Steps in Formation and incorporation of companies in pakistan

1. ASSIGNMENT
MUNEEB
MCOM II
ROLL NO
CORPORATE AND COMMERCIAL LAW
SUBMITTED TO

2. .
Formation of Company:
Under the provisionsof the CompaniesOrdinance, 1984acompany isa
corporate body with separate legal entity and a perpetualsuccession and a
company may be formed by personsassociating for any lawfulpurposeby
subscribing their namesto the Memorandum of Association and complying
with other requirementsfor registration of a company under the provisionsof
the Ordinance.
The CompaniesOrdinance, 1984providesthreedifferenttypesof companies:
1: A company limited by shares
2: A company limited by guarantee
3: An unlimited liability company
Companiesremain the most favored form of business organizationsin
Pakistan especially for medium and large-scale business enterprises. Legal
regime for establishment and regulation of companiesin Pakistan is given in
the CompaniesOrdinance, 1984. Whereasthe function of administration of
these companiesis vested in the Securities and Exchange Commission of
Pakistan and the Registrar of Companiesappointed by the Securities and
Exchange Commission of Pakistan for a Provinceof Pakistan where such
company isto be registered.
Company Registration Processin Pakistan:
Step No. 1 (Name Availability)
The first step in company Registration in Pakistan is to makean application to
the registrar of companies for the availability of name. The application can be
madeboth onlineand in offlinemodeand normally takes a period of 3 to 4
days before confirmation of the nameapplied for new company registration in
Pakistan. Before makingan application to the Securities and Exchange

3. Commission of Pakistan for company registration please do not forget to
do Company NameSearch on the Securities and Exchange Commission of
Pakistan website. Once the nameis confirmed you can proceed with the
process of company registration in Pakistan.
Step No. 2 (Preparation of Documents)
The second step in company registration in Pakistan is to start preparing
documents necessary for the process of company registration. The following
are the set of documents need to be prepared in order to successfully
complete the process of company registration in Pakistan:
1. Memorandum of Association
Memorandumof Association is the basic documentwhereall the objectives of
the company registration are stated e.g. the basic objective of company
registration is to engage in the business of general order supplier or trading
company or any other business.
All the business the company isplanningto undertake mustbe stated in the
memorandum in order to get the process of company registration in Pakistan
to complete.
Four copies of Memorandum of Association mustbe prepared for company
registration in Pakistan.
2. Articles of Association
Articles of Association is the basic documentwhereall the rules of the
company to operate are stated e.g. How directors are going to operate, when
how General Meetings of the company undergoingtheprocess of company
registration in Pakistan is to be conducted etc.
Four copies of Articles of Association mustbe prepared also.

4. 3. Form 1
Form I for company registration is the basically a declaration of oneof the
directors of the company aboutto be registered. Form 1 can be downloaded
from Securities and Exchange Commission of Pakistan website. This is another
compulsory componentof company registration process in Pakistan.
4. Form 21
Form 21 is the form whereby the address of company undergoingtheprocess
of company registration in Pakistan is notified to the registrar.
5. Form 29
Form 29 contains information aboutthe particulars of the directors of the
company that is undergoingthe process of company registration in
Pakistan. Form 29 is submitted in duplicate.
6. Power of Attorney
Power of Attorney in favor of any person authorized to submit documents and
liaison with the company registration office about differentissues during
company registration in Pakistan.
7. Copies of CNIC’s of Directors
Copies of CNIC are of Directors and witness who signed the memorandum and
articles of Association of the company that is undergoingthe process of
company registration in Pakistan.
8. Name Availability Letter/Email Original from SECP
Letter receives from the Securities and Exchange Commission of
Pakistan confirmingthe nameapplied for the company that is undergoingthe
process of company registration in Pakistan.

5. Step No 3 (Submission of documents to the registrar:
Abovementioned documents aresubmitted to the registrar for the purpose of
registration.
Step No 4 (Issuance of certificate of incorporation:
In this step in the process of company registration in Pakistan is to submit all
the above mentioned certificates to the registrar of the companies. Once
satisfied with the documentsincorporation certificate of the new company
registered is issued by Securities and Exchange Commission of Pakistan
within 3 to 5 workingdaysand the process of company registration in
Pakistan completes with the issue of this certificate.
Registered firm's'birth certificate' showingits legal nameand date
of incorporation. Also called certificate of registration.
There are also someconditions which mustbe fulfilled for the registration.
1: It mustformed for Lawfulpurpose
2: Objects should notbe inappropriate, deceptiveand insufficiently
expressive.
3: Compliencewith all the requirementsof the ordienance.
Step No 5 (Certificate of Commencementof Business:
When the company has been registered, the Registrar issuesa Certificate of
Incorporation. Oncesuch a certificate has been issued by the Registrar a
privatelimited company may commenceits business immediately.
Nonetheless, a public limited company cannotcommenceits business or
exercise its borrowingpowersyet unlessthe Registrar has issued a Certificate
for Commencementof Business.
The Registrar issues the Certificate for Commencementof Businessonly if the
followingrequirementshave been fulfilled:

6. 1: Shares held subject to the paymentof the whole amountthereof in cash
have been allotted to an amountnot less in the whole than the minimum
subscription
2: Every director of the company has paid to the company the fullamounton
each of the shares taken or contracted to be taken by him and for which he is
liable to pay in cash
3: No money is or may become liable to be repaid to applicants for any shares
or debentureswhich have been offered for public subscription by reason of
any failureto apply for or to obtain permission for the shares or debenturesto
be dealt in on any stock exchange
4; There has been filed with the Registrar of Companiesaduly verified
declaration by the chief executive or oneof the directorsand the secretary in
the prescribed form that the aforesaid conditionshave been complied with
and the Registrar of Companieshas issued a Certificate of Commencementof
Business
5: In the case of a company which has notissued a prospectusinvitingthe
public to subscribe for its shares, there has been filed with the Registrar of
Companies, astatement in lieu of prospectus
A publiclimited company may either be listed or unlisted.
In case of a listed company its shares may be quoted and dealt with on oneof
the three stock exchanges of Pakistan viz. Karachi Stock Exchange, Lahore
Stock Exchange and Islamabad Stock Exchange. Whereas the shares of an
unlisted publiclimited company may notlisted on a stock exchange.
A publiclimited company that intendsto have its shares listed on a stock
exchange mustobtain permission from the relevantstock exchange under the
listing regulationsof that stock exchange.

7. Followingcompaniescan be registered in Pakistan:
A privatelimited company
A single member company
A publiclimited company
A company limited by shares
A company limited by guarantee
An unlimited company
Relevantlaws of Pakistan for registration of a company in Pakistan:
.CompaniesOrdinance, 1984
.Companies(GeneralProvisionsand Forms)Rules, 1985
.Single Member CompaniesRules, 2003
.Schedule filing fees
CASE:
A group of company promoters for a new hotel businessentered into a
contract, purportedly on behalf of the company whichwas not yet registered,
to purchase wine. Once the company wasregistered, it ratified the contract.
However, the wine wasconsumed beforethe money waspaid, and the
company unfortunately wentinto liquidation. The promotersweresued. They
argued that their liability had passed to the company, and werenotpersonally
accountable.
Prior to Incorporation Kelner v Baxter.[1866] L.R.2 CP 174Thepromotersof a
hotel company entered into a contract on its behalf for the purchaseof wine.
When the company formally cameinto existence it ratified the contract. The

8. winewas consumed butbefore paymentwasmadethe company wentinto
liquidation. The promoters, as agents, weresued on the contract. They argued
that liability under the contract had passed, by ratification, to the company. It
was held, however, that as the company did notexist at the time of the
agreement it would be wholly inoperativeunless it was bindingon the
promoterspersonally and astranger cannot by subsequent ratification relieve
them from that responsibility.
On the other hand, a promoter can avoid personalliability if the company,
after incorporation, and the third party substitutes the originalpre-
incorporation contract with a new contract on similar terms. Novation, as this
is called, may also be inferred by the conductof the parties such as where the
terms of the original agreement are changed.
A promoter can also avoid personalliability on a contract wherehe signs the
agreement merely to confirm the signatureof the company becausein so
doinghe has not held himself out as either agent or principal. The signature
and the contractual documentwillbe a completenullity because the company
was notin existence (Newbornev Sensolid (Great Britain)Ltd [1954] 1 QB
45).
Kelner v Baxter (1866)
JUDGMENT:
I agree that if the Gravesend RoyalAlexandraHotelCompany had been an
existing company atthis time, the personswho signed the agreement would
have signed as agents of the company. But, asthere wasno company in
existence at the time, the agreement would bewholly inoperativeunlessit
were held to be bindingon the defendantspersonally. Thecases referred to in
the courseof the argumentfully bear outthe proposition that, wherea
contract is signed by onewho professesto be signing “as agent,” but who has
no principalexisting at the time, and the contract would bealtogether
inoperativeunlessbindingupon the person who signed it, he is bound
thereby: and a stranger cannot by a subsequentratification relieve him from

9. that responsibility. When the company came afterwardsinto existence it was
a totally new creature, having rights and obligations from that time, but no
rights or obligations by reason of anything which might have been done
before. It was once, indeed, thought that an inchoate liability might be
incurred on behalf of a proposed company, whichwould becomebindingon it
when subsequently formed: butthat notion was manifestly contrary to the
principlesupon which the law of contract is founded. Theremustbe two
parties to a contract; and the rights and obligations which it creates cannot be
transferred by one of them to a third person who was notin a condition to be
bound by it at the time it was made. The history of this company makesthis
construction to my mind perfectly clear. It was no doubtthe notion of all the
parties that success was certain: but the plaintiff parted with his stock upon
the faith of the defendants' engagementthat the price agreed on should be
paid on the day named. It cannot be supposed that he for a moment
contemplated that the paymentwasto be contingent on the formation of the
company by the 28thof February.