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Q. No. 10: What is the procedure for the formation of a Joint Stock Company in Pakistan? ANSWER:


INTRODUCTION: A company is formed by law for the purpose of carrying on any object such as business, sports, research, charity etc. There is a procedure for establishing the business in shape of company. After taking some permission from Government officials and making few legal documents the company can be formed. The whole process or procedure of companys formation is divided into three stages namely. 1: Promotion 2: Incorporation 3: Commencement of a company 1: PROMOTION OF A COMPANY: It is the first stage in the formation of company. Promotion means to start the business. The act of commencement to form the joint stock company is known as promotion. It is the process of exploration, investigation and the organization of necessary resources with the object of starting business in the form of company. Company with reference to a given object and set it going. In the public company there are at least seven and in a private there are at lest two promoters. Important steps in promotion stage: The important steps in the promotion of a company are as follows: i. Discovery of Business Idea. ii. Investigation of the business project iii. Verification of the result of investigation. iv. Preparation of Marketing Feasibility: v. Preparation of Financial Feasibility vi. Analysis of feasibility reports vii. Chalking out a definite course of action for establishing a company. viii. Financing of business proposition ix. Preparation of drafts of essential documents. x. The name of the company xi. Sanction for capital xii. Printing of drafts of the documents xiii. The select suitable amount of the capital the kinds of shares to be issued etc. 2: INCORPORATION: The second step for establishment of a company is to get the company incorporated or registered. The promoters have to prepare and file a number of documents with the registrar for the incorporation of a company. There are three stages in incorporation of a company. i. Filing of documents. ii. Payment of registration fees. iii. Certificate of incorporation i. Filing of documents: These documents are as under: a. The memorandum of association signed by at least seven persons. Prepared By:H. ABDUL REHMAN 0321-6485593


b. The articles of association signed by at least seven persons. c. Notice of the address at which the registered office of the company will be situated. d. A statutory declaration by the secretary or a chartered accountant thatll the provision of the companys ordinance with regard to registration has been fulfilled. e. Original copies of the receipted challans in respect of payment of duty on share capital with the prescribed filing fee. f. A list of directors and their willingness to act duly singed by each of them. ii. Payment of Registration Fees: The above documents when submitted must be accompanies with requisite filling fee. The registrar on receipt of all the documents will scrutinize them. If he is satisfied that requirements of law have been fully met with, he will register the company. iii. Certificate of Incorporation: After registration the registrar will issue a certificate of incorporation is a proof of that all the requirements of the companies ordinance have been compiled with. On obtaining the certificate, the company gets an independent legal entity. It can sue or be sued in its name, but cannot start the business. Conclusive Evidence: The certificate of incorporation is the evidence that: i. The company has been registered in a regular manner. ii. The documents of the company have been prepared according to law. iii. The association is dully registered under the ordinance. (Sec. 33) 3: COMMENCEMENT OF A COMPANY: A private limited company can commence business on receipt of certificate incorporation. A public company has, however, to wait to commence business till a Certificate Commencement of Business is issued and received from the registrar of the Joint Stock Company. Documents to be filed with Registrar: The certificate of commencement of business is granted on fulfilling following a few of requirements. i. Where prospectus has been issued inviting the public to subscribes for shares. ii. Shares payable in cash have been allotted to the amount of minimum subscription. iii. Every director of the company has paid the full amount of the shares payable in cash. iv. A statutory declaration by the chief executive or one of the directors and the secretary of that the aforesaid conditions have been compiled with. Certificate of Commencement: A statutory declaration by the chief executive or one of the directors and the secretary the aforesaid conditions have been complied with. The registrar on being fully satisfied that: a. The verified declaration has been filed and b. All other requirements of the ordinance have been compiled with, will issue a certificate is called, Certificate of Commencement of Business. On receipt of this certificate a company entitled to commence business. CONCLUSION: A private limited company may start its business after receiving the Certificate of Incorporation whereas it is a legal compulsion that a public limited company must obtain Certificate of Commencement of Business. Prepared By:H. ABDUL REHMAN 0321-6485593