1

NATURE OF COMPANY

Historical Background
The word company originated from the Latin word companio which
means companion. The word company was first usedin 1553 for a busmess
association. The word corporation is derived from the Latin word corpus which
means body. The world's oldest company was Kongo Gumi that was established
in 578 in Japan.
Originally, companies were only established through a royal charter or
an Act of the parliament. Examples of chartered companies are the British East
India Company, Dutch East India Company and Bank ofEngland established in
1600, 1602 and 1694 respectively. The British parliament enacted the Joint Stock
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 registràtion 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 liability 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The Companies Act, 1882 repealed all previous laws in India.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.
At independençe in 1947, Pakistan adopted the Companies Act, 1913
alongwith its amendments. In 1981, the Corporate Law Authority was formedthe
to

regulate the corporate sector. The Companies Act, 1913 was replaced by and
Companies Ordinance, 1984. In order to enforce the law, the Securitjes
SECP
Exchange Commission of Pakistan (SECP) was established under the SECP
Act, 1997. The SECP replaced the Corporate Law Authority. The
exercises all powers and functions on behalf of the Federal Government. In
2017, the Companies Ordinance, 1984 was replaced by Companies Act,
the
2017.
2 Nature of Company
Application of Law
The Companies Act, 2017 applies to
the whole of Pakistan. It is a Foad
eral
and 8
schedules.
law. It has 515 sections
The Act provides powers to the Provincial Government for non-tradine
corporations limited to a single province T tne icense Is issued by that Provincial
Government., If a non-trading corporation extends its business activities eyond
the limits of the province, it shall be liable to a penalty of level 3 or may be wound

up.
The provisions of the Act shall apply despite any provision contained in
the memorandum, articles, agreement or resolution. All provisions which are
against the Companies Act, 2017 shall be void. [Sec. 1,3,4]
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
purpose of carrying on some trade, business or undertaking usually with limited
but sometimes, with unlimited liability".
Characteristics of Company
The following are characteristics of a company:
1. Voluntary Association
A Company is a voluntary association. of people who
enter into an
in
to run a business. The registration of companies is compulsory
agreement
Pakistan. The company is registered under the Companies Act, 2017. t comes
VWithout
into existence from the date mentioned in the certificate of incorporation.
incorporation, the voluntary association has no legal existence.
2. Artificial Legal Person.
A Company is an artificial legal person with rights and liabilities. A
not
company is treated as a legal person separate from its members o f law
the eye or law
exist physically like a living person but exists legally. It exists in
and acts through directors elected by the shareholders.
3. Members and Direstors
A Company having one member is called a single member company.
v a e Company must have at least two members. A public company must iav
atleast three members.
A member company shall have one director. A private three
shall haveSingle
at least two directors. A non-isted company shall have at least tnre
directors. A listed company shall have at least seven directors.
Nature of Company 3
4. Separate Legal Entity
A company has a legal entity separate from its members. It has its own
name. Its assets and liabilities are separate from those of its members. The
creditors can recover their debts only from the assets of the company. Similarly,
the company is not liable for the debts of its members. A company can sue and
be sued. It can own property, borrow debts, open bank account, employ people
and make contracts.
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 five
children became members of the company.
After some time, the company went into liquidation. On liquidation, the
company had assets worth £6,000. The liabilities included £10,000 secured
debentures held by Salomon and £7,000 to unsecured creditors. The unsecured
creditors claimed prionity on the 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 agreement 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. In a

company limited by shares, the liability of a member is limited up to the face

value of shares held by him. If a member has paid the full 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 has a succession which means continuous
perpetual
company
of
existence. Its life does not end with the death, insolvency or retirement
law.
Snareholders. A company is created under the law and dissolved under the
he members may leave the company by selling their shares but the company
continues to exist.
Noel Tedman Holdings Pty Ltd.
and wife were the oruly shareholders of a company. They
were
A husband leaving behind an intant
also the company's directors. Both died in an accident, Wife to
Cid. The Court allowed the representatives of the dead husband and
 Nature of Company
transfer of shares to the child
hild.
allow the
of the company to
directors
appoint
of S h a r e s transferable. However in
7.
Transfer are freely
The shares of apublic company
in of sharee
of
e transfer
which the sharesis
the manner

the law
describes
n the right ofmemho
restrictions on membe
private company, reasonable
his shares, the transferee ae
contain
articles may
made. The member transfers
When a
to transfer
the shares. shares.
transferor regarding those
all rights ofthe Bhd
Estate Sdn
Ladang R.M. buyer. The
sold their shares to
Aziz bin Atan vs. one
All shareholders of the company
It was held
of employer took place.
determine whether a change
Court had to its identity.
that the company did not change
8. Separate Property
separate from its members. It can buy and
The company is a legal person used for
of the.company cannot be
sell property in its name. The property
The members cannot claim any ownership
personal benefit of the shareholders.
the existence of the company.
rights in assets of the company during
Macaura vs. Northern Assurance. Co Ltd.
business. Later, he
bought an insurance policy for his timber
Macaura
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
It was held that the
company refused Macaura's claim for compensation.
the
insurance company is not liable as Macaura's property is separate from
company.
9. Separate Management
The ownership and management of a 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 Ihe
members elect directors from the members to run the affairs of the company.
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
that only the company has the right to sue.company's
Moreover,property. It
if the majority or was
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. reiisna
vel between the
company and its members. When a
fraud or its company is invo and
policies are against the and
management may be held personally liablepublic interest, the members
memo Ignore
nore
the limited by the Court. The Court
liability of members and can to
separate legal entity of the
cO
 5
Nature of Company The
the corporate veil.
This act of the Court is called lifting
ounish the culprits. reasons:
corporate veil may be lifted for the following
1. Statutory Provisions
statutory provisions:
The corporate veil can be lifted under the following
a. Minimum Members
carries on business for
more
a if
The corporate veil can be lifted a company
members reduces
below 3 in a public
after the number of
than 180 days person who is a member during
below 2 in a private company. Every
company.or and is aware of this
continues its business after 180 days
time. [Sec.
the time the company of the company incurred during that
liable for the debts
fact, shall be
15]
b. Application Money shares or other
to subscribe to its
Where a company invites
the.public
in case of unaccepted or
shall refund the money not made within
securities, the company time. If a refund is
within the [pecified
unsuccessful applications
liable to repay the monèy with surcharge
the directors shall be be liable
the specified time, from the expiry of 15th day and shall
at the rate of 2%
for every month
level 3. [Sec. 68]
to a penalty of
c. False Prospectus a misleading,
incorrect, untrue
makes
an offense who under the
A person commits or omits information required
statement in a prospectus shall be
or deceptive a false or misleading prospectus
who has signed and _uffers a loss
Act. Every person person who buys securities
to any
liable to pay compensation Securities Act, 2015]
due to such prospectus.
[Sec. 92,93
of Company may
may ask the
d. Investigation resolution or the Court,
a The
The members, through look into the affairs of the company.
investigators to
Commission to appoint cases: [Sec. 256,257]
in the following
canlift the corporate veil oppression
investigator creditors or other persons;
intention against
members,
i Fraudulent business activities.
or fraudulent and unlawful
against members; and management..
or unlawful business by promoters
i. Fraud, misconduct
members.
i. Denial of reasonable
profits to
members regarding the
company affairs.
to
iv. Denial of information consideration.
shares for inadequate
v. Allotment of
sound business principles.
vi. Management violates
of the company.
vii. Danger of insolvency
Associated Company he
e. investigation of the affairs of a
company,
appointed to investigate
If an inspector is associated company,
associated undertaking
affairs of any
may Investigate the
6 Nature of Company
the chief executive of such a company. [Sec. 2601
and from
Name
f. Non-publication of
t 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 OT level 1 and shall be personally ble

to the holder
document.
ofthe [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 companies and held that they were
created to hide Dinshaw's income.
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 transport company wanted to obtain licenses for its vehicles but was
not allowed to apply in its name. It formeda subsidiary company ànd applied for
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 belifted by the Court where a company is formed
for a fraudulent purpose.
Gencor Ltd.
ACP
Dwas a
vs. Dalby
director of Gencor ACP Ltd. He fraudulently the
Gencor ACP Ltd. to another company owned by him. The shifted
Court assets of
lifted the
corporate veil between D and his company. D was ordered to return the
assets.
Nature of CompanyY
of Company controlling its
e.
Character if the persons
considered an enemy
A company may
be corporate veil to
The Court may lift the
citizens of an enemy country.
affairs are the persons controlling
the company.
evamine
examine the character of
vs. Continental
Tire and Rubber Co. World
Daimier
Co. Ltd.
German-made tires in England. During the
CTR Co. was marketing Daimler Co. for
a n English company
1, CTR Co. filed a suit against Co. was owned by
Germans and
War CTR
debts. Daimler Co. refused
as
veil and found
recovery of The Court lifted the corporate
at war with England.
Germany was Germans.
that CTR Co. was in fact owned by
Jurisdiction of Court
rules to deal with company
cases: [Sec. 5,6]|
The following are

1. High Court office

the registered
in the place where
The High Court having jurisdiction
that company.
situated shall be the Court for
of the company is
2. Winding up
Cases
place which
the
registered office
means
the
For winding up of companies, before the
during 180 days
has longest been the registered office of the company
for winding up.
presentation of the petition
3. Company Benches or more
constitute one
The Chief Justice of
each High Court shall
cases.
the company bench to deal with company
benches known as

4. Registrar to
of the High Court shall appoint a separate registrar
The Chief Justice
of the company bench.. The registrar shall deal with petitions
deal with the affairs of summons and other
issuance of notices, service
application_, written replies,
functions.
. Secretariat each
Court may establish a secretariat in
The Chief Justice of each High functions.
bench to provide secretarial support and perform other
company
6. Procedure of Court
The procedure is as follows:
Court shall be filed with the registrar of the
a. All written submissions to the
submission shall include the following:
company bench. The written
statement of facts, grounds and relief
i. A petition explaining a brief
claimed.
Ii. A written reply with particulars of set-off, if any.
i. An affidavit of facts by the petitioner or respondent or.other persons, dulyy
attested by the oath commissioner.
 8
iv. Any relevant document in poSsession of the petitioner or Nature of Company
resnOn
V. Any application for discovery of documents or interim iniunchi
required.
interim injunction, i
vi. A list of case law along with a summary by
petitioner in support ofof his
claim.
vii. Address, mobile number, email, fax or any other mode notified
Court for serving notices. ed hu
by the
vii. Any other document required by the registrar.
D. vvhere a petition is filed, the registrar shall issue summons to
to the
respondents according to law.
C. The respondent shall file a written reply to the registrar within 30
days. If the
respondent
fails to file the written reply within the time prescribed, the
Cout
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 adjournment shall
be granted except in exceptional circumstances.
f. The Court shall treat affidavits, counter-affidavits and other documents
filed
by the parties to the proceedings as evidence
g. The Court may order the deponent to appear for cross-examination. The
Court may refer the matter to the registrar or any other
person for the
recording of cross-examination.
h. The Court shall decide the case within 120
days from the date of-the
presentation of the case.
The Court may dismiss the petition and impose a fine for misstatements and
non-disclosure of facts.
Any person aggrieved.by any judgment of the High Court may file an appeal
in the Supreme Court of Pakistan within. 60 days.
Standard Scale of Penalty
There shall be a standard.scale of
There penalty for offenses under the
Companies Act, 2017. The standard scale consists of: [Sec. 479]
Level Limit of Penalty Per day penalty during which
the default continues
1 Upto Rs.25,000 Upto Rs.500
2 Upto Rs.500,000 Upto Rs.1,000
3 Upto Rs.100 million Upto Rs.500,000
 2
KINDS OF COMPANIES3
can be classified a s follows:
The companies

1.
According to Incorporation
Chartered Company
a.
Statutory Company
c. Registered Company
d. Foreign Company
Liability
2. According to
Limited by Shares
a: Company

b. Company
Limited by Guarantee
Unlimited Company
C.
Control
3. According to
Ownership and
a. Private Company
b. Public company
C. Public Sector
Company
Company
Holding Company and Subsidiary
d.
e. Associated Company
Act, 2017
4. According to Companies
Interest Company
and Large Sized Company
a. Public
b. Medium Sized Company
C. Small Sized Company
5. Miscellaneous
a. Associationnot for Profit

b. Shariah Compliant Company

C.FreeZone Company
d. Agriculture Promotion Company
e. lHegal Association
f. Startup Company
1. According to Incorporation as follows:
are classified according to incorporation
The companies

11
12 Kinds of Companies
a. Chartered Companyy
A company which is formed under a special charter granted by the Kin
or Queen is called a chartered company. The powers, liabilities and nature ofthe
business of such a company are determined by the charter. British Fast I
Company and Chartered Bank of Australia are examples of of chartered
chartered
companies. A chartered company does not exist'in Pakistán.
b. Statutory Company
A company which is formed by a special Act of the Parliament or an order
of the head of the State is called a statutory company. It is regulated by the Act
under which t is formed. The Act defines the powers and liabilities of the
company. It is usually formed to provide services to the public and not
to earn a
profit. The State Bank of Pakistan and WAPDA are examples of 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
memorandum.
laws. It gets powers.from the Companies Act, 2017 and the
Examples of aregistered 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)1
i. 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.

Pakistan but
It means a foreign company is incorporated outside
in Pakistan
conducts business inside Pakistan. Examples of foreign companies
are Coca Cola, Shell Petroleum, etc.
2. According to Liabllity
The companies are classified according to liability as follows:
a. Company Limited by Shares
of its
A company limited by shares means a company having the liability
them.
members limited to the amount remaining unpaid on the shares held by
Sec 2(1(20))
or
It means the of its members is limited up to the nominal value
liability Knan
them. Examples of a company limited by shares are DG
shares held by
Cement Co. Ltd. and Sitara Chemical Industries Ltd.
The liability clause of the memorandum states that the liability of the
or ns
members is limited. Such a must add the word 'Limited' at the end
company
Kinds o f C o m p a n i e s

name. [Sec. 27] 13

. Co
b. Company Limited by Guarantee
company
A limited by
guarantee means a company having the of
members limited to Such amount which members liability
undertake to contribute to
tne assets of the-company in case of winding up. [Sec. 2(1)(19)]
the
It means the liability of members is limited up to the
guaranteed amount.
The members are liable to pay the guaranteed amount at the time of
Dakistan Mutual Insurance Company (Guarantee) Limited and Asian Mutual
winding up.
Insurance Gompany (Guarantee) Limited are examples of companis limited by
guarantee.

The liability clause of the memorandym states that the liability of the
members is limited. Such a'Company must add the words (Guarantee) Limited'
as the last words of its name. [Sec. 28]

C. Unlimited Company
An unlimited company means a company not having any limit on the
liability of its members. (Sec. 2 (1)(71)1
It means that the per$onal assets of the shareholders can be used to pay
the debts of the company. The liability clause of the memorandum states that the
liability 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 means a company which by its articles: [Sec. 2(1)(49)]
i, Restricts the right to transfer its shares.
i. 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 member, it is called a single member company.
b. Public Company
A public company is a company which is not a private company. It means
that the company may invite the general public to subscribe to. its shares or
debentures. At least 3 members are tequired to form a public company. Ihere 5
no maximum limit of members in a public company. A public company may be
14
isted or non-listed. [Sec. 2(1)(52)]
Kinds of Companies
A listed company is listed with the stock
exchange. It can offer its sharee
to the public through the stock exchange. A non-isted
is
the stock exchange. It cannot offer ts shares to the company not listed with
public through the stock
exchange.
C. Public Sector Companyy
A public sector companý whether
public or private means: [Sec. 2(1 54)]
i. A company which is directly or
indirectly controlled or beneficially owned by
the Government.
ii. A company in which the Government holds at least 51% of
or voting power. voting securities
ii. A company in which the Government has the
appoint the majority of its directors. power to elect, nominate or
iv. Apublic sector association not for profit.
The nomination of directors by the Commission on the board of the
securities exchange or any entity shal not make it a public sector company.
National-Fertilizer Corporation and State Cement Corporation
examples of public sector companies. (Private) Ltd are
d. Holding and Subsidiary Company
A holding company means a company that controls the
controls more than 50% of voting securities of anothercomposition
the board of
or
company.
A company whose composition of the board is controlled or more than
50% of voting securities are held by
another company is called a subsidiary
company. For example, Engro Polymer and Chemicals Limited is a subsidiary of
Engro Corporation. [Sec. 2(1)(37,68)
e. Associated Company and Associated Undertaking
Two or more companies or
if they are connected undertakings are considered to be associated
in the following manner: [Sec. 2(1)(4)]
i. If a person 'who is owner,
partner or director or controls
power in a company is also the owner, partner
at least 20% of
or director or controls atvoting
least
20% of voting power in another
ii. If
company.
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.
The shares controlled, held or
person shall be considered to be owned.by a spouse or minor children or a
Ih order to determine the
controlled, held or owned by that person.
status of an associated
undertaking or associated person, the following shall ompany, associatea
not be considered:
Kinds of Companies
Directors appointed by the Federal Government, Provincial 15
Government
financial institution controlled by the Government or National or a

Tryst. Investment
. Director appointed as an independent director.
i. Shares owned by the National Investment Trust or financial institution
controlled by Govermment.
4, According.to Companies Act, 2017
The companies are classified
under: [Sec. 224]
according to the Companies Act, 2017 as

a, Public Interest Company and Large Sized Company

It includes the following:
i. Listed company
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, pension fund, mutual fund d
investment banking entity.
All companies engaged in production and sale of sugár.
ii. Non-listed company wjth:
Paid-up capital of Rs. 200 million or more.
Turnover of Rs. 1 billion or more.
Employees more than 750.
Such number of members holding ordinary shares as may be notified.
Assets exceeding such value as may be notfied.
. Foreign company with a turnover of Rs. 1 billion or more.

. Non-isted company formed under Section 42 or 45 having annual gross

revenue including other income of Rs. 200 million and above.
b.
Medium Sized Company
It includes the following:
Non-listed public company with:
Paid-up capital less.than Rs.200 million.
Turnover of less than Rs.1 billion.
Employees more than 250 butless than 750.
Private company with:
16 Kinds of Companies
Paid-up capital of greater than RS. 10 million but less than
Rs. 200
million.
Turnover greater than Rs. 100 million but less than Rs. 1 billion.
Employees more than 250 but less than 750.
ii. A foreign company which has a turnover of less than Rs. 1 billion.
iv. Non-listed company formed under Section 42 or 45 having annual grgss
revenue inctuding other income of less than Rs.200 million.
c. Smail Sized Company
A private company having:
Paid-up capital up to Rs. 10 million.
i. Turnover not exceeding Rs.100 million.
i. Employees not more than 250.
5. Miscellaneous
a. Association not for Profit
The Commission may register an association not for profit under the
foliowing conditions: [Sec. 42]
i It shall be formed to promote commerce, art, science, religion;
health,
education, research, sports, protection of environment, social welfare, charity
or any other useful object.
i t shalil use its profits to promote its objects
ii. It shall not pay dividends to its members.
Iv. ts objects against the laws, public order, security
and activities shall not be
sOvereignty and national interests of Pakistan..
The Commission may allow the association to be registered as a public
limited company, without adding the word Limited' or (Guarantee) Limited' to its
name The Commission may impose conditions which shall be included in the
memorandum and articles. The association shall have all the privileges and
obigations of a limited company. Lahore Waste Management Company is an
example of an association not for profit.
The Commission can revoke the license under the following conditions
Company fails to fulfill the conditions under which a license is granted.
Any regulation made under the law is not fulfilled.
1. Affairs of the company are conducted in a mannei against public interest on
public morality.
V 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 annual

returns for the preceding 2 consecutive financial years
Kinds o f Companies
17
of
has acted against the interest, sovereignty, integrity and security
Company States.
Pakistan and friéndly relations with foreign
is reduced below3.
vii. Number of members
unlawful or fraudulent activities.
vii. Company is carrying
on
accounts or commit
Is run by persons who fail to maintain proper
ix. Company
fraud.
money
.

or
by persons who are involved in terrorist financing
X. Company is run

laundering.
to the
managed by who rèfuse to act according
persons
xi. Company is
of the Commission or registrar.
memorandum, articles, Act or directions
1 year.
Company is not carrying on its business or is not in operation for
xii.
that the license should be revoked.
xii. It is just ahd equitable
b. Shariah Compliant
Company
which is conducting its
A shariah compliant company means a company
2(1)(64)]
business according to the principles of shariah. [Sec.
C. Free Zone Company
on business in an export processinng
A company incorporated to carry
Federal Government as a free zone is called a
zone or an area notified by
the
the
have such exemptions from the requirements of
free zone company. It shall investment,
be notified. The Commission may, to secure foreign
Act as may shareholders and
restrict the disclosure of information. regarding promoters,
454]
directors who are foreign nationals. [Sec.
to use the words "Private Limited"
or
A free zone company is not bound
the words "FZC" at the end of its name.
Limited" with its name. It must'add
Company
d. Agriculture Promotion in
agriculture promotion o r engaged
Acompany related to produce for company.
any activity connected with produce is called an agriculture promotion
re-vegetation,
animal husbandry, forest products,
Produce includes agriculture,
products. [Sec. 457]
Dee raising and farming plantation
e. lllegal Association on any business
partnership or company to carry
Any association, is illegal unless. it is registered
as a
than 20 members
consisting of more
Company underthe Companies Act. [Sec.9)
It does not apply in the 'following cases law.
Any society, body or association incorporated under any other Pakistani
. A joint family carrying on joint family business,

joint families where total'members, excluding

A partnership of two or more
not.be more
that adult members must
minors, does not exceed 20. It
means
18
Kinds of Companies
than 20 but total members including minors may be more
than 20.
iv. A partnership formed to carry on
practice as lawyers, accountants or
profession where practice as a limited liability company is not allowed under
the law.
Every member of an illegal association is personally liable for all liabilities
ofthe business and liable to a penalty not exceeding level 1.
f. Startup Company
Startup company means a company that:
i. Is in existence for less than 10 years from the date of incorporation.
ii. Has a turnover of less than.500 million rupees for any of the
financial years
since incorporation.
ii. Is working towards innovation, development or
improvement of products,
processes or services, or isa business model with' a high potential of
employment generation or wealth creation..
iv.
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)]