Deatils about coperate sector works in Pakistan. And also tells the rule of copertae sector

1. Name: Syed Ziyad Bin Hasan
Class ID: 105469
Student ID: 11091
Course: Corporate & Business Law
Course Instructor: Attia Iqbal
MAIN CAMPUS
ASSIGNMENT 2:
The corporate sectorin Pakistan was governed by the Companies Ordinance 1984
which was promulgated on 8 October1984 and repealed the Companies Act,1913.It
is now replaced by Companies Ordinance2016..The Companies Ordinance1984 is
a broad piece of Pakistani legislation that,according to its preamble, is "An
Ordinance to consolidate and amend the law relating to companies and certain other
associations".It encompassesall legal rules and regulations for businesses registered

2. with the Security and Exchange CommissionofPakistan (SECP) and is enforced by
that agency.
Introduction: A company is a corporation.In the eye of the law, it is a person
which is different from its members. As a company in person in the eye of the law, it
can own property.It can have rights and it can also be subject to the liabilities. A
company is not an agent ofits members. The company cannot sue the members in
case of liabilities and members of the company cannot sue it to enforce rights.
Main Point Of Difference b/w Public & Private Company:
1. Relevant statute:
 PRIVATE COMPANY -Private company has the following restriction while
these restrictions do not apply to othercompanies.
 (1) It cannot have members more than 50 excluding those are the employees of
the company (2) It cannot invite the general public to subscribe to the share of the
company
(3) It restricts freely transferof share
 PUBLIC COMPANY - Companies Ordinance define a public company as a
company that is not a private company.It means every company that is registered
in Pakistan eitherit is a private company ora public company.
The Ordinance also provides legal protection and regulates the business community
of Pakistan,with the SECP keeping a close check on financial and corporate entities
to ensure stakeholder’s interest.
The previous Companies Act 1913 was in practice for the same purposes.
DEFINITIONSIN COMPANIES ORDINANCE 1984
Article.
"articles" means the articles of association ofa company as originally framed or as
altered following the provisions of any previous Companies Act,or of this Ordinance,
including, so far as they apply to the company,the regulations contained in Table A in
the First Schedule;
1." associated companies"

3. Associated Companies A company whose 20 % or more shares (up to 50%) are
held by anothercompany shall be considered an associated companyof that company.
2.Body corporate
"Body corporate" or "corporation“Meansa setup having separate existence
distinct from its member.In includes a company incorporated in Pakistan and outside
Pakistan, but does not include the following corporation sole; or a co-operative
society registered underany law relating to such societies; or any otherbody
corporate,otherthan a company definedin this Ordinance,which the Federal
Governmentmay,by notification in the Official Gazette,specify for this purpose.
ok and/orPaper" book and paper","book orpaper" or "books ofaccounts" include
accounts, deeds, vouchers, registers, writings and documents maintainedon paperor
computernetwork,floppy,magnetic cartridge tape,CD,rom or any othercomputer-
readable media.
3.Chief Executive and Commission
"chief executive",about a company means an individualwho, subject to the control
and directions of the directors, is entrusted with the whole, or substantially the whole,
of the powers of managementofthe affairs of the company,and includes a director
or any otherperson occupying the position of a chief executive,by whatevername
called, and whetherundera contract ofservice or otherwise;“Commission” means
the Securities and Exchange CommissionofPakistan established undersection 3 of
the Securities and Exchange CommissionofPakistan Act,1997 (XLII of 1997);]
4. Company
"company"means a company formed and registered underthis Ordinance or an
existing company; "company limited by shares" means a company having the liability
of its members limited by the memorandumto the amount,if any, unpaid on the
shares respectively held by them; "company limited by guarantee" means a company
having the liability of its members limited by the memorandum to such amount as the
members may respectively thereby undertake to contribute to the assets of the
company in the event of its winding up;
5. Court, Debenture, and Director
"the Court" means the Court having jurisdiction under this Ordinance"debenture"
includes debenture stock,bonds, 2[term finance certificate]and any othersecurities,
otherthan a share, of a company,whetherconstitutinga charge of the assets of the

4. company ornot;"director" includes any person occupying the position of a director,
by whatevername called:
6.Document and Existing Company:
"document"includes summons, notice,requisition, order, anotherlegal process,
voucher,and register;"existing company"means a company formed and registered
under any previous Companies Act;
7. Financial Institution:
“financialinstitution” includes:–a companyoran institution whetherestablished
under any special enactmentand operatingwithin or outside Pakistan which transacts
the business of banking or any associated orancillary business through its branches; a
modaraba,leasing company,investmentbank,venture capitalcompany,financing
company,housing finance company,a non-bankingfinance company;and such other
institution or company authorizedby law to undertake any similar business, as the
FederalGovernment may,by notification in the Official Gazette,specify for the
purpose;]
8. Financial year, Form and Holding company
"financialyear" concerning any body corporate,means the period in respect of which
any profit and loss account or the income and expenditure account ofthe body
corporate,laid before it in generalmeeting,is made up, whetherthat period is a year
or not; "form" means a form set out in any of the schedules as prescribed.
9. Listed Company and Member
"listed" about securities, means securities which have been allowed to be traded on a
stock exchange; "listed company",means a company ora body corporate or other
body whose securities are listed; "member" means, to a company having a share
capital, a subscriber to the memorandum ofthe company and every person to who is
allotted, or who becomes the holder of, any share, scrip or other security which gives
him voting right in the company and whose name is entered in the registerof
members, and,with a company not having a share capital, any person who has agreed
to become a memberof the company and whose name is so entered;
10. Memorandum, Modaraba, and Officer
"memorandum" means the memorandum ofassociation ofa company as originally
framed or as altered from time to time in pursuance of the provision of any previous
Companies Act or this Ordinance;"modaraba" and "modarabacompany" have the
same meaning as in the modaraba Companies and Modaraba (Floatation and Control)
Ordinance,1980 (XXXI of 1980);"officer" includes any director,chief executive,
managing agent,secretary oranotherexecutive of the company,howsoever

5. designated,but,save in sections 205, 220 to 224, 260, 261, 268, 351, 352, 412, 417,
418, 474 and 482, does not include an auditor;
9. Previous Companies Act
"previous Companies Act" includes any Act or Acts relating to companies in force
before the Indian Companies Act,1866 (X of 1866),or the Acts repealed thereby,the
Indian Companies Act (Xof 1866), the Indian Companies Act,1882,(VI of 1882) the
Indian Companies Act 1913 (VII of 1913),or any law corresponding to any of those
Acts and in force in any of the territories now constitutingPakistanbefore the
extension ofthe Companies Act,1913 (VII of 1913),to such territories;
10. Private Company:
"private company" meansa company which,by its articles,— restricts the right to
transferits shares, if any; limits the numberof its members to fifty; and prohibits any
invitation to the public to subscribe for the shares, if any, or debentures ofthe
company:Provided that,where two or more persons hold one or more shares in a
company jointly, they shall, for this definition,be treated as a single member.
11. The prospectus and Public Company
"prospectus" means any document describedorissued as the prospectus, and includes
any notice,circular, advertisement,orothercommunication,inviting offers from the
public for the subscription or purchase of any shares of a body corporate,orinviting
deposits from the public, otherthan deposits invited by a banking company ora
financial institution approvedby the FederalGovernment,whetherdescribed as a
prospectus or otherwise;
public company" means a company which is not a private company;
12. Registrar, Scheduled Bank, and Secretary
"registrar" means a registrar, an additionalregistrar, a joint registrar, a deputy registrar,
or an assistant registrar,performing underthis Ordinance the duty of registration of
companies; "scheduled bank" has the same meaning as in the State Bank of Pakistan
Act, 1956 (XXXIII of 1956);"secretary" means any individualappointedto perform
the secretarial, administrative orotherduties ordinarily performed by the secretary of
a company;
13. Security:
"security"means any share, scrip, debenture,participationterm certificate,
modaraba certificate,Mutharik a certificate,term finance certificate bond,pre-
organization certificate,orsuch otherinstrument as the FederalGovernmentmay,by

6. notification in the Official Gazette,specify for the purpose"share" meansto share in
the share capitalof a company;Share is a right to receive a certain proportion of
profit made by a company while it is a going concern and of the capitalwhen it is
wound up.
14. Share and Ultra ViresShare
means to share in the share capitalof a company;Share is a right to receive a certain
proportion ofprofit made by a company while it is a going concern and of the capital
when it is wound up. Ultra Vires means an act performed without any authority to act
on the subject.
15.Special Resolution
"specialresolution" means a resolution which has been passed by a majority of not
less than three-fourths ofsuch members entitled to vote as are present in person or
by proxy at a generalmeeting of which not less than twenty-one days notice
specifying the intention to propose the resolution as a special resolution has been duly
given:Provided that,if all the members entitled to attend and vote at any such
meeting so agree, a resolution may be proposed and passed as a specialresolution at a
meeting ofwhich not less then twenty-one days notice has been given;
16. Subsidiary and Holding Company
Meaning of "subsidiary" and "holding company".Forpurposes of this Ordinance,a
company orbody corporate shall be deemed to be a subsidiary of anotherif— that
othercompany orbody corporate directly or indirectly controls, beneficially owns, or
holds more than fifty percent of its voting securities or otherwise has the power to
elect and appoint more than fifty percent ofits directors; or the first-mentioned
company orbody corporate is a subsidiary of any company orbody corporate which
is that other's subsidiary;
17. Where Ordinance is not applied
Ordinance not to apply to certain corporations .- Nothing in this Ordinance shall
apply to—a trading corporation ownedorcontrolled by a Province and carrying on
business only within that Province;ora co-operative society;ora university.
18. Non Trading Companies
Application of Ordinance to non-tradingcompanies with purely provincialobjects.-
The powers conferred by this Ordinance on the Federal Governmentorthe
Commission shall, about companies which are not trading corporations and the

7. objects of which are confined to a single Province,be the powers of the Provincial
Government.
19. An ordinance to override memorandum.
The ordinance to override memorandum,articles, etc..- Save as otherwise expressly
provided herein,— the provisions of this Ordinance which come into force by a
notification undersub-section (3) ofsection 1 shall affect anything containedin the
memorandumorarticles of a company,orin any contract or agreementexecuted by
it, or in any resolution passed by the company in general meeting orby its directors,
whetherthe same be registered,executed or passed,as the case may be, before or
after the coming into force or the said provisions; and any provision containedin the
memorandum,articles, agreement orresolution aforesaid shall, to the extent to which
it is repugnant to the provisions of this Ordinance,become orbe void, as the case
may be.
20. Artificial Person:
It means that a company possesses a separate legal entity,identify,and personality of
its own,apart from its shareholders. It can borrow money,enterinto contracts, and
hold property in its name can sue and can be sued by its shareholders.
21. Auditors:
Auditors are independentpersons who examine the accounts ofthe company and
report on the same.They express their opinion on the accounts and are also supposed
to detect fraud,manipulations of accounts aimed at concealment ofthe true financial
position of a company.
22.Common Seal
Every company must have a seal of its own,called “CommonSeal”.Directors must
provide for its safe custody.it shall be affixed to share certificate and any other
instrument,only on the authority of a resolution of directors.
23. Covenant
An agreement convention,orpromise of two or more parties, by deed in writing,
signed and delivered by which either of the parties pledges himself to the other that
something is either done,or shall be done,or shall not be done,or stipulates for the
truth of certain facts. In the broadest usage,it means any agreement orcontract.

8. 24. Fiduciary and Fiduciary Behavior
Fiduciary This term used to refer to a person having duties involving good faith,trust,
special confidence,and candor towards others. Fiduciary Behaviorrefers to the
behaviorin good faith,trust, special confidence,and candortowards others.
25. Incorporated Association
Incorporationmeans the recognitionofthe existence ofa company,in the eyes of law
as a separate legal entity.IPSO FACTOItmeans fact itself; orBy the mere fact the
mere effect of an act or a fact
26. Limited liability
means that the liability of the members of the company to pay back the debts of the
company is limited up to the face value of their shares. The fact of limited liability
stems from the fact of the company is an artificial person.Liabilities for repayments
of loans tend to be divided between the companyand the shareholders.
27. Par Value/ stated Value
Par Value/ stated Value is the face or stated value of a share of stock or bond is called
par value. PerpetualSuccession means that a company possessespermanentlife which
is not affected by debt,insolvency, insanity,or withdrawalof any of its members.
28. Prima Facie Prima Facie it means
At first sight on the first appearancePresumablySuccessorin Interest One who
follows anotherin ownership or controlof the property.To be a successor in Interest
a party must continue to retain the same rights as the original ownerwithout a change
in ownership and there must be a change in form only and not in substance and
transferee is not a successorin interest.
29. Successors and Team of Management
Successors Those persons, otherthan creditors who are entitled to a property of a
deceased underhis will or succession statute.Team of ManagementShareholders,
being the entrepreneurs, are owners of the company and as such have the right to
manage the company.But owing to their large number, they delegate most of their
managerialpowers to their elected representatives.
30. Team of Management is constituted as follows
 Chairman
 Chief ExecutiveBoard OfDirectors

9.  Shareholders
 SecretaryChief
 AccountantManagers and otherfunctionaries
31. UpcomingCourts, SECP, and Registrar.
Companies Ordinance, 2016 – The progression of the
companies law from 1984 to 2016
The Government has, in November2016, promulgated the Companies Ordinance,
2016 replacing the Companies Ordinance,1984.Aftervarious seminars, conferences,
expert groups, discussions, and debates, the Companies Ordinance,2016 (the “2016
Ordinance”)was drafted,debated,and promulgated.The new law encourages a
movement towards simplifying certain procedures, enabling greateruse of technology,
and encouraging a paperless record keeping environment.
The constitution forcompanies and the backbone legislation for the economy has
experienced a cardinal shift.The salient changes to the legislation are provided below
and will be revised accordingly;the history of the law and the analysis and discussion
on the projected effect will follow in a subsequent post.
1. Classification of Companies as provided by Section 224 and the
Third Schedule of the 2016 Ordinance.
The Third Schedule provides for Public Interest Companiesand Large Sized
Companies (“PILSCs”),Medium-SizedCompanies(“MSCs”);and Small Sized
Companies (“SSCs”).Small Sized Companies,for example,shall include private
companies having
(1) paid-up capitalup to Rs. 10 million;
(2) turnover not exceeding Rs. 100 million; or
(3) employees not more than 250.

10. The classification of a company shall be based on the previous year’s audited financial
statements and can be changed if it does not fall under the previous criteria for two
consecutive years.
Special provisions are provided to facilitate small and medium companies.
The 2016 Ordinance also provides for relaxations for Free-Zone Companies (Section
454) and the establishment ofan InvestorEducation and AwarenessFund (Section
245).The 2016 Ordinance furtherprovides for companies that are “Inactive
Companies” to seek such status from the registrar to avail limited proceduraland
accounting requirements (Section 424).
Moreover,the 2016 Ordinance provides for streamlining lengthy processes by
introducing an efficient dispute resolution mechanism throughthe Mediation and
Conciliation Panel(Section 276),passing of members’ resolution by circulation, and
simplified provisions for Mergers and Acquisitions.
2. Memorandum of Association
The 2016 Ordinance requires that companiesengagein such business that is the
“principalline of business” (Section 26) to reduce the issues related to the doctrine of
ultra vires whereby the company undertakes acts that are beyond its scope of work or
powers. The principalline of business shall be mentioned in the memorandum of
association ornotified to the registrar.
3. Conversion of Shares into Electronic Format.
Electronic or “Demat”form is the concept ofdematerialization in finance and
financial law and refers to the substitution of paper-form securities by book-entry
securities. This is a form of an indirect holding system that is used as an intermediary,
such as a broker or a centralsecurities depository,and holds the records of the
ownership of the shares in an electronic format.The Central Depository System in
Pakistan,established underthe Central Depositories Act,1997 has a similar system of
electronic filing, record,and transfer for and of securities.
4. Special provisions for Independent and Non-Executive
Directors (Section 166).
The 2016 Ordinance provides for the inclusion of independentdirectors and non-
executive directors on the Board including provisions for the mannerof selection and
maintenance ofthe data bank ofsuch directors.

11. 5. Increased provisions for Disclosure of Directors, and Beneficial
Owners and Increased Transparency by local and foreign
companies.
The 2016 Ordinance provides for increased disclosure by companies to the regulatory.
It further provides for the companies to maintain a Companies’ GlobalRegisterof
BeneficialOwnership (Section 452) for every substantialshareholderor officer of a
company incorporated underthe 2016 Ordinance,having ten percent (10%) ormore
shares in a foreign company orbody corporate.
There is increased regulatory controlvis-à-vis fraud, terrorist or corrupt financing,and
money laundering.
6. Certificate of Shariah Compliance.
Section 451 enables companies to seek for a Shariah compliance certificate from the
Securities and Exchange Commission ofPakistan.No company shallbe permitted to
be called “Shariah-compliant”unless it is conducting business accordingto the
principles of Shariah and has been so certified by the Commission.
7. Agriculture Promotion Companies (Section 457).
The 2016 Ordinance enables the registration ofagriculture promotion companies for
the development and enabling of the agriculture sector.
8. Table of Fees, amended, to be paid to the Registrar.
The Seventh Schedule updates the Table of Fees to be paid to the Registrar(Section
462 and 469).
Can a foreign company sue in Pakistan?
4 August 2014
Under Section 456 of the Companies Ordinance,1984 (the “Ordinance”),a foreign
company may contract,dealor transact (with othercompanies)in Pakistan but unless
the foreign company meets the requirements laid out under the laws of Pakistan,in
the event of any conflict, dispute,or issue, the foreign company is not entitled to
bring any suit, claim any set-off,make any counter-claim or institute any legal
proceedings. Section 456 is as follows:
456. Company’s failure to comply with this part not to affect Its liability under
contracts, etc.-Any failure by a foreign company to comply with any of the

12. requirements of section 451 or section 452 shall not affect the validity of any contract,
dealing or transaction entered into by the company orits liability to be sued in respect
thereof; but the company shall not be entitled to bring any suit, claim any set-off,
make any counter-claim or institute any legal proceeding in respect of any such
contract, dealing or transaction untilit has complied with the provisions of section
451 and section 452. (emphasis added)
Sections 450 to 460 of the Ordinance, interalia, dealwith the requirements that
foreign companies must meet to effectively defend themselves or initiate proceedings
in Pakistan.
section 450 provides as follows:
450. Application of this Part to foreign companies.- This Part shall apply to all foreign
companies, that is to say, companies incorporated orformed outside Pakistan which,
after the commencementof this Ordinance, establish a place of business within
Pakistan or which have, before the commencementof this Ordinance, established a
place of business in Pakistan and continue to have an established place of business
within Pakistan at the commencement of this Ordinance.
A “place of business” includes a branch,management,share transferor registration
office, factory,mine, or fixed place of business but does not include an agency unless
the agent exercises a generalauthority to negotiate and conclude a contract or
maintains a stock of merchandise on behalfof the company.
Section 451 provides for the documentsto be delivered to the registrar by foreign
companies. These documents include:
(a) a certified copy of the memorandumand articles of the company (Form38);
(b) the full address of the registered or principal office of the company (Form 39);
(c) a list of the directors, chief executive and secretaries (if any) (Form 40);
(d) a return showing the full name and surname, father’s name,nationality,
designationand full address in Pakistan ofthe principalofficer of the company in
Pakistan by whatevername called;
(e) the full name and surname,father’s name,nationality,designationand full address
of someone (1) or more persons resident in Pakistan authorized to accept on behalf

13. of the company service of process and any notice or otherdocument required to be
served on the company togetherwith his consent to do so (Form 42);
f) the full address of that office of the company in Pakistan which is deemed to be the
principal place of business in Pakistan (Form 43);and
(g) particulars of a principal officer of the company in Pakistan (Form 41).
Section 451 is read in line with Rule 22 of the Companies (GeneralProvisions and
Forms) Rules, 1985.
Moreover,a foreign company is required to obtain a permission letter from the Board
of Investmentwith a specific validity period for opening and maintaining its
branch/liaison office in Pakistan.A copy of such a permission letter is required to be
furnished with the documents meantforregistration.
Section 454 of the Ordinance provides the statutory obligationsthat the foreign
company is required to comply with.These include, among others, maintaining
registers of Pakistanimembers, directors, and officers at its principal place of business
and keeping it open to inspection,stating the country oforigin in every prospectus,
the exhibition of the name of the company.