Professional Documents
Culture Documents
It means that a company possesses separator legal entity, identity and personally of its own,
part from its shareholder. It can borrow money, enter into contracts, and hold property in its
own name. It can sue and be sued by its shareholder.
2.2 AUDITORS.
Auditors are independent persons who examine the accounts of the company and report on the
same. They express their opinion on the accounts and are also supposed to detect frauds,
manipulations of account aimed at concealment of true financial position of the company.
Every company must have a seal of its own, called “Common Seal”. Director must provide for its
safe custody. This shall be affixed to share certificated and any other instrument, only on the
authority of a resolution of directors.
2.4 COVENENT
An agreement convention, or promise of two or more parties, by deed in writing, signed, and
delivered, by which either of the parties pledges himself to the other that something is either
done, or shall be done, or shall not be done or stipulates for the truth of certain facts.
2.5 FRIDUCIARY
This term is use to refer to a person having duties involving good faith, trust special confidence,
and candor towards other.
It refers to the behavior in good faith, trust, special confidence, and candor towards other.
Incorporation means the recognition of the existence of a company, in the eyes of law, as a
separate legal entity.
It means:
Share capital is the capital collected by the subscription to the shares of the company. This
capital is non-refundable except in the case of winding up and reduction of capital.
It means that the liability of the members of the company to pay back the debts of the company
is limited up to the face value of their shares. The fact limited liability stems from the fact of
company being an artificial person. Liabilities for repayments of loans tend to be divided
between company and the shareholders.
Note:
The privilege of limited liability has been defeated to a large extent by other laws, such as
Taxation law which lays down that in the case of private companies directors and shareholders
holding not less than 10% of the company’s shares individually shall be personally liable for the
company’s unpaid tax liability. Moreover, Banks have made it a usual practice to obtain personal
guarantees from the directors of companies for the loans which they advance to the companies,
however, this practice is more common in case of private companies.
It means that matters or things are generally the same, but be entered when necessary, as to
names, offices, and the like.
The face or state value of a share or stock or bond is called par value.
It means that a company possesses permanent life which is not affected by death, insolvency,
insanity or withdrawal of any of its members.
It means:
The shares of public companies are easily transferable without any restriction whereas in case of
private companies this is subject to restrictions as may be imposed in the Articles of Association.
A company is incorporated for the accomplishment of special purpose or purposes which are
clearly laid down in the objects clause of memorandum of association. Any act beyond those is
an ultra vires act.
In order to be a “successor in interest”, a party must continue to retain the same rights as
original owner without change in ownership and there must be a change in form only and not in
substance, and transferee is not a “successor in interest”.
In case of corporation, the term ordinarily indicates statutory succession as, for instance, when
corporation changes its name but retains same property.
2.20 SUCCESSORS
Those persons, other than creditors, who are entitled to property of a decedent under his will or
succession statute.
Shareholder, being the entrepreneurs, are owners of the company and as such have the right to
manage the company, but owing to their large number, they delegate most of their managerial
powers to their elected representatives called Directors. Board of Directors appoints Chief
Executives as the nucleus.
(a) Chairman,
(b) Chief Executive
(c) Board of Director
(d) Shareholders
(e) Secretary,
(f) Chief Accountant,
(g) Managers, and
(h) Other Functionaries.
It means, “An act performed without any authority to act on the subject.”
Chapter -3
TYPES OF COMPANIES
Note: Where two or more persons hold one or more shares jointly they shall be treated as a single
member.
A public limited company can be formed with at least three (3) members.
Public limited companies may further be classified in the following two categories.
The companies whose securities are allowed to be traded on a stock exchange are called
listed companies.
The companies whose securities are not allowed to be traded on a stock exchange are called
unlisted companies.
One the basis of composition of shareholding, companies can be classified in any of the
following types:
It means a company or a body corporate which holds (directly or indirectly) more than fifty
percent (50%) in the voting securities of accompany, or has a power to elect and appoint more
than fifty percent (50%) of the directors of such other 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 director of such company.
Note:
If the holding company is a subsidiary of another company, every company which is the
subsidiary of such holding company will automatically become the subsidiary of the another
company.
A company whose 20% or more shares (up to 50%) are held by another company shall be
considered an associated company of that company (for complete definition of an associated
company see Para 1.1 Chapter-)
4. REGISTERED COMPANIES
_____________________________________________
By Guarantee
5.1 If the securities and Exchange Commission of Pakistan satisfied with an association which has
been formed or is capable of being formed as a limited company that it meets the conditions
specified by Companies Ordinance, 1984, the Companies may grant a licence and direct that the
association be registered as a limited company without the addition of word “Limited” or
“Guarantee Limited”, as the case may be, to its name and the Association may be registered
accordingly.
(a) Association should be formed for providing commerce art, science, religion, sports,
social services, charity or any other useful object;
(b) Association applies or intend to apply its profit, if any or other income in promotion its
objects; and
5.3 The conditions and regulation in this regard issued or imposed by the Commission shall be
binding on the association and may be inserted in Memorandum and Articles of Association or
one of those on the direction of Commission.
5.4 The association shall enjoy all privileged of a limited Company subject to all its obligation except
using the word “Limited” or5 “Guarantee Limited”, as the case may be.
5.5 The licence may be revoke by Securities and Exchange Commission of Pakistan and upon its
revocation, the registrar shall enter the word “Limited”, Private Limited”, or “Guarantee
Limited”, as the case may be, at the end of the name of Association and the Association will
cease to enjoy all the exemptions and privileges granted by SECP.
5.6 Before the revocation of licence, the Commission shall give a notice in writing to up Association
of its intention and the association shall afford the opportunity of submitting a representation
in this regard.
5.7 The above rules are application to public limited companies only and private limited company
can be granted licence under section 42.
1- A public company should have at least 1- A private company should have least two (2)
Three (3) members in case of unlisted member except single member company (SMC).
Company and seven (7) members in case
Of listed company
2-There is no restriction on the maximum no 2- Maximum member cannot exceed fifty (50).
Of members. However, the employee members are not
Counted for the purpose of deciding upper
limit.
3- A public company can invite subscription 3- A private company cannot invite subscription
From general public.
From general public.
4. A public company can transfer its 4-Tranfer of share is restricted in private
Subscription from general public. Company.
5- A public company has to seek certificate 5- No such certificate is required and it can
For commencement of business. Commence business just after is incorporation.
6- The public company has to raise minimum 6- There is no requirement to raise minimum
Subscription before obtaining certificate of subscription.
Commencement of business.
7- A public company is required to file the 7- There is no requirement of filling prospectus
Prospectus or a statement in lieu of or statement in lieu of prospectus for a private
Prospectus (SILOP) for obtaining the certificate company except when private company coverts
For commencement of business. Into public company.
8- A public company is required to fill its 8- Filing of accounting is not required by the
Accounting with the accounting. Private company.
9- Auditor’s qualification is prescribed as 9- No qualification is prescribed for an auditor
Chartered Accountant. Of a private company except when it has a paid
Up capital exceeding Rs. 3 million.
10- A public company should have at least 10- A private company should have least two (2)
Three (3) directors in case of unlisted directed except single member company(SMC).
Company and seven (7) directed in case of
Listed company.
7- Difference between public listed and public unlisted company:
2-A listed company should have at least 2-An unlisted should have at least three (3)
Seven (7) members. Members
3-A listed public company is required to file 3-An unlisted public company is required file its
Its account with commission and the accounts with the Registrar only.
Registrar.
4-Beneficial ownership of a listed public 4-No such restriction on unlisted public
Company is controlled and reported. Company.
5-Quorum for general meeting of listed 5-Quorum for general meeting of an unlisted
Company is ten (10) members present in company is tow (2) members present in person
Person or through proxy having not less or through proxy having not less than 25%
Than 25% voting power. Voting powers.
6-Listed public company prepares its account 6-Unlisted company prepares its accounts in
In accordance with fourth schedule and IASs. Accounts in accordance with fifth schedule and
IASs.
7-Appointment of whole time qualified 7-Appiontment of whole time qualified
Company secretary is mandatory, company secretary is not mandatory.
8-A member of stock exchange or his spouse 8-There is no such restriction on unlisted public
Cannot becomes director of a listed company. Public company.
9-ot is required to issued prospectus 9-It is only required to file statement in lie of
Prospectus.