This document contains the details of SECP mainly of its introduction, functions, objectives, organizational structure etc.

1. SECURITIES &
EXCHANGE
COMMISSION
OF PAKISTAN
Submitted to: Hafiz Adnan
ABSTRACT
This document contains the information about
SECP i.e. the securities and exchange
commission of Pakistan; mainly including its
introduction, Functions of SECP, different types
of companies and process for registration of
company.

2. 1
Contents
History.......................................................................................................................................3
1. Introduction.......................................................................................................................3
1.1. Main Functions of SECP..............................................................................................4
Incorporation of a Company...................................................................................................5
1.2. Divisions of SECP .........................................................................................................5
2. Organizational Structure of SECP..................................................................................9
2.1. Policy Board...................................................................................................................9
2.2. Organizational Structure ...........................................................................................10
2.2.1. Commission .................................................................................................................11
2.2.2. Chairman.....................................................................................................................12
3. How to Register a Private Company.............................................................................14
3.1. Process of registering a Private Company ................................................................14
4. Types of Companies........................................................................................................18
4.1. According to its Formation ........................................................................................18
4.2. According to its liability .............................................................................................21
4.3. According to its Control .............................................................................................23
4.4. Association Not-for-profit ..........................................................................................25

3. 2
Group Members
 IRFAN UR REHMAN FA17 – BBA -069
 FAHAD MASOOD FA17-BBA-003
 WASIF EHSAN FA17-BBA-177
 TAUQEER AHMAD FA17-BBA-167
 SAAD IBRAHIM SP17-BBA-091

4. 3
History
The Securities and Exchange Commission of Pakistan (SECP) is the successor to the former
Corporate Law Authority (CLA), which was an attached department of the Ministry of Finance.
The process of the CLA's restructuring was started in 1997 under the Capital Market
Development Plan of the Asian Development Bank (ADB). The parliament passed the
Securities and Exchange Commission of Pakistan Act, which was promulgated in December
1997. Consequently, the SECP, having an autonomous status, became operational on January
1, 1999.[1] The Act gave the organization the administrative authority and financial autonomy
to carry out the reform program for Pakistan’s capital market.
1. Introduction
SECP i.e. The Securities and exchange commission of Pakistan is a financial regulatory
institution whose main objective is in a struggle to develop a modern and efficient corporate
sector. On a large scale, it encourages investment and foster economic growth and prosperity
in Pakistan. According to SECP, their mission is to develop a fair, efficient and a clear
regulatory framework, based on international legal standards and best practices, for the
protection of investors and qualification of systemic risk aimed at fostering growth of a strong
corporate sector and broad-based capital market in Pakistan.
It also ensures proper risk management procedures in the capital market and protects investors
through open policy measures and effective enforcement practices. The SECP was initially
responsible for the regulation of corporate sector and capital market. Over time, its mandate
has expanded to include supervision and regulation of insurance companies, non-banking
finance companies and private pensions. The SECP has also been assigned with oversight of
various external service providers to the corporate and financial sectors, including chartered
accountants, credit rating agencies, corporate secretaries, brokers, surveyors etc.
So, the current directive of the SECP includes the following main points: -
 Regulation of corporate sector and capital market
 Supervision and regulation of insurance companies
 Supervision and regulation non-banking finance companies and private pensions schemes

5. 4
 Oversight of various external service providers to the corporate and financial sectors,
including chartered accountants, credit rating agencies, corporate secretaries, brokers,
surveyors etc.
1.1. Main Functions of SECP
SECP’s main functions includes following: -
 regulation of securities market and related institutions like Central Depository
Company (CDC),
 Credit Rating Companies and Modarabas (funds operating based on Islamic economic
principles).
 Administration of the company law.
 Regulation of non-banking finance companies like leasing companies
 Investment banks and mutual funds
 Regulation of insurance business and private pensions.
 Guiding the business in stock exchange and any other securities market.
 Encouraging the organized development of the capital market and the corporate sector
in Pakistan.
 Prohibits the fraud and unfair trade practices relating to securities market.
One of the important functions of the SECP is the incorporation/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) for the purpose of incorporation
or registration of different type of companies.
From the beginning of SECP, several operational changes have been introduced and a friendly
environment has been created at the CROs. Incorporation of companies has been made much
easier, smooth and swift ensuring completion of this process within three days. Other public
services like availability of name, providing of certified copies etc., are rendered within one
day. E-Services has been launched by the SECP in Sep. 2008, which facilitates online
availability of name, online incorporation of companies and e-filing of statutory returns. It
enables the promoters and management of the company to interact online using the e-Services
portal, without visiting the SECP offices. Online services save time and resources, increase

6. 5
efficiency, create a paperless environment, promote confidence and strengthen the country’s
economy.
Incorporation of a Company
For the convenience of general public, promoters and directors of companies, SECP has
established its eight CROs at Islamabad, Karachi, Lahore, Peshawar, Faisalabad, Multan,
Sukkur and Quetta. Online facilities for incorporation of companies and filing of returns have
been made available. registration of companies and monitoring of their working according to
law, functions of CRO’s include providing services and guidance and to ensure that the
companies and their directors comply with the statutory requirements as provided under the
Companies Ordinance, 1984 (the Ordinance). The record of companies maintained by the
CROs is public record and the investors, shareholders, creditors and general public, may
inspect the record of any company whenever they need, and they may also obtain certified copy
of any specific document on payment of nominal amount of fee.
Any three or more persons associated for lawful purpose may, by subscribing their names to
the Memorandum of Association and complying with the requirements of the Ordinance form
a public company and any one or more persons so associated may, in like manner, form a
private company. If only one member forms a private company, it is called a single member
company and if it is formed by more than one member, it is termed as a private company.
1.2. Divisions of SECP
The Securities and Exchange Commission of Pakistan (SECP) regarding its functions and to
exercise its powers effectively and efficiently has reorganized itself into five Divisions and five
Departments apart from the Appellate Bench and Chairman and Commission Secretariat.
The SECP is divided into the following divisions:
 Company Law Division
 Securities Market Division
 Specialized Companies Division
 Insurance Division
 Prosecution and Legal Affairs Division
 Support Services Division

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The work of each Division has further been divided into Departments and Wings in order to
handle the specific and specialized nature of assignments by the teams of professionals having
knowledge of the specific areas and experience in the relevant fields. The Departments include:
Information Systems and Technology Department; Finance Department; Human Resource and
Training Department; Administration Department; and Internal Audit Department.
Company Law Division: The SECP has granted powers and functions to the Corporate sector
and Compliance Department, Company Law Division to appoint administrator to manage the
affairs of a company licensed under section 42 and initiate wingding up proceedings. Powers
included grant, renew or revoke license and impose terms and conditions in respect thereof and
to grant any approval required pursuant to the said terms and condition including prior approval
regarding investment in associated company.
Others powers included to sanction issue of shares at discount on such terms and conditions as
he thinks fit; allow extension in time to issue shares at discount; impose penalty for violation
of provisions of section 82; allow extension in time for allotment of declined or not subscribed
shares by the directors of a company and allow a company to issue further share capital to any
person for cash or for a consideration other than cash. The company Law division have also
been empowered to impose penalty as provided for any offence, contravention of, or default in
complying with provisions of the Companies Act, 2017 which fall within the jurisdiction of
Commissioner through delegation of powers. The powers of the Commission under the rules
or regulations made under a section are also delegated to the Commissioner or the officer
concerned if powers and functions of the commission provided in the section relevant to the
said rules or regulations have been delegated to him.
Securities Market Division (SMD): The Securities Market Division (SMD) is responsible for
monitoring, regulating, and developing the securities market. It regulates the primary and
secondary markets as well as market intermediaries through registration, surveillance,
investigation, enforcement, and rulemaking, with the objective of protecting investor interests.
The SMD also processes and grants approvals to prospectuses for public offering of both debt
and equity securities. In addition, it institutes appropriate regulatory reforms to develop and
promote the market, engender investor confidence and instil transparency, effective risk
management and good governance at the Stock Exchange, Pakistan Mercantile Exchange,
Central Depository Company and National Clearing Company. The division has four
departments: a. Policy, Regulation and Development Department b. Public Offering and

8. 7
Regulated Persons Department Surveillance, Supervision and Enforcement Department d.
Commodity Market Department
The main task of SMD is to take enforcement actions against the market participants for non-
compliance with the regulatory framework. SMD has been divided into two departments, i.e.,
Market Supervision and Capital Issues Department, and Policy, Regulation and Development
Department. While the former will oversee broker registration, capital issues, compliance,
market surveillance, litigation and inspection functions, the latter will focus on policy and
regulation matters pertaining to stock and commodity exchanges. Separate wings have been
created in each department to focus on specific areas of significance like development of debt
market and commodities markets. The SCD and ID shall have two departments each – Policy,
Regulation and Development Department and Supervision Department. The supervision
department in both the divisions has been entrusted with inspection, surveillance and
enforcement functions.
Specialized Company Division (SCD): The SCD strives to provide a regulatory environment
which is conductive for development and promotion of a robust Non-Bank Financial (NBF)
sector. There are certain functions that are performed under SCD that includes licensing,
registration, regulation, on-site inspection, off-site surveillance and enforcement. For
operational ease and enhanced efficiency, the specialized company division is divided into two
main departments i.e. policy, regulation and development Department (PRD) Supervision and
Enforcement Department.
The PRD performs the function of licensing, registration, provision of comprehensive
regulatory framework and granting necessary regulatory approvals to the NBF sector. On the
other hand, Supervision and Enforcement Department is primarily responsible for centralized
functions.
Insurance Division: The SECP has been regulating the Insurance industry since 2001. It
regulates and monitor the Insurance sector in the country through powers vested in the
Insurance Ordinance. From an economic point of view, insurance is an arrangement for
reducing financial risk by transferring it from a policy holder to an insurer. The social aspect
of insurance involves the collective bearing of losses through contributions by all members of
a group to compensate for losses suffered by a few group members. From a business viewpoint,
insurance achieves the sharing of risk by transferring risks from individuals and businesses to

9. 8
financial institutions specializing in risk management. Lastly, from a legal perspective,
insurance is a contract whereby, in consideration of a premium received, a person promises to
make payment to another person, in case of happening of an event specified in the contract due
to which second person suffers a loss. The party bearing the risk is known as the 'insurer' or
'assurer' and the party whose risk is covered is known as the 'insured' or 'assured.
This department plans, designs, develops and executes SECP’s investor education and
awareness program and delivers educational seminars, besides ensuring resolution of investor
complaints. It also liaises with multilateral standard setting forums.
Prosecution and Legal Affairs Division: It provides as the name suggests prosecution
litigation and legislative support like the previous division this division has further departments
but there are only two departments
1): The first Department is prosecution and civil litigation department
It streamlines mechanism visible litigation it represents the SECP in civil and corporate
proceedings through special public prosecutors and prepares the pleadings
2): The last department in this division is that of legal affairs department
It drafts and reviews legislation and helps and liaises with the federal government about
proposed legislation it also gives legal opinions vets and reviews laws agreements policies
show-cause notices notifications and orders then in this commissioner's office.
Support Services Decision: It basically provides administrative support unlike the other two
divisions this division is also divided into further departments.
 The first department is that of a human resource department
It ensures a congenial working atmosphere for the work force which includes continuous
alignment of HR policies and their implementation in line with the organizational objectives
and framework it also deals with HR planning and budgeting recruitment compensation
benefits and funds management furthermore it deals with performance appraisals and
promotions and employee relations.
 The next department is finance department
which processes payments for authorized transactions it also liaises with banks to ensure
then banking arrangements are adequate and invests surplus fund.
 The last department in this division is that of administration department
It is responsible for organizing events procurement provision and maintenance of office
equipment medical services maintenance and renovation of office facilities such as day-care
and gym safety and security premises SECP.

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2. OrganizationalStructure of SECP
Mainly, the organizational Construction of SECP contains the policy board and its
organization’s model. These two are discussed separately as following: -
2.1. PolicyBoard
This Policy Board is based on maximum 11 members that are all appointed by the Federal
Government. (i.e. Five Ex-Officio Members and Six members from Private sector).
While ensuring full autonomy of the Commission, the 1997 Act provides for establishment of
a Securities and Exchange Policy Board (Policy Board). The main objective of the Policy Board
is to provide guidance to the Commission in all matters relating to its functions and to formulate
policies in consultation with the Commission. The Policy Board is also responsible for advising
the Government on matters falling within the purview of the Act and other corporate laws; and
to express its opinion on policy matters referred to it by the Government or the Commission.
Currently, the policy board consist of following members including the Chairman and
Secretaries: -
1): Mr Khalid Mirza (Chairman Securities and exchange policy Board)
2): Mr Naveed Kamran Baloch (Secretary Finance Division)
3): Mr Aamir Khan (Chairman SECP)
4): Mr Sardar Ahmad Nawaz (Secretary Commerce Division)
5): Mr Jameel Ahmad (Deputy General, State Bank of Pakistan)
6): Mr Muhammad Khashih Ur Rehman (Secretary Law & Justice Division)
7): Mr. Sadeq Sayyed
8): Mr. Adnan Afridi
9): Mr. Waqar Ul Islam
10): Syed Asad Ali Shah
11): Mr. S Masoud A. Naqvi

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2.2. OrganizationalStructure

12. 11
2.2.1. Commission
In the organizational chart above, the first thing that comes is commission under the
Securities and Exchange Policy Board. Commission of SECP is consist of Commissioners,
including chairman. Commission is based on 5-7 members. The commissioner is Appointed
by the Federal Government. It has some Expertise in following concerns: -
 Securities market
 Law
 Accountancy
 Economics
 Finance [insurance]
 Industry
Commissioners shall always be of private sector persons. Under the commission, there are
Commission Secretariat, Internal Audit & Compliance Department, Appellate Bench Registry
and Shari’ah Advisory Board.
Internal Audit & Compliance: This department conduct independent and objective audits,
evaluations, investigations and other reviews of SECP programs and operations. It is also
responsible for preventing and detecting fraud, mismanagement in SECP programs and
operations. It offers expert assistance and advice whenever required to improve SECP
programs and operations.
Appellate Bench Registry: The Appellate Bench (the Bench) of the Securities and Exchange
Commission (the Commission) is mandated to hear and decide the appeals filed under section
33 of Securities and Exchange Commission of Pakistan Act, 1997 (the Act) against the orders
passed either by a Commissioner or any other officer authorized by the Commission. However,
no appeal shall lie before the Bench against the following: -
1. An administrative direction given by a Commissioner or an officer of the Commission.
2. An order passed in exercise of the powers of revision or review.
3. A sanction provided or decision made by a Commissioner or an officer of the Commission to
commence legal proceedings.
4. An interim order which does not dispose of the entire matter.

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Shariah Advisory Board: Shari’ah Advisory Board (“SAB”) of SECP give its opinion on
Islamic capital market matters. The SAB is entrusted to provide Shari’ah opinion on the laws,
rules, regulations, agreements, and documents presented to it. The Shari’ah scholars also advise
SECP on a range of issues including the operation, auditing and reporting of Islamic mutual
funds, pensions and insurance operators etc. The guidance and advice of the Shari’ah Board
enhances the credibility of Islamic financial institutions and products.
2.2.2. Chairman
The Federal Government shall appoint one of the Commissioners to be the Chairman of the
Commission. (2-3 Years). The chairman is known as the CEO of the commission, its duty is to
advice and help on various day-to-day activities and issues. They can provide input assistance
in processing the new laws and amendments in existing laws and rules/regulations.
The Chairman has its own secretariat which is responsible for managing the chairman’s official
Schedule, engagements and correspondence. It coordinates with the internal and external
stakeholders on behalf of the chairman. It works on behalf of the chairman and deals with the
personals that effect or being affected by the decisions of the SECP.
One of the main commissioners is the SECP divisions that are described above (Section: 2.1)
The chairman Secretariat is further divided into Five different departments that are as follows:
1- Local & Bilateral Relations Department
Its handles communication received from federal and provincial government. It also handles
the correspondence in: -
 Ministries and parliaments.
 Donor Agencies
 Regulatory Authorities
 Law Enforcement agencies
 Bilateral Relations with other regulators.
2- Media Corporate Communication Department
It interacts with media corporations to provides timely information on events happening and
changes that are occurred by the law regulations. It can also organize the regular briefings on

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various reform measures, and it can also work on the SECP’s publications, including their
following things as well: -
 Annual Report
 Newsletter
 Websites
 Portals
 Supplements etc.
3- Islamic Finance Department
Its main duty is to enforce the Islamic laws on the registered Companies and creates regulatory
framework for Shari’ah- compliance companies to ensure that they undertake their business
activities in accordance with Shari’ah.
4- Professional Development Department
Its main duty is to conduct the seminars and arranges the training for the SECP offices and
other capital market Intermediaries. It is also responsible in oversighting of institute of Capital
market and the Pakistan Institute of Corporate Governance.
5- Systemic Risk Department
This department considers the importance of management of systematic risk for the
Commissioner. It is responsible for minimizing any possible systematic risks and interruptions
during the smooth running of operations.

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3. How to Registera Private Company
Any company which is registered as a private company and its article of association restricts
the certain things is called as a Private Company. These restricted things are as follows: -
1): Number of shareholders will not exceed from 50 i.e. the joint shareholders
2): It restrict the transfer of shares freely.
3): Private company cannot incite general public for its subscription.
Single Member Company (SMC): A single member company can be defined as a company
with only one member, also referred to as the shareholder. A company may be formed as a
single member company or may become a single member company following a share transfer
whereby the number of shareholders is reduced to one. This one shareholder will hold all the
shares of the company in their name.
3.1. Process of registering a Private Company
The process of incorporating a company in Pakistan includes six basic steps. Each of these
steps are explained below with their specific requirements. There is also a way to register the
company online which costs 50% less than offline procedure. For online, the individual uses
the SECP e-services portal.
This process comprises of six steps with different requirements in order to register a company
Step – 1: Company Name Reservation
The first step is followed to reserve the name of the company. For this purpose, an application
from is filled by paying its fee (of Rs. 200/=). This application form allows the individual to
mention three names for their company from which a one name is selected. The individual
must be sure about the company kind i.e. either Private Limited Company (Pvt Ltd.) or a Single
Member company (SMC).
Afterwards, the individual receives an email at your registered email address in about two to
three days if your name reservation is successful. If there is any objection, then you may need
to repeat the first step. Your company name will be reserved for a period of 90 days. You can
either pick up the Company Name Reservation Certificate from the concerned Company
Registration Office (CRO) on the next working day or it will be delivered to your address.

16. 15
In case the approval is not so obtained, or the approval is not granted by the registrar; the
company cannot be established.
While selecting the name it should be considered that the name:
 should not contains word or expression notified by the Commission;
 is not inappropriate, undesirable or deceptive;
 does not exploit or offend the religious sentiments of the people;
 is not a name identical with the name of the company already registered.
 not closely resemble with the name of the company already registered.
Whatever name is proposed, the final authority to decide whether a name is in
line with the provisions of the Act lies with the Commission.
Publication of Name:
After the name is finalized, the company name is published in following ways:
1): The name of company must be published in one Urdu and one English Newspaper which
is circulated nationwide. Whenever, the new name is used the old name of company should be
mentioned in brackets for at least three months.
2): The name must be published in every document of the company i.e. the letter-head, sales
revenue and business.
3): The company name should be engraved on seal.
Step – 2: Preparation for documents of Incorporation
The main documents prepared during the process of incorporation are: Memorandum of
Association (MOA) and Article of Association (AOA). These documents are drafted right after
the individual issues the application for availability of name.
 Memorandum of Association
This document is stated as an external constitution of the company containing seven clauses. It
is the main document of company for investors and public i.e. outside the company. It defines
in brief what the company is, what it is for, where it will be and what shall be liability of the
members of the company .It further states the amount of share capital with which the company
proposes to be registered and the persons who are the initial members of the company, the
signatories to the MOA.

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Registration of company is the registration of its constitution, the memorandum of association,
so the memorandum when registered binds the members of the company. It binds all the
members of the company irrespective of the fact that any members have subscribed to it or not.
The person becoming member of the company is deemed to have read and understood the
memorandum of the company and the memorandum shall be binding on him in such a way as
if he has signed the memorandum himself.
Sample Memorandum according to nature of business are available at the SECP website. If
you do not find the sample for your business, then you may need to hire a professional lawyer
to draft those for your business. The contact of my recommended lawyer who has experience
with start-ups is listed at the end.
Clauses of Memorandum of Association
Memorandum of association consists of various clauses which contain variety of information
and it may vary from company to company based on the type of the company or the business
of the company. Following clauses usually exist in the memorandum of association of the
company.
 Name clause
 Registered office clause
 Principal line of business clause
 Undertaking clause
 Liability clause
 Authorised capital clause
 Subscription clause
 Article of Association
This document shows the rules on which the company runs. It is an internal constitution of the
company containing rules regarding the management of affairs of the company. They contain
the guidelines on day to day issues faced by a company
The registration of the articles of association is compulsory requirements for a company limited
by guarantee and an unlimited company.
The articles of an unlimited company or a company limited by guarantee (if both have a share
capital) shall state the amount of share capital with which the company proposes to be
registered.

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The articles of an unlimited company or a company limited by guarantee (if both have no share
capital) shall state the number of members with which the company proposes to be registered.
Articles shall list and enumerate the voting and other rights attached to different classes of
shares and securities issued or to be issued by the company.
Step – 3: Fee of Incorporation/Challan Fee
The incorporation fee is attached to share capital and can calculate it online using
the Incorporation Fee Calculator. For more details, see the Schedule of Fees.
OFFLINE PAYMENT: Individual uploads the deposit receipt before you can submit the
process.
ONLINE PAYMENT: After completing the previous steps, Individual submits the process
and then it will appear in the online payment section of eservices from where he/she can make
the online payment.
Step – 4: Verification of Documents
After preparation of all required documents, the individual submits them before the registrar of
the company. After submitting the documents, the registrar verifies the documents that either
is there any deficiency or not.
If there is no deficiency, then registrar issues the certificate and record the documents in
register.
Step – 5: Certificate of Incorporation
This certificate will be issued by the registrar. The individual might receive an email if an
objection arises. Make the required correction and submit the concerned form again through
eservices Portal. SECP will take about seven working days to complete the process if there is
no objection then individual receives a confirmation email regarding successful incorporation
of your company including the incorporation number.
Individual can pick up the Incorporation Certificate from the concerned Company Registration
Office (CRO) by showing a copy of the payment receipt or it will be delivered to your
registered address after seven working days.

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Characteristics of Incorporation Certificate
Following are some characteristics of Incorporation Certificate: -
1): It contains the name of company.
2): Mentions that either the company is private limited or public limited.
3): Also shows the serial number of companies.
Company Incorporation certificate is conclusive evidence i.e. the CNIC for showing Pakistani
Nationality.
4. Types of Companies
There are four ways in which the types of companies are explained i.e. According to its
formation, According to its liability and According to its control
4.1. According to its Formation
These types of companies can also be called as companies’ classification based by virtue of
legal form. There are following categories that lie in the types of companies with respect to its
formation which means that how these companies were formed actually: -
a. Chartered Company: Chartered company is formed under a special charter granted
by the head of the state, or Queen or King in some countries. This type of company
normally enjoys some special rights or privileges over other companies. The Chartered
Bank of England and East India Company is an example of chartered company.
b. Statutory Company: A company which is created by an act of parliament (e.g. SECP
1997 act) is called as statutory company. This type of company is governed by the
ordinance under which this type of company is created. As in most of other parts of the
world there are companies in Pakistan that are formed under some special statue. In
Pakistan one of the most renowned statutory companies is State Bank of Pakistan. State
Bank of Pakistan is a statutory company and is regulated by the state bank of Pakistan
ordinance.

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c. Government Company: Government company is the type of company in which
majority of the shareholding is controlled by the Government or in other words if 51%
or more of the paid-up capital of the company is owned by the Government such type
of company is called Government company. Further a company which is a subsidiary
of the Government company is also called Government company.
d. RegisteredCompany: Any organization registered under the companies’ act 2017 or
any previous law is called as registered company. Under the registered companies, there
are following two main categories: -
 Private Company: Before going into the discussion that what is the private
company; let’s discuss the its types i.e. SMC-Private (Single-member company)
and other than single member company which is the private company
I. SMC-Private (Single-member company): It is a company which consists of a
single member who is also the director of the company. These companies are
governed by special rules implemented by Securities & Exchange Commission
of Pakistan for such companies. In these companies (SMC-PVT) Limited is
added to the name of the company.
II. Other Private or Private company: A company which is registered as a private
company and its article of association restricts the following things: -
 Number of members will not exceed from 50 i.e. the joint shareholders.
 It restricts transfer of shares freely.
 The invitation of subscriptions from general public for its shares or
debentures or Redeemable capital.
 Public Company: Public company means a company which is not a private
company it can take two forms: Public listed company and Public unlisted
companies.
I. Public Listed Company: Such form of public company whose securities are
listed on an exchange and they are traded as per regulations of that stock

21. 20
exchange. The listed companies must issue a document called as prospectus for
the invitation of its shares.
Advantage & Disadvantages: The biggest advantage of forming a public limited
company (PLC) is the ability to raise capital by issuing public shares. Selling
shares to the public means anyone can invest in the company, meaning more
capital can be amassed than as a private limited company. Being listed on an
exchange can also attract interest and investment from hedge funds, mutual
funds, and other traders.
But with the positives, there are also negatives. Being a Public listed means
there is more regulation, which can be burdensome for some corporations. They
are required to have at least two directors and hold annual general meetings
(AGMs), along with higher transparency when it comes to accounting. Because
they’re public, they’re vulnerable to takeovers and require a higher initial
financial contribution.
II. Public Unlisted Company: A company which is not registered on stock
exchange as compared to the other companies is called as Public Unlisted
company. Public unlisted companies have not made an offer of their shares to
general public hence their shares are not traded on a stock exchange.
A public unlisted company however is entitled to make an offer to the general
public as and when it thinks fit unlike private companies which are forbidden to
invite subscriptions from general public

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4.2. According to its liability
Limited liability may be in the form of a company limited by shares or a company limited by
guarantee and unlimited company.
I. Company Limited by Shares: A company limited by shares is the type of company in
which the liability of the members of the company is limited to the amount unpaid on
the shares if any. In other words, the limited liability of its owners is restricted, in law,
to the face value of the shares they own. 99% of the companies are registered as limited
by share that are profit-oriented.
It can be a Public Company or a Private Company. If it is a public company, it can be
listed on Stock Exchange or an un-listed company. If it is a private company, it can be
a multi-member private company or a single member private company.
For example, if company has authorized capital of Rs. 100,000 out of which members
have paid just Rs. 40,000 then in case of any legal action or other dispute the members
of the company are liable to contribute just Rs. 60,000.
II. Company Limited by guarantee: A company limited by guarantee is the type of
company in which the liability of the members of the company is limited up to the
amount undertaken by members to contribute in the event of winding up of the
company. In simple words the liability of the members is limited up to the amount
guarantee by them. Not-for-profit companies are registered by limited by guarantee i.e.
their legal representatives will be liable.
Its owners may or may not have shares. Their share of the ownership of the company
is recognised, and they are ‘members’ of the company. Their liability to the company
is limited to an amount that the member guarantees to contribute if the company goes
into liquidation for a company not having share capital and for a company having share
capital this shall also include the amount of share capital he subscribed to the company.
A Guarantee Company may be of two types: i.e. having share capital (register capital
with guarantee) and (ii) not having share capital.

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In both cases, each member undertakes to contribute to the assets of the company in the
event of its being wound up while he is a member or within one year afterwards, for
payment of the debts and liabilities of the company contracted before he ceases to be a
member, and of the costs, charges and expenses of winding up, and for adjustment of
the rights of the contributories among themselves such amount as may be required, not
exceeding a specified amount.
About Guarantors: Shareholders are also the member of the company. However, all
shareholders are member of company, but all the members are not shareholder of
company.
For example, suppose a company A has to give Rs. 5,00,000/= to another company B.
The company A kept something as a security against the amount to company B.
However, if a third person gives the guarantee, he/she is called as guarantor and the
phenomenon is called as contract of guarantee.
III. Unlimited Company: Unlimited company is the type of company in which the liability
of the members of the company is unlimited. In other words, if the company is in the
course of winding up then to settle creditors and other claims against the company there
is no limit of contribution and even the personal assets of the members can be ordered
to be taken in custody for the purpose of settlements of winding up of the company.
An unlimited liability corporation is sort of a hybrid: It is an incorporated entity
with unlimited liability. It shelters shareholders from liability in most circumstances,
with one major exception: upon liquidation of the company. If that happens,
shareholders become liable for the debts of the company. Ex-shareholders can also be
held responsible if they disposed of their shares less than one calendar year before the
bankruptcy occurs.
This has all the advantages of a normal company except that the liability of its members
is not limited. In practice unlimited companies are rare but are sometimes used by a
‘partnership style’ business.

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4.3. According to its Control
The third type of company is related to according to its control. It includes two of that
companies i.e. Holding Company and Subsidiary Company.
i. Holding Company: It means a company or body corporate which holds (directly
or indirectly) more than fifty percent (50%) in the voting securities of any other
company or controls the composition of the board of such other company.
Holding company can be defined in context only of subsidiary company.
A holding company doesn’t conduct any operations, ventures, or other active
tasks for itself. Instead, it exists for the purpose of owning assets. In other words,
the company does not engage in the buying and selling of any products and
services. Instead, it was formed so that it gains control over one or more
companies. A holding company exists for the sole purpose of controlling other
companies, whether they be other corporations, limited partnerships or limited
liability companies. Holding companies may also own property, such as real
estate, patents, trademarks, stocks, and other assets.
Businesses that are 100% owned by a holding company are referred to as
"wholly owned subsidiaries." Although a holding company can hire and fire
managers of companies it owns, those managers are ultimately responsible for
their own operations. It is thus crucial for owners to keep a sharp eye on its
businesses to make sure they are running optimally.
Advantages: Holding companies enjoy the benefit of protection from losses. If
a subsidiary company goes bankrupt, the holding company may experience
a capital loss and a decline in net worth. However, the bankrupt company’s
creditors cannot legally pursue the holding company for remuneration.
Consequently, as an asset protection strategy, a parent corporation might
structure itself as a holding company, while creating subsidiaries for each of its
business lines. For example, one subsidiary may own the parent corporation's
brand name and trademarks, while another may own its real estate, another may
own the equipment, and still others may own and operate each individual
franchise.

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ii. Subsidiary Company: It means a company or 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 controls the
composition of the board of such company.
In the corporate world, a subsidiary is a company that belongs to another
company, which is usually referred to as the parent company or the holding
company. The parent holds a controlling interest in the subsidiary company,
meaning it has or controls more than half of its stock. In cases where a
subsidiary is 100% owned by another firm, the subsidiary is referred to as
a wholly owned subsidiary.
Advantages and Disadvantages: Subsidiaries can contain and limit problems for
a parent company. Potential losses to the parent company can be limited by
using the subsidiary as a kind of liability shield against financial losses or
lawsuits. Entertainment companies often set individual movies, or TV shows up
as separate subsidiaries for this reason. The subsidiary structure can also offer
tax advantages: They may only be subject to taxes in their state or country,
versus having to pay for all the parent's profits. Subsidiaries can be the
experimental ground for different organizational structures, manufacturing
techniques, and types of products. Fashion-industry companies often have a
variety of brands or labels, each set up as a subsidiary.
However, subsidiaries also have a few drawbacks. Aggregating and
consolidating a subsidiary's financials make a parent's accounting more
complicated and complex. Since subsidiaries must remain independent to some
degree, transactions with the parent may have to be "at arm's length," and the
parent may not have all the control it wishes. Yet the parent may also be liable
for criminal actions or corporate malfeasance by the subsidiary. It may have to
guarantee the subsidiary's loans, leaving it exposed to financial losses.
For example, one Company A invest in other company B. If the shares are more
than 51% then company A will be called as Holding Company and the company
B is called as Subsidiary company.

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4.4. Association Not-for-profit
People working for useful objects of the society sometimes need protection of limited
liability for such work. Companies Act allows the registration of companies as
associations not for profit if they satisfy certain conditions to Securities and Exchange
Commission of Pakistan. If the Securities and Exchange Commission of Pakistan is
satisfied with an association is to be formed as a limited liability company that it meets
the conditions specified by the Companies Act, 2017 the Commission may, by a license
for a period to be specified, permit for the association to be registered as a limited
company without the addition of word “Limited”, or “(Guarantee) Limited”, to its
name.
Licensing and Conditions: Not for profit association shall be licensed by Commission
to get registered and work as a limited liability company without using the words
Limited or (Guarantee) Limited.
There are some following conditions that are referred to as Not-for-profit association:
 Such association may be set up for any of the following purposes: Commerce,
art, science, religion, health, education, research, sports, protection of
environment, social welfare, charity or any other useful object.
 Such Association shall apply its profits, if any, or other income in promoting its
objects.
 Such Association shall prohibit the payment of any dividend to its members.
 Its objects and activities are not and shall not, at any time, be against the laws,
public order, security, sovereignty and national interests of Pakistan.
License shall be granted by Commission on such conditions and subject to such regulations as
it thinks fit. These conditions and regulations shall be binding on the association and shall on
directions of Commission be inserted in the memorandum and articles, or in one of those
documents.
The association shall on registration enjoy all the privileges of a limited company and be
subject to all its obligations, except those of using the word or words "Limited “or "(Guarantee)
Limited" as part of its name.
A license under this section may be cancelled at any time by the Commission but Commission
shall give to the company, a notice in writing of its intention to do so and shall provide an

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opportunity to be heard to the association before such cancellation. Upon its revocation the
registrar shall enter the word or words "Limited" or "(Guarantee) Limited" at the end of the
name of the association upon the register, and the association shall cease to enjoy the
exemptions and privileges granted by that license.