This document discusses the process of forming and registering a company in Pakistan. It explains that upon registration, a company becomes a separate legal entity with its own rights and liabilities. There are three types of companies that can be registered: limited by shares, limited by guarantee, or unlimited liability. The registration process involves selecting a name, preparing documents like the Memorandum of Association, Articles of Association, and Form 1, paying registration fees, submitting documents to the Securities and Exchange Commission of Pakistan (SECP), and receiving a Certificate of Incorporation. Once incorporated, the company gains benefits like the ability to own property, sue and be sued, and have perpetual succession separate from its members.

1. Submitted by:
Huma Rashid

2. Formation and Incorporation of Company
Formation of Company:
Company formation is the process of registering a business as a distinct legal
entity at Companies House. Itis also referred to as ‘company incorporation’ and
‘company registration’. Upon formation, a company becomes a legal individual
with its own rights, responsibilities and liabilities.
Under the provisions of the Companies Ordinance, 1984 a company is a
corporatebody with separate legal entity and a perpetual succession and a
company may be formed by persons associating for any lawfulpurposeby
subscribing their names to the Memorandumof Association and complying with
other requirements for registration of a company under the provisions of the
Ordinance.
Types and Forms of Companies which may be registeredinPakistan:
According to the Companies Ordinance, 1984 therecan be three different types
of companies:
 A company limited by shares
 A company limited by guarantee
 An unlimited liability company
In order to getting a company registered or incorporated in Pakistan, it is
important to know about the Securities and Exchange Commission of Pakistan.
SECP is the financial regulatory body in Pakistan that looks after the companies’
registration, regulation and deregistration matters. One of the main purposes of
SECP is to register/incorporatethe companies. This task is performed by the
Registration Department, Company Law Division of (SECP). Registration
Department has many filed offices that are known as Company Registration
Offices (CROs) for the purposeof registration/incorporation of different type of
companies.

3. Company Registration Process in Pakistan:
Following are the steps for registration of a company in Pakistan:
1. Availability of Name:
The first step with regard to incorporation of a company is to seek the availability
of the proposed name for the company fromthe Registrar. For this purpose, an
application is to be made both online and in offline mode and a fee of Rs.500 for
physicaland Rs.200 for online is required to be paid for seeking availability
certificate for each name. Itnormally takes a period of 3 to 4 days before
confirmation of the name applied for new company registration in Pakistan.
Section37 of the Ordinance provides that:
• the proposed name should not be inappropriate, deceptive, or designed to
exploit or offend the religious susceptibilities of the people;
• the proposed company name shall not be identical or haveclose resemblance. It
must be distinguishablefromthe names of existing companies, and any name
that has already been reserved by the Registrar for registration of a company.
On acceptance of application (for a company’s namereservation), the name is
reserved for a period of 90 days, further extendable up to the same period on
receipt of fresh application. Confirmation of availability or non-availability of
name is instantly sent on the e-mail address (if provided by the company).
Simultaneously, letter is also dispatched on the postal address.
2. Preparation of Documents for registration of a company:
Postreceiving the name availability certificate fromSECP, the applicants haveto
file an application for incorporation. Following Documents must be prepared
before incorporation;
i. Memorandumof Association (MOA)
ii. Article of Association (AOA)
iii. Form -1

4. Memorandumof Association(MOA):
The memorandumof association of company, often simply called
the memorandum, is one of the mostimportant documents. Ithas to be filed with
the Registrar of Companies during the process of incorporation of a Company. It
contains the fundamental conditions upon which the company is allowed to
operate. Itis the document that governs the relationship between the company
and the outside.
The memorandum of association gives the company's name, names of
its members (shareholders) and number of shares held by them, and location of
its registered office. Italso states the company's;
(1) objectives,
(2) amount of authorized sharecapital,
(3) whether liability of its members is limited by shares or by guaranty, and
(4) what type of contracts the company is allowed to enter into.
The Memorandumof Association;
•Must be printed
•Divided into paragraphs
•Signed by each subscriber (seven or morein case of a public company)
•Add his name, address and description
•Presence of at least one witness who is to attest the signature.
Article of Association(AOA):
The articles of association is a document that specifies the regulations for a
company's operations. The articles of association define the company's purpose
and lays out how tasks are to be accomplished within the organization, including
the process for appointing directors and how financial records will be handled.
Articles of association often identify the manner in which a company will issue
stock shares, pay dividends and audit financial records and power of voting rights.
Form-1:
Itis the third document to be made and submitted before incorporation. It
specifies that all the requirements of the Companies’ ordinance1984 and the

5. rules made there under for registration of company havebeen compiled with.
Itmay be signed and submitted by an advocateof High Court, Chartered
Accountant, cost management accountant, person name in the articles as a
director or officer of the company.
Itis optional for Companies limited by shares butit is compulsory for companies
limited by guarantee and companies having unlimited liability.
3. Payment of Registration fees:
After the availability of name and preparation of required documents, the next
step is to submit filing fees and registration fees in the prescribed bank and the
receipt of which is to be submitted along the documents to be submitted for
incorporation. The fee is to be paid accordanceto the authorized capital of the
company.
The company who has sharecapital, there fee is given in sixth schedule as per
authorized capital whereas; the company having no sharecapital has to pay Rs.
30,000 as registration fee for physicalregistration and Rs.20, 000 for online
registration.
4. Submission of Documents:
After preparing abovemention documents it is important to submit required
documents to registrar. Itincludes:
i. Memorandum of Association(MOA) and Article of Association(AOA):
Four printed copies of Memorandumand Articles of Association in case of offline
submission and one copy for online submission, duly signed by each subscriber in
the presenceof one witness.
ii. Form -1:
Declaration of compliance with the pre-requisites for formation of the company.
iii.Registration/filing fee:
A copy of the original paid Challan in the any branch of MCB Bank Limited or a
Bank Draft/Pay Order drawn in favor of the Securities and Exchange Commission
of Pakistan of the prescribed amount.
Iv. Copy of national identity cardor passport, incase of foreigner, of each
subscriber andwitness tothe memorandumand article of association.

6. 5. Issuance of Certificate of Incorporation:
A certificate of incorporation is a legal document relating to the formation of a
company or corporation. Itis a license to forma corporation issued by state
government.
Once all the documents have been submitted to the registrar, he shall examine
the documents and if he satisfied then he register MOA, and AOA and issues
certificate of incorporation to company.
This certificate is considered as the birth certificate of company and the date
given in it is the first day of its existence.
Legal Effects Of Incorporation:
Sec 16 (5) A body corporate…exercising all the functions of an incorporated
company of suing and being sued and having perpetual succession….with power
to hold land.
1. Separate Legal Entity:
The company is a legal person [artificial] having a distinct entity fromits
members .
2. Ability toownProperty:
A company can own property in its own name.
Macaura Vs Northern Assurance Case:
Fact: M was an owner of a land which produced timber. Sold all the timber to a
company incorporated by him. He took up Insurancefor thetimber in his own
name. Later the timber was destroyed by fire and Macaura claimed under the
insurancepolicy.
Result: M had no insurableinterest in the timber-belonged to the company, not
M.
3. Ability toincur its liability:
Liability of a company is unlimited Liability of members is limited, depends to the
type of company i.e. limited by shares or limited by guarantee.

7. 4. Ability tosue and be sued:
A company can sue and be sued in its own name any wrong done to the
company, only the company can take action.
5. Perpetual Succession:
A company shall exist until properly wound up or struck off fromthe register. It‟ s
life span does not depend on the life of its members.
Re Neol Tedman HoldingsPTY Ltd Case:
Fact: H & W were the only shareholders and directors of company-died. Leftan
infant child.
Held: The personalrepresentative of the deceased members should appoint
directors, so that the new directors could assentthe transfer of the shares to the
beneficiary.
6. Certificate of Commencement:
Private Company:
A private company can startits business operation immediately on obtaining
certificate of incorporation.
Public Company:
A public company has some formalities to be observed . A public company has to
receive the certificate of commencement beforestarting the business. A company
submits the following documents to registrar.
• Prospectus
• Minimum subscription
• Directors shares
Ithas to issueprospectus. Ithas to raiseminimum subscription and after raising
minimum subscription, it has to apply to the registrar again for issueof certificate
of commencement of business. If theregistrar is satisfied he will issuecertificate
of commencement of business.

8. Benefits of Incorporation:
 Raising Capital: Incorporation is generally regarded as an indication that the
owners areserious about their business enterprise, and intend to devote time
and resources to the venturefor a significantperiod of time. This factor, as
well as the reporting requirements of incorporation and—in somecases—the
owners'moreformidable financial resources—makecorporations more
attractive to somelending institutions. In addition, corporations havethe
option of raising capital by selling shares in their business to investors.
Stockholders know thatif the business they are investing in is a corporation,
their personalassets are safeif the company gets into litigation or debt
trouble.
 Ease of Ownership Transfer: Ownership of the company can be transferred
fairly easily by simply selling stock (though some corporations attach
restrictions in this regard).
 Tax Advantages: Somebusinesses enjoy lower tax rates under the
incorporated designation than they would if they operated as a partnership or
sole proprietorship. For instance, business owners can adjustthesalaries they
pay themselves in ways that impact on the corporation's profits and,
subsequently, its tax obligations. Itcan also be easier for a business to invest
in pension plans and other fringebenefits as a corporation becausethe cost
of these benefits can be counted as tax-deductible business expenses.
 Liability: This factor is often cited as far and away the mostimportant
advantageto incorporation. When a company incorporates, "the shareholders,
the owners of a corporation, areliable only up to the amount of money they
contribute to the firm, basically equal to their shares of stock,"
Drawbacks of Incorporation:
 Regulatory and Record keeping Requirements: Corporateoperations are
governed by local, state, and federal regulations to a greater degree than are
other businesses.

9.  Added Costof Doing Business: Regulatory and record keeping guidelines
and requirements often make it necessary for corporations to makeadditional
investments (in accounting staffing, etc.) devoted to seeing that those legal
requirements are met. In addition, there are fees associated with incorporating
that business partnerships and soleproprietorships arenot subjectto.
 Double Taxation: People who are owners of a corporation, and who also
work as an employee of the business, can receive financial compensation in two
different ways. In addition to receiving a salary or wages for work performed, the
owner may also receive a dividend or distribution on the stock that he or she
owns. Any distribution of income to stockholders via dividends is taxable.
This is sometimes called "doubletaxation" in recognition of the fact that such
income has in reality been taxed twice, firstwhen the corporation paid taxes on
its profits, and secondly when the dividends weredistributed.
 Separation of Finances: While incorporation provides significantprotection
of owners'personalassets fromrepercussionsof business downturns, italso
means that a business owner is not allowed to tap into the corporation's account
for assistancein meeting personaldebts.