Corporate law in pakistan

UniversityofcentralPunjab
PGCSahiwalcampus

"Inthenameof
Allah,most
graciousandmost
merciful"
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Members
× Ahsin Yousaf
× Anam Shahzadi
× Irum Gul
× Burhan Sarver
× S1F17MSCT0047
× S1F17MSCT0048
× S1F17MSCT0052
× S1F17MSCT0056
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‫ہے؟‬ ‫کیا‬ ‫نے؟کیوں؟‬ ‫کب؟کس‬
‫سوچئے۔۔۔‬ ‫ذرا‬

INTRODUCTION:
o Pakistan came into being, the Companies Act,
1913 was adopted.
o In the year 1984, the President of Pakistan passed
the Companies ordinance, 1984.
o At then the Companies act 1913 was repealed.
o Currently, companies ordinance, 1984 is the
main law regarding companies and it regulates all
matters relating to the companies.
o 514 sections and eight Schedules.
o Later, time to time, different amendments have
been made in it.
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Objective
 Growth of the Corporate Enterprises
 Protection of Investors and Creditors
 Promotion of investment and development
of economy and matters arising out of
above factors or connected therewith.
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Sources
 Main source of Company Law is the companies
ordinance, 1984.
 The Companies Rules, 1985. It provides
guidance to follow the law.
 Notifications and circulars, etc., issued by the
Securities and Exchange Commissions of
Pakistan (SECP) or the Federal Government.
 The Case Laws of High Court and Supreme
Court.
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Artificial Legal Person
 A company becomes an Artificial
legal person and recognized by law as
person.
 It is not a natural person.
 Does not have heart, mind, hands or
feet but still recognized by law as a
person that is why it is considered to
be Artificial Legal Person.
 Can purchase assets in its name,
 Have liabilities in its name.
 Sue or can be sued.
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Separate Entity
 The company is said to be a separate
and distinct entity.
 But separate from whom?
 It means that company is separate
from its.
 The liability Company and the
liability of members are different.
 If company is sued it does not mean
member is sued.
 Bank account of owner VS company
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Ownership & Management is Separate
 The members are the owners of the company.
 But they don’t directly manage the company.
 The members elect the directors who manage the
company.
 Directors acts independently from the members.
 The members are not the agents & cannot bind the
company in any contract.
 Directors are the agents of the company and manage the
company.
 Directors are elected normally out of members but
members other than directors are not part of management.
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Perpetual Succession
× A company has a permanent life until it is
wound up or seized by Registrar of Companies
due to any legal implication.
× The death, insanity, or insolvency of a partner
does not affect the life a company.
× In short it can be Said that company does not die
due to the death of a Member.
× If we compare company with partnership then
we can observe that partnership dies with the
death of partner but company does not.
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Common Seal
 Common Seal mean the Official Stamp of the Company.
Every registered company requires to have a common
seal, as per Companies Ordinance 1984. The Common
Seal is used to authenticate the important documents of
the company. The common seal is kept in safe custody. A
record is maintained regarding the documents upon which
the common seal the company is applied.
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Limited Liability
 Liability of its members limited or unlimited.
 Mostly liability is limited.
 Now within limited liability, it may be limited by
share or limited by guarantee.
 If it is limited by shares it means liability of the
members of the company is limited upto the face
value of the shares held by each member and this is
the most popular type of company.
 Whereas if the liability is limited by guarantee then
it means that liability of the members is upto the
amount that each member has promised / undertaken
to contribute in the assets of the company at the time
of winding to pay off the liabilities. 15

Tranferability of Shares
 In the case of Public companies the shares can be easily
transferred from one person to another person.
 There is no restriction on transfer of shares.
 The shares of a Public listed company can be traded on
Stock Exchange as well.
 No permission of the other members is required to
transfer the shares.
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Statury Company
 The companies which are formed under special statutes
are termed as statutory companies.
 These are governed by the acts or ordinance through
which these are created.
 Examples of such type of companies are the state bank of
pakistan, small business finance corporation, investment
corporation of pakistan etc.
(A) kinds of companies on the base of legal form:

Chartered Company
× Chartered companies are formed by means of a
special charter granted by the head of state, or
king or queen of the crown.
× Normally these enjoy certain exclusive rights
and privileges on other associations of persons.
× The east india company and the chartered bank
of england are examples of such type of
companies.
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Government Company
 A government company is a company of which more
than 50 percent of the paid up capital is held by the
government.
 A company which is a subsidiary of a government
company automatically becomes a government
company.
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Registered Company
 Registered companies are those companies which are
registered in pakistan under the companies ordinance,
1984 or any previous companies act or ordinance.
 These companies are further classified into the following
three broad classifications [15(2)]:
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Registered Company--- conti…
× a) company limited by shares:
× It means a company whose memorandum of
association limits the liabilities of its members to the
amount unpaid, if any, on the shares held by them in
the capital of the company.
× b) Company limited by guarantee:
× It means a company whose memorandum of
association limits the liabilities of its members to the
amount as the members may respectively undertake
to contribute to the assets of the company in the event
of its winding up. This company may or may not have
a share capital.
 22

Registered Company--- conti…
× c) Unlimited company:
× It is a company which is registered without limiting
the liability of its members to the extent of the value
of the shares held by them. Now a days such type of
companies are not found in pakistan.
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Private Company
 It is a company which by its Articles:
 Restrict the rights to transfer its share , if any;
 Limits the maximum number of its members to fifty; and
 Prohibits any invitation to the public to subscribe for the
share or debentures of the company.
(B) TYPES OF COMPANIES ON THE BASIS OF ARTICLES OF ASSOCIATION

Public Company
 It can be formed by at least seven members and there
is no limit to the maximum members.
 The public limited company invites applications from
investors through advertisement in the newspapers,
giving full detail of the objects, share capital, method
of applying procedure to be adopted for the allotment
of the share etc.
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Public Company – conti…
 Public limited companies may further be classified in
to the following two categories;
 i)Listed Companies
 The companies whose securities are allowed to be
traded on a stock exchange are called listed company
 ii)Un-Listed Companies
 The companies whose securities are not allowed to be
traded on a stock exchange are called un-listed
companies.
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Single Member Company
 SMC means a private Company which has only one
member.

Holding Company
 It means a company or a body corporate which holds
(directly or indirectly) more than fifty percent (50%)
in the voting securities of a company , or has a power
to elect and appoint more than fifty percent (50%)of
the directors of such other company.
(C) TYPES OF COMPANIES ON THE BASIS OF COMPOSITION OF SHAREHOLDER:

Subsidiary Company
 It means a company or a body corporate whose more than
fifty percent(50%) voting securities are held or controlled
(directly or indirectly) , by some other company or such
other company has a power to elect and appoint more
than fifty percent (50%)of the directors of such company.
 NOTE: If the holding company is a subsidiary of another
company, every company which is subsidiary of such
holding company will automatically become the
subsidiary of that another company.

Associated Companies
 A company whose 20% or more shares ( upto 50% )
are held by another company shall be conaidered an
associated company of that company.

(D) Association not for Profit
 If the Securities and Exchange Commission of Pakistan is
satisfied with an association which has beeb formed or is
capable of being formed as a limited company that it
meets the conditions specified by Companies Ordinance
,1984, the Commission may great a license and direct that
the association be registered as a limited company
without the additions of word “Limited” , “(Private)
Limited “ or “(guarantee) Limited” , as the case may be ,
to its name and the association may be registered
accordingly.

Corporate law in pakistan