LAW GOVERNING COMPANIES

Introduction to companys ordinance 1984

UK companies act 1844, 1850 in India 1913 the companies act was passed in British India Pakistan adopted the act of 1913 Appointed a company law commission in 1959 report was submitted in 1960 In 14th Jan 1972 ordinance was amended In 1984, 1913 act was replaced by the companys ordinance 1984 Amendments has been made time to time till 31st Aug 2003

Company Courts
High courts One or more benches in the high court known as company bench Appeal Supreme Court is Appellate court

Corporate Law Authority

Federal government empowered to constitute a CLA Consists of members not less than three one of the member is appointed as chairman by the federal govt SECP

Powers and functions

Call for any documents/information for purpose of any enquiry or proceedings

Allow alteration in memo of association Decide name of the company Approval for conversion of a public company into a private company Approval of prospectus Sanction issue of shares at discount Allow to make a loan to a director Appoint auditors in certain cases Make application to the court for winding up of a company Recommend a panel to the court for appointment as liquidator Prescribe additional fees for filing of documents Impose fine as penalty Hear appeals against the order of registrar

Registration of company
Promoters; few person get together to bring it into existence Documents Memo of association Article of association Statement showing the authorized capital of the company List of persons agreed to act as first director There written consent Notice of the situation of the registered office of the company Issue of a Prospectus

Memo of Association
Most important documents Defines the constitution Its a nature of contract and outside world Subscribed by at least seven persons in case of public company two or more in case of private company Memo must be Prepared very carefully Printed Divided into different paragraphs Stamp according to the provisions of companies ordinance Signed by each subscriber in the presence of witness Contents of Memo Name of the company Domicile of the registered company Object of the company Authorized capital Name of the Company Every company use the word limited Not identical with any other registered company

Words express, royal, imperial, state, King, Federal, must not be used Without sanction of govt. Registered office The company must have a registered office Must notify to registrar Change of place The place changed from province to province by passing a resolution and Obtaining the confirmation by CLA The place changed within the province by a special resolution only notice to the registrar

Object
Purpose of the Company, sphere of the companies activities Company cant do anything outside the object class Cant amended easily Protection to the share holders debenture holders creditors or bankers All other persons deal with the company The object of the company is gone the company may be wound up

Alteration of the Object

Company can alter the object with the confirmation of CLA Alteration is made within the following limits Carry on its business more efficiently Attains the main purpose by new or improved means To enlarge or change the local area To carry on some other business this may be conveniently combined with its own

To amalgamate with other company

Procedure
A notice to person whose r likely be effected CLA must hear the objections CLA confirm the alteration Certified copy of the order with copy of memo should be filed with the Registrar within 90 days Registrar issues the certificate of registration Capital clause of Memo Must state the amount of capital Way in which divided into shares What funds are necessary to set the business? If proposed to buy an old what some is wanted and what addition is wanted to keep the business going Article of Association Rules made by the company for the internal management and affairs To carry out the objects of the company Difference between memo and articles Memo is the area beyond which the company cant go Articles are the by laws for the share holders and the company

Memo cant be altered, exceptions are there Articles can be altered to any extent Articles are subordinate to the memo thus they cant control or alter the memo If any ambiguity both should be read together Registration of Articles Articles signed by the subscriber may be registered Articles must be printed Signed by each subscriber of the memo in the presence of at least one witness Alteration of Article Wide powers in the company to alter its articles Limitations By passing a special resolution Should not contain illegal provisions Alteration should not constitute a fraud on minority Should be made bonafide for the benefit of the company Should not enable the company to commit a breach of contract Articles not to be made unalterable Promoters A person who undertakes to form a company with reference to a given object A person who was a party to the preparation of prospectus

Promoters liability to disclose Duty to disclose all material facts relating to the formation of company Disclosure must be actual and express Promoter is liable for all his acts He is also answerable for any secret profit he made during the formation of Company His liability arises if company comes into existence Promoters remuneration Prospectus Any document describe as Prospectus which invite the public to purchase of any Shares or Debenture Includes Notice, Circular, Advertisement, or any other communication. Contents of Prospectus Contents of memo names, addresses, and occupations of the signatories and the number of shares subscribed for by them. Description of business Names, addresses, and occupations of the Directors, Chief Executive, the Managing Director, and the Secretary Remuneration payable to them. Date/Time of the opening of the subscription list Amount payable on application and allotment of shares.

Amount of premium or discount on shares. Preliminary expenses. Names and Addresses of auditors and legal advisors. Voting rights. Restriction imposed upon the members of the company Untrue Statement Liability 2years imprisonment fine may extend to Rs. 10,000. Contracts May be made on behalf of the company in writing, signed by any person acting under authority Bill of exchange or pro note made, drawn, accepted or endorsed on behalf of company under authority implied or express. May empower a person under its common seal to execute deeds on its behalf either generally or some specified matters. May issue a facsimile seal for use in abroad Directors interest A director can not enter in to a contract with the company He disclose the nature of interest, he cant participate in further proceeding and voting. Register Company maintain a register of all contracts Should kept open to inspection by any member after payment of fee in registered office

Allotment of Shares Division of entire share Capital into definite shares each of a particular value Assignment of such shares singly or numerously to different persons. Application for allotment with prospectus is irrevocable Not less than amount specified by CLA Applicant is binding on him Incase of violation it is punishable extend to 10,000 Shares cannot be further allotted to any other person An application is a offer and allotment is acceptance SUM COLLECTED IS USED FOR Purchased of property or to be purchased Any preliminary expenses Repayment of any money borrowed by the company Shares at discount A company can issue share at discount on passing a resolution in general meeting Obtaining sanction of CLA Discount must not exceed 10 % if then approved by CLA The particular of discount must be stated in prospectus in case of default fine up to 2000/-