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incorporation of private limited company


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incorporation of private limited company

  1. 1. Final Project Presentation Company law Professor Farooq Awan Group Members: Usman Manzoor Raabia Tamkeen Faryal Umid Junaid Nasir Nouman Siddque Ayesha
  2. 2. Pakistan’s Regulatory Authority of Company’s Registration Security and Exchange Commission of Pakistan
  3. 3. A limited company is a company in which the liability of members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. The former may be further divided into public companies and private companies. Who may become a member of a private limited company is restricted by law and by the company's rules. In contrast, anyone may buy shares in a public limited company.
  4. 4. • Minimum paid-up capital Rs. 1 Lakh. • Restricts the transfer of shares. • Minimum 2 and maximum 50 members. • Prohibits any invitation to the public to subscribe for any shares. • Prohibits any invitation or acceptance of deposit from persons other than its members, directors or their relatives. Provisions of Private Companies
  5. 5. Stages in the formation of company Incorporation stage Subscription stage Commencement stage Promotion stage According to company ordinance 1984 the process of company formation is divided into 4 stages
  6. 6. Promotion means to start the business it is the first stage in the formation of company that people who take initial steps in the formation of company are called promoters these people prepare the legal documents and takes step for its registration the promoters shall have to observe the legal formalities drafting the following documents… Promotion stage (1st stage)
  7. 7. Documents Memorandum of Association (MOA) Article of Association (AOA)
  8. 8. Necessary Documents by SECP Phase – 1 • Make an application to Additional Registrar of Companies, Company Registration Office, seeking name availability along with paid challan Rs.500/- (in case of physical application) in any branch of MCB Bank Limited. • Name availability can be checked online. Phase-2 • After receiving name availability certificate, make an application for incorporation of the company along with following documents: • FORM- 1, (One copy) duly filled in, signed and witnessed. • FORM- 21, (One Copy) duly filled in and signed. • FORM- 29 (Two copies) duly filled in and signed. • MEMORANDUM OF ASSOCIATION • ARTICLES OF ASSOCIATION • 4 copies duly signed by each subscriber/promoter, witnessed and dated. • Copies of Valid CNIC of Promoters and witness. • Special Power of Attorney on Stamp paper (worth 500) duly notarized. • Copy of Name availability Letter issued by SECP • Original Fee Challan • Covering Letter
  9. 9. SECP  Securities and Exchange Commission of Pakistan established under the Pakistan Act 1997  It was operational as a body Corporate on 1st January 1999.  important functions of the SEC is registration of companies.  This task has been entrusted to the Registration Department, Company Law Division which has its field offices known as Company Registration Offices (CROs).
  10. 10. Memorandum of Association  Main document of the company.  It defines the objects of the company for which it is established.  Lays down the conditions upon which alone the company allowed to be formed. Charter of the constitution of the company.  It defines the scope of its activity and also states that anything beyond it is unauthorized and illegal.  The Memorandum of Association •Must be printed •Divided into paragraphs •Signed by each subscriber (seven or more in case of a public company) •Add his name, address and description •Presence of at lease one witness who is to attest the signature.
  11. 11. Contents of MOA 1. Name of the company 2. Registered office of the company 3. Objects of the company 4. Liability of the members 5. Details of the capital of the company 6. Subscription or Association clause
  12. 12. Name Clause  The Company is a legal entity. Therefore, it must have its name to establish its identity.  The name of the company should not be Similar, Undesirable, or which will mislead the public. E.g. Indian National flag, name or pictorial representation of Mahatma Gandhi or Prime Minister of India, etc.  Its use has been, therefore, prohibited by the Government under the Emblems and Names (Prevention of Improper Use) Act, 1950.  The company can change its name by passing a special resolution and obtaining he approval of the Central Government.
  13. 13. Registered Office Clause  Every company must have a registered office from the day it starts its business or within 30 days of getting the Certificate of Incorporation, whichever is earlier.  Memorandum of Association must state the name of the State in which the registered office of the company is situated.  This clause is important as it mentions the residence for the purpose of the communication with the company.  It determines the jurisdiction of the company and also mentions the place where all the records of company are maintained.  Where the company wants to change its registered office from one state to another then it can do so by passing a special resolution as well as by confirmation of Company Law Board.
  14. 14. Object Clause  It defines the limits and extent of the activities of the company.  The 3 types of objects are: - • Main objects • Objects incidental or ancillary to the attainment of the main objects. • Other objects.  Objects stated in the main objects are to be pursued by the company immediately after incorporation or within reasonable time thereafter.
  15. 15. Liability clause  This clause states that the liability of the members is limited to the extent of the shares subscribed by the member or shareholders if the company is formed with share capital.  Amount of capital with which the company is to be registered and its division into shares of a fixed amount must be stated in the MOA of a company.  The capital with the company is registered is called “Authorized capital” or “Registered Capital”.
  16. 16. Alteration of MOA Sec – 21 Change in Name: -  Application is made with the registrar of the company for availability of new names.  Special resolution is passed in the general meeting of the company with members.  Approval of Central Govt. is required.  No approval is needed when a company changes its name by addition or deletion of word “Private”.  The change of name is complete only after the issue of fresh certificate of incorporation by the registrar.
  17. 17. Article of Association  Defines the responsibilities of the directors, the kind of business to be undertaken, and the means by which the shareholders exert control over the BOD.  Contains the rules & regulations for the internal management of the company.  AOA needs to be filed with the Registrar of Company.  AOA can be altered from time to time.
  18. 18. Contents of AOA  Share capital  Payment, calls, transfer, lien, conversion, transmission, forfeiture etc. Of shares  Share certificate & warrants  Rights of shareholder  Meetings  Appointment, remuneration, qualification, powers etc. Of Board of Directors  Accounts & Audit  Payment of dividends  Winding up  Indemnity
  19. 19. Alteration of Article of Association  It can be altered with special resolutions.  Approval of the central government for conversion of company from public to private.  AOA should not violate provisions of MOA and company law board.  Special resolution passed or approved by central government must be filed with the Registrar within 1 month.
  20. 20. Limitations of Article of Association  The alteration cannot be made so as to increase the liability of members without his/her written consent.  Limit the number of members to 50.  Prohibit any invitation to the public to subscribe for any share in, or debenture of the company.  Restrict the right to transfer shares.  Approval of central government: -  Appointment or re-appointment of Director  Increase in remuneration of Director
  21. 21. Memorandum of Association Article of Association It is a charter of a company determining constitution and activities of the company. It contains rules & regulations regarding internal management of the company. Every company must have a memorandum. Public companies limited by shares may or may not have articles. Alteration of Memorandum is much difficult and strictly regulated. Articles can be easily altered by a special resolution. Prior permission is required. No need for permission(in some cases) Defines the relationship between company & outsiders. Defines the relationship between management & shareholder.
  22. 22. Incorporation Stage To format and incorporate now u need to take following items in your hand and submit to SECP for further process and establishment of your desired company: The second stage for formation of company is to get the company registered. for registration of company following documents are submitted registrar for the registration of company. Memorandum of association (MOA) Article of association (AOA) Nominal capital (Value or form of Capital Amount) Special Power of Attorney on Stamp Paper Covering Letter List of directors Original Fee Challan Copy of Valid CNIC’s of Promoters and Witnesses Declaration (Name Availability Certificate) Form 1 , Form 21 , Form 29 ( duly filled as per instructions and requirement ) If the registrar is satisfied with documents then he will issue certificate of incorporation private limited company can start its business after receiving certificate of incorporation. but a public limited company wait for certificate of commencement.
  23. 23. Name Availability of Company
  24. 24. Contd…
  25. 25. Commencement stage ( 4th stage) • A public company has to received the certificate of commencement before starting the business. • A company submits the following documents to registrar. • Prospectus • Minimum subscription • Directors shares
  26. 26. Cont… • After verifying these documents registrar issue a certificate of commencement they can start the business.