty was
granted to banking and insurance companies through the Joint Stock Companies
Act 1860. India enacted the Companies Act, 1866 which introduced
memorandum of association, articles of association, company limited by
guarantee, prohibition of alteration in the object clause of the memorandum and
provisions for winding up.
The Companies Act, 1882 repealed all previous laws in India. The
Companies Act, 1882 was replaced by the Indian Companies Act, 1913 which
introduced the concept of a private company The Amendment Act of 1936
introduced provisions for a managing agent, holding and subsidiary companies,
members' voluntary winding up and creditors' voluntary winding up
Act, 1913
At independence in 1947, Pakistan adoptedLaw Companies
the

ng with its amendments. In 1981, the Corporate Authority was formed to

guiate the corporate sector. The Companies Act, 1913 was replaced by the
and
panies Ordinance, 1984. In order to enforce the law, the Securities
under the SECP
KChange Commission of Pakistan' (SECP) was established
The SECP
9 The SECP replaced the Corporate Law Authority.
Federal Government. In
all powers and functions on behalf of the
Ses the Companies Act,
he Companies Ordinance, 1984 was replaced by
20
2017.
 Nature of Company
2
Application of Law
2017 applies to the whole of Pakistan. It is a
The Companies Act,
law. It has 515 sections
and 8 schedules. Federal
to the Provincial Government for
The Act provides powers non
province it. the license is issued by that Dadng
corporations limited to single
a
corporation extends its business acti
Vincial
Government. If a non-trading
it shall be liable to a penalty of level 3 or may h nd
the limits of the province, und
up.
The provisions of the Act shall apply despite any provision contained in
the memorandum, articles, agreement
or resolution. All provisions which are
2017 shall be void. [Sec. 1,3,4]
against the Companies Act,
Meaning and Definition
A company means a voluntary association of persons to run a business

and share the profit with limited liability and capital divisible into shares.
Sec. 2(1)(17): "Company means a company formed and registered under
the company law".
Heelis: "A Joint stock company is an association of individuals for the
on some trade, business or undertaking usually with limited
purpose of carrying
but sometimes, with unjimited liability".
Characteristics of Company
The following are characteristics ofa company.
1. Voluntary Association
A company is a voluntary association of people who enter into an
agreement to run a business. The registration of companies is compuisory i
Pakistan. The company is registered under the Companies Act, 2017. It comes
into existence from the date mentioned in the certificate of incorporation. Witnou
incorporation, the voluntary association has no legal existence.
2. Artificial Legal Person
A Company is an artificial legal person with rights and liabilites
company Is treated as a. legal person separate from its members. t u
f law
eistphysically like living
a person but exists legally. It exists in the eye
and acts through directors elected
by the shareholders
3.
Members and Direstors.
A company having one member is called a ingle member: compan
must h
nave

private
at
company must have at least two members. A public compa
blic company

least three members.

A single member company company
A privateleast
shall shall havee
one
director. three
have atleast two directors. at
A non-listed company shall
directors. A listed
company shall have at least seven directos.
nav
Nature of Company
4. Separate Legal
Entity
A Company has a
legal entity separate from its members. It has its own
name. It assets and liabilities are
separate from those of its members. Thee
creditors can recover their debts only from the assets of the
the company is not liable for the debts.of its company. Similarly,
members. A company can sue and
be sued. It can own property, borrow
debts, open bank account, employ
and make contracts. people
Salomon vs. Salomon & Co. Ltd.
Salomon owned a leather business. He formed a company called
Salomon and Co. Ltd and sold his business to the company for £39,000. In
return, the company allotted 20,000 shares of £1 each, £10,000 secured
debentures and paid £9,000 cash to Salomon. Salomon, his wife and
children became members of the company.
five
After some time, the company went into liquidation. On liquidation, the
companyhad assets worth £6,000. The liabilities included £10,000 secured
debentures held by Salomon and £7,000 to unsecured creditors. The unsecured
creditors claimed priority on thé ground that the company and Salomon were the
same person. The Court held that the company is separate from its members
and Salomon would be paid first.
Arshad Saleem vs. Civil Aviation Authority
Arshad, a director of a company, made an àgreement with CAA to install
hoardings. CAA sued Arshad for payment of dues. The Court held that Arshad
signed the contract on behalf of the company and he cannot be held personally
liable for acts of the company.
5. Limited Liability
A company may be limited by shares or limited by guarantee. Ih a
company limited by shares, the liability of a member is limited up to the face
the full
value of shares held by him. If a member has paid amount on his shares,
he is not further liable. In a company limited by guarantee, the liability of a
member is limited up to the amount for which he has guaranteed to contribute to
the assets of the company on its winding up.
6. Perpetual Succession
A company has a perpetual succession which means continuous
existence. Its life does not end with the death, insolvency or retirement of
shareholders. A company is created under the law and dissolved under the law.
The members may leave the company by selling their shares but the company
continues to exist.

Noel Tedman Holdings Pty Ltd.

A husband and wife were the only shareholders of a company. They were
also the company's directors. Both died in an accident, leaving behind an intant
child. The Court allowed the representatives of the dead husband and wife to
4
appoint directors of the company to allow the transter of Nature of Company
shares to the chil ny
7. Transfer of Shares child.
The shares of a public company are freely
transferable. However in a
private company, the law.describes the manner in which the transfer of shares i
made. The articles may contain reasonable
restictions on
to transfer the shares. When a member transters his shares,thethe
right of members
all rights of the transferor regarding those shares
transferee aets
Aziz bin Atan vs. Ladang R.M. Estate Sdn Bhd
All shareholders of the company sold their shares to one
buyer. The
Court had to determine whether a change of employer took place. It was held
that the company did not change its identity.
8. Separate Property
The company is a legal person separate from its members. It can buy and
sell property in its name. The property of the company cannot be used for
personal benefit of the shareholders. The members cannot claim any ownership
rights in assets of the company during the existence of the company.
Macaura vs. Northern Assurance Co Ltd.
Macaura bought aninsurance policy for his timber business. Later, he
converted his business into a company but did not transfer the insurance policy
to the company. A fire broke out and destroyed the timber. The insurance
company refused Macaura's claim for compensation. It was held that the
insurance company is not liable as Macaura's property is separate from the.
company.
9. Separate Management
The ownership and management ofa company are separate. A company
has many members who cannot take part in the management of the company
The management is run by the representatives of members called directors. The
members elect directors from the members to run the affairs of the company. The
directors are collectively known as the board of directors.
Foss vs. Harbottlo
Foss and Turton were two minority shareholders in Victoria Park Co.
They sued the directors for improper use of the company's property. It was held
that only the company has the right to sue. Moreover, if the majority of
shareholders have approved an act, the minority shareholders cannot sue.

Lifting the Corporate Veil

A company is a legal person that is separate from its members. There is a
is involved in
veil between the company and its members. When a company
and
fraud or its policies, are against the public interest, the members
the Court. The Court can ignore
management may be held personally liable by
of the company to
the limited liability of members and separate legal entity
Nature of Company
nish
the Culprits. his act of the
Court is called
5
corporate veil may.be lifted for the lifting the corporate veil. Tne
following reasons:
1. Statutory Provisions
The corporate veil can be lifted under the
a. Minimum Members
following statutory provisions
The corporate veil can be lifted if
a
than 180 days after the number of
company carries on business for more
members reduces below 3 in a
company or below 2 in a private company.
Every public
who is a member during
the time the person
company continues its business after 180
fact. shall be liable for the debts of the days and is aware of this
15 company incurred during that time. [Sec.
b. Application Money
Where a company invites the
public to subscribe to its shares or other
secunties. the company shall refund the
money in case of unaccepted or
unsuccessful applications within the
specified time. If a refund is not made within
the specified time, the directors shall be
liable to repay the money with
at the rate of 2% for surcharge
every month from the expiry of 15th day and shall be liable
to a penalty of level 3. [Sec. 68]
c. False Prospectus
A
person commits an offense who makes a
misleading, incorrect, untrue
or deceptive statement in a prospectus or omits information
Act. Every person who has required under the
lable to pay compensation to
signed a false
or misleading
prospectus.shall be
any person who buys securities and suffers a loss
due to such prospectus. [Sec. 92,93 Securities Act, 2015]
d.
Investigation of Company
The through a resolution or the Court, may ask the
members,
Commission to appoint investigators to look into the affairs of the
company. The
investigator can lift the corporate veil in the following cases: [Sec. 256,257]
Fraudulent intention against members, creditors or other persons; oppression
against members; or fraudulent and unlawful business activities.
.
Fraud, misconduct or unlawful business by promoters and
management.
1.
Denial of reasonable profits to members.
.
Denial of information to members regarding the company affairs.
Allotment ofsharés for inadequate consideration.
Management
Vi.
violates sound business principles.
Danger insolvency of the company
of
e.
Investigation of Associated Company
lt an inspector is appointed to investigate the affairs of a company, he
ay investigate the affairs of any associated company, associated undertaking
6
Nature of Company
and from the chief executive of such a company. [Sec. 260]
f. Non-publication of Name
If an officer of a limited company issues a document including bills of
exchange, cheque or promissory note and does not mention the name of the
company he shall be liable to a penalty of level 1 and shall be personally liable
to the holder of the document. [Sec. 24(2)]
2. Judicial Decisions
The corporate veil can be lifted under the following judicial decisions:
a. Tax Evasion
When a company is formed for the purpose of tax evasion, the Court may
lift the corporate veil.
Sir Dinshaw Maneckjee Petit
Dinshaw created 4 private companies for tax evasion. He transferred his
income to the companies. He got loans from the companies and never repaid.
The Court lifted the corporate veil of the 4
created to hide Dinshaw's income.
companies and held that they were

b. Company as
Agent
When a company acts as an agent or trustee of the shareholders, it loses
its corporate entity. In such circumstances, the Court may lift the corporate veil
Merchandise Transport Ltd. vs. British Transport Commission
A transpot company wanted to obtain licenses for its vehicles but was

not allowed to apply name. It formed a subsidiary company and applied for
in its
licenses in the name of the subsidiary. Held, the holding and subsidiary company
were one unit and the application was rejected.

C. Contractual Obligation
When a company is incorporated to avoid legal obligations, the Court may
lift the corporate veil.
Gilford Motor Co. vs. Horne
H, a former employee of GM Co., had an agreement with GM Co. to not
compete with each other. H formed a private company and started competing
with GM Co. GM Co. filed a suit. The Court restrained H and his private company
from competing with GM Co.
d. Fraudulent Purpose
The corporate veil may be lifted by the Court where a company is formed
for a fraudulent purpose.
Gencor ACP Ltd. vs. Dalby
D was a director of Gencor ACP Ltd. He fraudulently shifted the assets of
Gencor ACP Ltd. to another company owned by him. The Court lifted the
ordered to return the assets.
corporate veil between D and his company. D was
Nature of Company
e. Character of Company.
A Company may be considered an enemy if the persons controling is
affairs are itizens of an enemy country. The Court may lift the corporate velir
examine the character of the persons controling the company.
Daimler Co. Ltd. vs. Continental Tire and Rubber Co.
CTR Co. was marketing German-made tires in England. During World
War 1, CTR Co. filed a suit against an English company Daimler Co. for the
recovery of debts. Daimler Co. refused as CTR Co. was owned by Germans and
Germany was at war with England. The Court lifted the corporate veil and found
that CTR Co. was in fact owned by Germans.
Jurisdiction of Court
The following are rules tó deal with company cases: [Sec. 5,6]
1. High Court
The High Court having jurisdiction in the place where the registered office
of the company is situated shall be the Court for that company.
2. Winding up Cases
For winding up of companies, the registered office means the place which
has longest been the registered office of the company during 180 days before the
presentation of the petition for winding up.
3. Company Benches
The Chief Justice of each High Court shall constitute one or more
benches known as the company bench to deal with company cases.

4. Registrar
The Chief Justice of the High Court shall appoint a separate registrar to
deal with the affairs of the company bench, The registrar shall deal with petitions,
written issuance of notices, service of summons and other
replies,
applications,
functions.
5. Secretariat
The Chief Justice of each High Court may establish a secretariat in each
bench to provide secretarial support and perform other functions.
Company
6. Procedure of Court
The procedure is as follows:
be filed with the registrar of the
a. All written submissions to the Court shall
submission shall include the following:
company bench. The written
of facts, grounds and relief
i. A explaining a brief statement
petition
claimed.
i. A written reply with particulars
of set-off, if any.
ii. An affidavit of facts by the petitioner or respondernt or other persons, duly
commissioner.
attested by the oath
8
iv. Any relevant document in possession of the petitioner or Nature of Co
v. Any application for discovery of documents or interim
respondent
required. injunction
vi. A list of case law along with a summary
by pettioner in support of
claim. his

vii. Address, mobile number, email, fax or any other

mode notified by
Court for serving notices. the

vii. Any other document required by the

registrar.
b. Where a petition is. filed, the
respondents according to law.
registrar shall issue summons to the
C. The respondent shall file a written
reply to the registrar
days. If the within 30
respondent fails to file the written
reply within the time prescribed, the Court
may proceed ex parte and announce the final order.
d. The registrar shall
present the case to the Court within 45 days of the first
service of notice or 'such extended time as
may be granted by the Court
e. The Court shall fix a
date and time for hearing the case. No
be
granted except in exceptional adjournment shall
circumstances.
f. The Court shall treat affidavits, counter-affidavits and other documents filed
by the paties to the proceedings as evidence.
9. The Court may order the
Court refer
deponent to appear for cross-examination. The
may the
matter to the
recording of cross-examination. registrar or any other person for the
h. The Court shall decide the case within 120 days from the date of
presentation of the case. the
The Court may dismiss the
non-disclosure of facts.
petition and impose.a fine for misstatements and
j. Any person aggrieved by any judgment of the
in the Supreme Court of Pakistan within. 60 days.High Court may file an
appeal
DIFFERENCE BETWEEN COMPANY AND PARTNERSHIP
COMPANY
1. Formation PARTNERSHIP
It is formed by
following a procedure |lt is formed by an
under the law.
the persons. agreement between
2. Legal Person
It has a legal existence
its shareholders.
separate from|lt has no
legal existence separate from
3.
ts partners
Liability of Members
The liability of members is limited.
The liability of partners is unlimited.
 9
Nature of Company
4.Mutual Relationship
of partnership are its agents.
Members of a company are not its Partners a

agents.
5. Management
in the
All members cannot the All partners can take part
manage
company. It is managed by a board of management of a partnership.
directors.

6. Regulation
It is regulated by the Companies Act, |It is regulated by the Partnership Act,
2017. 1932.
7. Registration
Registration is compulsory for the Registration is not compulsory for the
formation of a company. formation of a partnership.

8. Minimum Members
must have at least 2
A Single member company has 1A partnership
member. A private company has at |partners.
least 2 members. A public company
has at least 3 members.
9. Maxinmum Members

Maximum number of members is 50 in |Maximum number of partners is 20 in a

a private company and unlimited in a

partnership.
public company.
10. Dissolution
It can be dissolved under the law only. t canbe dissolved with the consent of
the partners.
11.Transfer of ownershipP
A shareholder can transfer his shares A partner cannot transfer his share to

person without the consent of any person without the consent of all
to any
shareholders. partners.
12. Life
Its life is not affected by death, insanity. The death, insanity, insolvency. or
insolvency or expulsion of its members. expulsion of any partner terminates the
partnership.
13. Legal Formalities
A company is required to follow many A partnership is not required to follow
egal formalities. many legal formalities.

14. Audit
A public company is required to get itsA partnership is not required to get its

accounts audited by a certified jaccounts audited by a certified

 10 Nature of Company
chartered accountant chartered accountant.
15. Distribution of Profits
Distribution of profit is not compulsory. Profit is distributed
Members get a share in profit when a according to the partnership deed.
among partners
dividend is declared.
16. Number of Directors
A single member
company has 1 A partnership has no director.
director. A private company must
at least 2 directors. A
havve
Company must have at least 3
non-listed
directors. A listed company must have
at least 7 directors.

17. Taxation
The income of the
company and The income of
partnership and partners
shareholders is taxed
separately. It |is not taxed
results in double taxation. separately.
18. Remedy for Creditors
Creditors of the
the members.
company cannot sue
Creditors of the
partnership firm can

19. Financial Statements

Sue the partners jointly or separately.
Financial statements of a company are
Financial statements of a
published for the
public. .partnership
are not published for the public.
Standard Scale of Penaltyy
There shall be a standard
scale of penalty for
Companies Act, 2017. The standard scal consists of: [Sec. offenses under the
I Level Limit of Penalty 479]
Per day penalty during which
the default continues
Upto Rs.25,000 Upto Rs.500
Upto Rs.500,000 Upto Rs.1,000
Upto Rs.100 million Upto Rs.500,000

1.
QUESTIONS
Explain the historical
background of company
law.
2. Define a
company and discuss its characteristics.
3 Explain the corporate veil. Under what
circumstances it is
4. lifted?
Explain the jurisdiction of the Court regarding
company cases.
5. Differentiate between company and partnership.
 2
KINDS OF COMPANIES
The
companies can be classified as follows:
1. According to Incorporation
a. Chartered Company
b. Statutory Company
c. Registered Company
d. Foreign Company
2. According to Liability
a. Company Limited by Shares
b. Company Limited by Guarantee
c. Unlimited Company
3. According to Ownership and Control
a. Private Company
b. Public company
C. Public Sector Company
d. Holding Company and Subsidiary Company
e. Associated Company
4. According to Companies Act, 2017
a. Public Interest Company and Large Sized Company
b. Medium Sized Company
C. Small Sized
Company
5. Miscellaneous
a. Association not for Profit
b. Shariah Compliant Company
C. Free Zone Company
d. Agriculture Promotion Company
e. llegal Association
f. Startup Company
1. According to Incorporatlon
The companies are classified according to incorporation as follows:

1
 Kinds of Companies
12
a. Chartered Company
under a special charter granted by the Kins
A company which is formed
The powers, liabilities and nature of th
or Queen is called a chartered company.
determined by the charter. British East India
business of such a company are
examples of chartered
Company and Chartered
Bank of Australlia are
does not exist in Pakistan
companies. A chartered company
b. Statutory Company
special Act of the Parliament or an order
A company which is formed by a
of the head of the State is called a statutory company. It iS regulated by the Act
under which it is formed. The Act defines the powers and liabilities of the

usually formed to provide services to the public and not to earn a

company. It is
of
proft. The State Bank of Pakistan and
WAPDA are examples statutory
companies.

c. Registered Company
A company which is formed under the Companies Act, 2017 is called a
registered company. It includes existing companies registered under previous
laws It gets powers from the Companies Act, 2017 and the memorandum.
Examples of a registered company are Packages Limited and Millat Tractors
Limited
d. Foreign Company
A foreign company means a company or body corporate incorporated
Outside Pakistan: [Sec
2(1)(35)
Which has a place of business or liaison office in Pakistan by itself or through
an agent, Physically or through electronic mode; or
ii. Which conducts any business activity in Pakistan.
t means a foreign company is incorporated outside Pakistan but
onducts business inside Pakistan. Examples of foreign companies in Pakistan
are Coca Cola, Shell Petroleum, etc.
2. According to Liability
The companies are classified according to liability as
follows
a.
Company Limited by 3hares
A Company limited
by shares means a company having
the liability of IS
members limited to the amount remaining unpaid on the shares held by ie
Sec 2(1)(20)]
It
shares held
means the liability of its
members is limited up to the nominal
value o
by them. Examples of a
Cement company limited by shares are DG Nd
Co. Ltd.
and Sitara Chemical
Industries Ltd.
The liability clause of the
memorandum states that the liability of n
members is limited. Such a company must add
the word 'Limited' at the end or
Kinds of Companies 13
name. [Sec. 27]
b. Company Limited by Guarantee
A company limited by guarantee means a company having the liability of
its members limited to such amount which members
undertake to contribute to
the assets of the company in case of winding
up. [Sec. 2(1)(19)]
It means the liability of members is limited
up to the
The members are liable to pay the guaranteed amount at theguaranteed
amount.
time of winding up.
Pakistan Mutual Insurance Company
(Guarantee) Limited and Asian Mutual
Insurance Company (Guarantee) Limited are examples of
companies limited by
guarantee.
The liability clause of the memorandum states
that the liability of the
members is limited. Such a company must add the words
as the last words of its name.
'(Guarantee) Limited
[Sec. 28]
c. Unlimited Company
An unlimited company means company not having any limit on the
lability of its members. (Sec. 2 (1)(71))
It means that the personal assets of the shareholders can be used to pay
the debts of the company. The
liability clause of the memorandum states that the
ability of the members is unlimited. Such a company shall add the word
Unlimited as the last words of its name. [Sec. 29]
3. According to Ownership and Control
The companies are classified
according to ownership and control as
follows
a. Private Company
A private company company which by its articles: [Sec.
means a
2(1(49)]
iRestricts the right to transfer its shares.
1. Limits the number of members to 50, not including persons who are in the
employment of the company.
ii. Prohibits any invitation to the public to subscribe for the shares, debentures
or redeemable capital of the
company.
Where two or more persons hold one or more shares in a company
jointly, they shall be treated as a single member.
An example of a private company is Bahria Town (Pvt.) Ltd. If a private
company is formed by a single rmember, it is called a single member company.
b. Public Company
A
public company is a company which is not a private company. It means
tnat the company may invite the general public to subscribe to its shares or
debentures. At least 3 members are required to form a public company. There is
no maximum limit of
members in a public company. A public company may be
4
listed or non-listed. [Sec. 2(1)(52)] It can offer its shares
with the stock exchange.
company Is not listed with
is listed
A listed company A non-listed
the stock exchange. the stock
to the public through shares to the public through
its
the stock exchange.
It cannot offer

exchange.
C. Public Sector Company
public or private means: [Sec. 2(1)(54)]|
whether
A public sector company
or indirectly
controlled or beneficially owned by
i . A company which
is directly
the Govenment.
Government holds at
least 51% of voting securities
i. A company in which the
or voting power.
the power to elect, nominate or
Government has
A company in which the
1. directors.
appoint the majority of its
Iv. A public sector association not for profit.
Commission on the board of the
The nomination of directors by the
public it a sector company.
securities exchange entity shall not make
or any
and State Cement Corporation (Private)
Ltd are
National Fertilizer Corporation
examples of public sector companies.
d. Holding and Subsidiary Company.
that controls the composition of
company means a, company
holding
A
the board or controls more than 50% of voting
securities of another company.

A company whose composition of the board is

controlled or more than
a subsidiary
50% of voting securities are held by another company is called
or
For example, Engro Polymer and Chemicals Limited is a subsidiary
company.
Engro Corporation. [Sec. 2(1)(37,68)]
e. Associated Company and Associated Undertaking
Two or more companies or undertakings are considered to be associated
ifthey are connected in the following manner: [Sec. 2(1)(4)]
Ifa person who is owner, partner or director or controls at least 20% of voting
ieast
power in acompany is also the owner, partner or director or controls.at
20% of voting power in another company.
i. If companies are under common management or control.
ii. If one is a subsidiary of another company.
iv. If the undertaking is a Modaraba
managed by a company.
of a
The shares controlled, held or owned by a
person shall be considered to be
spouse or minor children
controlled, held or owned by that person.
In order to determine the status of ted
an associated company, assoclal
undertaking or associated person, the
following shall not be considered
Kinds of Companies
i. Directors appointed by the Federal
5
Government; Provincial Government or
d
financial
Trust.
institution controlléd by the Government or National Investment
i. Director appointed as an
ii.
independent director
Shares owned by the National
controlled by Government. Investment Trust or financial institution
4.
According to
Companies Act, 2017
The companies
under: [Sec. 224]
are classified according to the
Companies Act, 2017 as

a. Public Interest Company and

It includes the Large Sized Company
i. Listed company
following:
i. Non-listed company which
is
A public
sector company.
A public utility
company carrying on the business of essential public
service.
Holding assets in a fiduciary capacity for a
group of outsiders such as a
bank, insurance company, securities broker,
investment banking entity. pension fund, mutual fund or
All companies engaged in production and sale
of sugar.
i. Non-listed
company with:
Paid-up capital of Rs. 200 million or more.
Turnover of Rs. 1 bilion or more.
Employees more than
750.
Such number of members holding ordinary shares as may be notified.
Assets exceeding such value as may be notified.
.
Foreign company with a turnover of Rs. 1 billion or more.
V.
Non-listed company formed under Section 42 or
45 having annual gross
revenue including other income of Rs. 200 mlion and above.
b. Medium Sized Company
It includes the
following
Non-listed public company with:
Paid-up capital less than Rs. 200 million.
Turnover ofless than Rs.1 billion.
Employees more than 250 butless than 750
.
Private company with:
 Kinds of Companies
than Rs. 10 million but less than Rs 200
Paid-up capital of greater
million.
but less than Rs. 1 billion.
.Turnovergreater than Rs. 100 million
Employees more than 250 but less than 750
than Rs. 1 billion.
ii. A foreign company which has a turnover of less
iv. Non-listed company formed under Section 42 or 45 having annual gross
revenue including other income of less than Rs.200 million.

Small Sized Company

A private company having:
i. Paid-up capital up to Rs. 10 million.
i. Turnover not exceeding Rs.100 million.
ii. Employees not more than 250.
5. Miscellaneous
a. Association not for Profit
The Commission may register an association not for profit under the
following conditions: [Sec. 42]
i. It shall be formed to promote commerce, art, science, religion, health,
education, research, sports, protection of environment, social welfare, charity
any other useful object.
or
i. It shall use its profits to promote its objects.
L. It shall not pay dividends to its members.
iv. Its objects and activities shall not be against the laws, public order,
sovereignty and national interests of Pakistan. security.
Commission may allow the association to be registered as a
The
limited company, without adding the word 'Limited' or public
name. The Commission
"(Guarantee) Limited' to its
may impose Conditions which shall' be included in the
memorandum and articles. The association shall have all the
privileges
obligations of a limited company. Lahore Waste Management Company and
example of an assOCiation not for profit
is an
The Commission can revoke the license under the
following conditions:
i. Company fails to fulfill the conditions under which a license is
granted.
ii. Any regulation made under the law is not
fulfilled
ii. Affairs of the company are conducted in a manner against public interest or
public morality.
iv. Company is engaged in any activity against
public policy or a moral hazard.
v. Company has made a default in filing its financial statements or
returns for the preceding 2 consecutive financial
years.
annual
Kinds of Companies 17
vi. Company has acted against the interest, sovereignty, integrity and security or
Pakistan and friendly relations with foreign Stàtes.
vii. Number of members is reduced below 3.
vii. Company is carrying on unlawful or fraudulent activities.
ix. Company is run by persons who fail to maintain
proper accounts or commit
fraud.
x. Company is run by persons who are involved in terrorist financing or money
laundering
xi. Company is managed by persons who refuse to act according to the
memorandum, articles, Act or directions of the Commission or
registrar.
xii. Company is not carrying on its business or is not in
operation for 1 year.
xii. It is just and equitable that the license should be
revoked.
b. Shariah Compliant
Company
A shariah compliant
company means a company which is conducting its
business according to the principles of shariah. [Sec.
2(1)(64)]
c. Free Zone Company
A company incorporated to carry
on business in an export
procesing
zone or an area notified by the Federal Goverhment as a free zone is called a
free zone company. It shall have such exemptions from the requirements of the
Act as may be notified. The Commission may, to secure foreign investment,
restrict the disclosure of information regarding promoters, shareholders and
directors who are foreign nationals. [Sec. 454]
A free zone company is not bound to use the words "Private Limited" or
"Limited" with its name. It must add the words "FZC" at the end of its name.
d.
Agriculture Promotion Company
A company related to produce for agriculture promotion or engaged in
any activity connected with produce is called an agriculture promotion company.
Produce includes agriculture, arnimal husbandry, forest products, re-vegetation,
bee raising and farming plantation products. [Sec. 457]
e. llegal Association
Any association, partnership or company to cary on any business
Consisting of more than. 20 members Is illegal unless it is registered as a
Company under the Companies Act. [Sec. 9]
It does not apply in the following cases:
Any society, body or association incorporated under any other Pakistani law.
. A joint family carrying on joint family business.
i. A partnership of two or more joint families where total members, excluding
minors, does not exceed 20. It means that adult, members must not be more
 Kinds of Companies
18
than 20 but total members including minors may be more than 20.
iv. A partnership formed to carry on practice as lawyers, accountants o
limited liability company Is not allowed under
profession where practice as, a
the law.
Everymember of an illegal association is personally liable for all liabilities
of the business and liable to a penalty not exceeding level 1.
f. Startup Company
Startup company means a company that:
i. ls in existence for less than 10 years from the date of incorporation.
i. Has a turnover of less than 500 million rupees for any of the financial years
Since incorporation.
ii. Is working
processes
towards innovation, development or improvement
or services, or is a business model with a high
of products
potential of
employment generation or wealth creation.
iv. Such other companies as
may be notified by the Commission.
A company formed by splitting up or reconstruction of an existing
company shall not be considered a startup company. [Sec. 2(1)(67A)]

QUESTIONS
1. Explain the kinds of companies according to incorporation.
2. Explain the kinds of
companies according to liability.
3. Explain the kinds of companies
4.
according to ownership and control.
Explain the kinds ofcompanies according to the Companies Act, 2017.
5. Write note on
a
association not for profit.
6. Explain free
association.
zone
company, agriculture promotion company and illegal