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 What is Law
Definition
Those rules and principles that govern the social conduct of people and are
enforced by the courts
Importance
It controls all human activity including that of Business, Economics and
Social Sciences

 Importance and Sources of Law

 Law is important for maintaining law and order, justice and peace in
the society.
• Sources of law are customs, traditions and legislations.
 Kind of Laws
Public Law
• Constitutional law
• Administrative law
• Criminal law

Private Law
• Law of Contracts
• Law of Sales of Goods
• Law of Partnership and
• Company Law etc.
 Company Law
• History of Company Law
• Need of new law
• Present Company Law
• Applicability of company law
• Exceptions
Corporations
Universities
Registered societies

Incorporation of a company
• Three or more persons can form a public company
• Two or more persons can form a private company
• One person can form a single member private company (SMC)
• Company has Ltd, (Pvt) Ltd or (Guarantee) Ltd after its name
• Unlimited Company has no notation after its name
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Registration Formalities
Memorandum of Association (First Schedule)

Articles of Association (First Schedule)

Statutory declaration

Registration fee (duty on share capital and filing fee)

Consent to become directors

Notice of situation of registered office

 Incorporation of a company
• Three or more persons can form public company
• Two or more persons can form private company
• One person can form a single member company (SMC)
• Company has Ltd, (Pvt) Ltd or (Guarantee) Ltd after its name
• Un limited has no notation after its name

 Registration Formalities
 Memorandum of Association (First Schedule)
 Articles of Association (First Schedule)
 Statutory declaration
 Registration fee (duty on share capital and filing fee)
 Consent to become directors
 Notice of situation of registered office

 Memorandum of Association
• It is most the important and public document
• It gives powers and objects of the company
• It binds company members with its provisions
• Creditors and shareholders know the enterprise
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• It is printed, paragraphed, numbered and bound

• It cannot be easily changed
• Its format sample is provided in Ordinance
 Articles of Association
• It is second most important document and can be easily changed
• It shows internal arrangement to achieve objects of the company
• Gives definition of important terms
• Share capital, right of share holders and issue/ transfer of shares
• Directors appointment an duties
• Accounts, audit and winding up procedure
• It is printed, paragraphed, numbered and bound

Certificate of Registration
Issued by the registrar and contains:
Name of the company
Date of issue
Name of the province
Signature of the registrar and his seal
Legal Status of Registered Company
• The company becomes a body corporate, has a name and is separate from
its members
• Can exercise all functions of the company
• Has company seal and perpetual succession
• It can own property and enter in contracts
• It can sue and be sued

 What is Prospectus

 Any document, which invites public to subscribe or purchase shares or

debentures of a company is called a prospectus and it includes any
notice, circular, advertisement or communication.
 Contents of Prospectus
 Name of the company
 Name of directors, their profession and share holding
 Capital required by the company
 Past financial records of the company
 Name of its bankers, underwriters, auditors and legal advisors
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 It is published in one English and Urdu news papers

 It is approved by the registrar
 Application form is provided in the advertisement
 Shares Allotment Procedure
 Banks collect the money and also underwrite
 Investors apply through their bank
 The lead bank coordinates money collection and banks share
 Shares are allotted through ballot and others money refunded
 If required amount is not offered all money is refunded
 The money collection is submitted to the registrar
 The shares are provided after ninety days to shareholders
 Capital of a Company
• Capital. Capital is the money that gives a company power to buy goods and
services and is balance of asset-liability

• Authorized Capital It is the maximum amount a company can have and is

written in the memorandum

• CAPITAL SOURCES

• Share capital Loan capital

• Issued share capital Debentures
• Subscribed share capital
• Paid up share capital
• Unpaid share capital

 ALTERATION OF SHARE CAPIAL

Company can alter its share capital by amending the memorandum of association

 Company can Alter Authorized Capital

 Company can consolidate share capital
 Company can sub divide share capital
 Company can share capital
 DEBENTURES
Debentures are certificates of loan taken by the company from individuals and
institutions

 Debenture holders are not members of the company

 They are simply creditors and have no voting right
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 Trusties are appointed to secure the interest of creditors

 Participation Term Certificates are a kind of loan

 Federal Govt. nominates Banks give loan to companies
 Funds are obtained as agreed and PTCs are

 MORTGAGE AND CHARGES

Financial need of a company, beyond share capital and debenture, is borrowed by
creating mortgage or a charge on its assets:
Immoveable property
Book debit
moveable property
Un called capital etc.

 TYPE OF MEETINGS
 Directors Meetings
 Board meetings
 Committee meetings

Requirement of valid meeting

 Meeting schedule / agenda
 There must be a quorum
 There must be a chairman
 Meeting record/ minute
 Chairman signature

 Shareholders Meeting
 Statutory Meeting

 Annual General Meeting (AGM)

 Extraordinary General Meeting EGM)

 STATUTORY MEETING
 Public companies having shares must hold this meeting
 It is the first and held only once in life of a company
 It is held within 3 to 6 months of start of business
 Failure to hold it may results in winding up of company
Purpose of the meeting
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 Directors prepare a statutory report/ send to members 21 days before the

date of meeting to inform:
 Particulars of directors, secretary, auditors and legal advisors
 Total numbers of share allotted and cash received against it
 Bank commission on sale of shares and under writing if any
 Brief review on the affairs of the company/ report to registrar

 ANNUAL GENERAL MEETING (AGM)

 All companies hold AGM and members invited to attend
 First AGM is held I8 months after registration
of the company and thereafter every year
 It is held in the town company is registered
 Notice of meeting venue, date and time is given to members 21 days before
 Listed companies also publish notice in news paper
 AGM IMPORTANCE AND AGENDA
 The directors must call this meeting to inform members about company’s all
affair and fined for not holding it.
 Ordinary business includes
 Consideration of audited accounts
 Declaration of dividend
 Election of directors and
 Appointment of auditors
 Extraordinary General Meeting
 All business of a company other than ordinary business is called special
business and must be done at this meeting
 Directors/ members can call it at any time
 Agenda of the meeting ,venue and date/ time is intimated 21 days before the
meeting
• Quorum
Quorum means a minimum number of members that must be present at a valid
meeting to transact a valid business

 Generally articles define quorum

 Listed public company-10 members with 25% voting power
 Any other company -2 members with 25% voting power
• Proceedings
• Proceedings of any meeting are the steps taken on any resolution from the
start to finish
 Taking up a resolution of the agenda
 Debating all aspects of the resolution
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 Voting on the resolution

 Resolution is either approved or failed
 Making a record which is called minute
 Signature of the chairman on the minute
 Keeping the record of the minute
• Casting of votes
• Resolutions at a meeting are decided by votes
• Members votes are in ratio of their shares
• A member/ or proxy can vote by show of hand
• Chairman, after voting, declares the result
• Chairman/ members can also vote by ballot
• Result is announced by the chairman
• Minutes of the proceedings when signed by the chairman are authentic record
• Provision of Proxy
A member of a company can appoint a person to represent him at a meeting is
called a Proxy
– Member has to fill send a proxy form
– Proxy is entitled to speak on behalf of the member and also cast vote
– Proxy form must reach the company two days before the meeting
• Challenging validity of meeting Proceedings of any meeting if challenged by
a member having 10% voting power, within thirty days, can be set aside by a
court
• Notice of resolution With notice of meeting the draft resolution proposed to be
discussed in the meeting must be sent to all members 21 days before the
meeting

• POSITION OF DIRECTORS
• Directors formulate the policy and supervise the management activity of the
company
• The directors are:
 Agents
 Trusties
 Governors and
 Managing Partners but are
 Not Servants
• ELECTION OF DIRECTORS
• Directors are elected in a general meeting
• Candidates file their name 14 days before
• Retiring directors are replaced by new ones
• A members vote is equal to his shares
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• A member’s total votes= No of directors to be elected multiplied by shares a

member holds
• Member getting highest votes is elected
• Removal of directors
• A director can be removed only by members in a general meeting
• Member’s votes for removing a director must at least be equal to the vote
obtained by an elected director in the preceding meeting
• QUORUM FOR DIRECTORS’ MEETING
• The quorum for a meeting of directors is four or one third of the number of
directors, whichever is greater
• The quorum for 8 directors is 4 and for 13 is 5
 Investments in associated companies
When two or more companies are related to each other in the following manner :
 If the Director/ shareholder has 10% voting power in both the
companies
 If the companies are under common management or control
then such companies are called associated companies

Investment in such companies will be approved as a special resolution in

general meeting indicating the nature, amount and terms and any change
will also require approval

 Investments in company’s own name

 All investments by a company will be in its own name

 A company appointing a nominee director may have qualifying shares either

jointly or in nominees name
 PROHIBITION OF SHORT SELLING
 When shares are sold and purchased by a person in the same day it is called
short selling
 Short selling is legally permissible except:
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 The director, chief executive, managing agent, chief accountant,

secretary or auditor of a listed company
 A other person who owns not less than 10% shares of such a company
 DISCLOSURE OF INTEREST BY DIRECTORS
 If a director is concerned or interested in a contract to which the company is a
party he must disclose the fact in a meeting of directors and shall not be:
 present or sit in that meeting
 counted in quorum
 participate in deliberation /voting of that matter

Memorandum of Association
• A charter of incorporation
• Gives powers and objects
• Binds company members with its provisions
• Creditors and shareholders know the enterprise
• It is printed, paragraphed, numbered and bound
• It cannot be easily changed
• Its format sample is provided in the Ordinance