MERCANTILE LAW

TYPES OF COMPANY
By liability:
Limited by shares
Limited by shares and guarantee
Limited by guarantee
Unlimited company (unrealistic)

By share Transferability:
Private Limited
Public Company (listed/unlisted)

By Ownership:
Holding Company
Subsidiary company

By object:
For Profit Company
Not for profit (section 42) company = profits are not given to owners in the form of
dividends.

Incorporation of company:
Getting suitable name of a company.
Preparing MOU
Preparing articles of association
Filling the Memorandum and articles (securities and exchange commission)
Filling documents necessary for obtaining certificates of commencement of business.

Memorandum of Association:
MOU is the constitution of the company.

CLAUSES OF MOU:
Name clause. (whats the name)
Registered office clause. (where located)
Principle line of business clause. (what are you doing- main thing)
Undertaking clause (SCEP)
Liability clause.
Authorized share capital clause. (Total amount of investments share holders can make)
Subscription Clause (We are such share holders, we are holding such and such shares)

How to alter MOU:

Subscription clause cannot be altered.
Liability clause can only be altered upon conversion of status of company (from limited to
unlimited)
The rest of the clauses can be altered by special resolution in a general meeting
(shareholder meeting)

ARTICLES OF ASSOCIATIONS
“The bylaws of the company, subordinate to the constitution of the company and further
subordinate of the Act.”

Company limited by share can get their articles registered or just adopt the articles in table
A of the first schedule to the Companies act 2017.

Registration of articles of association is compulsory requirement for a company limited by

guarantee or unlimited company.

A company may be special resolution after its articles.

PROSPECTUS
Any document inviting offers from the public for the subscription or purchase of any
securities of a company.

The prospectus is issued with the approval of SCEP.

The prospectus shall be published at least in one Urdu and one English in newspaper.
The prospectus must contain sufficient material to enable any person to reach a decision on
the investment in the security of the company.
A person who commits an offence, who:
- Makes a misleading, incorrect, untrue or deceptive statement in a prospectus; or
- Or omits information or a statement that is required to be published.

BORROWING
Types of Borrowing:
- Debenture
- Borrowing from credit institutions
- Borrowing from other sources. (taking money from owners)
Types of securities:
- Pledge
- Mortgage
- Charge
o Fixed charge
o Floating charge
Procedure for registration of mortgage or charge (details in notes)

Types of company meetings

 Board of directors’ meetings
 General meetings (share holder meeting)
A general meeting:
- Statutory meeting (once in a lifetime, when company is made)
- An annual general meeting
- An extraordinary general meeting

Statutory meeting:
Timing, matters to be stated in the meeting, Auditors report.

Annual General meeting:

Voting on certain resolutions. Meetings called by board of directors.

 the election or re-election of directors, if due on the date of AGM

 the approval of a final dividend, if declared by the directors
 the appointment or re-appointment of the auditors.

EGM:
Directors can call it, members too can call it (at least 10% of shares holding in the company).

Board Meetings:
Directs can call as many meeting as they want in as many manners as they want.
Audit & Human resource committee – Mandatory
Nomination and Risk Management Committee – Optional.

Meetings:
Members in the GM can:
Elect/Dis-elect board members.
Can alter the power of the board directors by altering articles of association of the company.
Approve or disapprove dividents. (Through special resolution – not less than 3/4 th)

Management:

TRANSFER OF SHARES:
Application of transfer along with proper instruments of transfer to be submitted to the the
company either by the transferee or by the transferor.
The company shall within fifteen days after the registration of the transfer of any
such securities complete the process and
- ensure the delivery of certificates to the transferee at his address.
- Enter in its register of the members the names of the transferee.
Board shall not refuse to transfer any shares or securities unless the transfer deed is for any
reason defective or invalid.
15 days will be given to the transferee to re-lodge its application after the removal of the
defect.
5 days will be given to the central depository.
All of this is for public company, in private limited the share holder can not go and sell the
share at his own whim this be subject to such limitations and restrictions as may have been
imposed by the articles of the company.

Private company and share of transfer:

Member who wants to sell needs to notify the board.
The board will then in a period of 10 days offer the shares to the existing members.