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EORUPA SCIENCE & COMMERCE ACADEMY

Q. No. 13: Discuss the various kinds of companies. ANSWER:

VARIOUS KINDS OF COMPANIES


INTRODUCTION: There are different kinds of companies. Most of the companies are formed for earning profit only. However, some companies are formed for providing facilities to the public or other useful objects. Generally the companies are divided, as given in the chart below. The companies can be classified from several points of view. Generally, the companies can be divided into following kinds on the basis of incorporation, liabilities, ownership, and others.

KINDS OF COMPANIES

Chartered Company

Statutory

Registered Company

Unlimited Company

Company Limited by Guarantee

Company Limited by Shares

Public Limited Company

Private Limited Company

(A) ON THE BASIS OF INCORPORATION: On the basis of incorporation, there are three classes of companies. These are as follows: Chartered companies Statutory Companies Registered Companies Prepared By: H. ABDUL REHMAN 0321-6485593

EORUPA SCIENCE & COMMERCE ACADEMY


1) CHARTERED COMPANIES: Meaning: A company created by the grant of a royal charger is called a chartered company. Explanation: The charter governs its powers, rights, and functions. After the implementation of companys companies ordinance 1984 no new company can be formed by a royal charter in Pakistan. The provisions of companies ordinance 1984 apply to the foreign companies in Pakistan as well. Examples: Chartered Bank of England The East India Company Chartered Mercantile Bank of India 2) STATUTORY COMPANIES: Meaning: The companies, which are incorporated by a special Act of legislation or under a ordinance, are named as statutory companies. Explanation: These companies are organized for the object of social welfare business and for utilities such as electricity, gas, water, railways and finance. The companies formed under special act of legislation have been mostly provided with compulsory powers. They also special rights and privileges which are not available to companies incorporated under the company ordinance 1984. Example: The state bank of Pakistan The national bank of Pakistan. Pakistan railway WAPDA ZTBL 3) REGISTERED COMPANIES: Meaning: A company, which is formed and registered under the companies ordinance 1984, is called a registered company. Explanation: Such companies come into existence only when these are registered under the Ordinance. Such companies get their powers from the companies ordinance, 1984 and from the memorandum of association. This is the most popular mode of incorporation a company. Kinds of Registered Companies: The companys ordinance 1984 under section 15 provides registration of the following company. Company Limited by Shares {Section 15 (2) (a)}: Meaning: According to Section 2(8): Company limited by shares means a company having the liability of its members limited by memorandum of the amount, if any, paid on the shares respectively held by them.

Prepared By: H. ABDUL REHMAN

0321-6485593

EORUPA SCIENCE & COMMERCE ACADEMY


Explanation: The capital is divided into a number of shares. A person who buys the share becomes the member of the company. The shares can be freely transferred and sold. Companies limited by shares are further divided into the following types. (a) Private Company (b) Public Company Private Limited Company: A private limited company has the following features. It has a minimum of two members are there is no limit for maximum members. The company by its articles can restrict the right to transfer its shares. It cannot issue its shares or debentures to the general public. Example: Dawlance Company (Pvt.) Ltd. Public Limited Company: A public limited company has the following features: It has a minimum of seven members and there sin no limit for maximum members. The company by cannot restrict the right to transfer its shares. It can issue its shares or debentures to the general public in the stock exchange. Example: KASB Punps Ltd. Sitara Textile Ltd. Company Limited by Guarantee [Section 15(2) (b)]: Meaning: According to Section 2(9) A company limited by guarantee means a company having the liability of its members limited by the memorandum of such amounts as the members may respectively undertake to contribute the assets of the company in the event of this winding up. Explanation: This type of company is formed mostly when work if of non-profit making nature such as clubs, charitable institutions, and stock exchange etc. Example: Lahore Stock Exchange Guarantee limited Islamabad Stock Exchange Guarantee Limited Karachi Stock Exchange Guarantee Limited. An Unlimited Company [Section 15(2) (c): Meaning An unlimited company is that in which the liability of its members is unlimited. Explanation: Every member of the company is personally liable to the full extent of his personal assets for all the debts of the company during the membership of the company. The unlimited companies due to great risk do not exist here. OTHER CLASSIFICATION: The following are the other classification of the company 1) Holding Company: When a company has control over another company, it is known as holding company. A holding company holds more than 50% securities of another company. Prepared By: H. ABDUL REHMAN 0321-6485593

EORUPA SCIENCE & COMMERCE ACADEMY


2) Subsidiary Company: The company, which is controlled by a holding company, is known as subsidiary company. 3) Foreign Company: The companies which are incorporated outside Pakistan and having a place of business within Pakistan are called Foreign Companies. CONCLUSION: The following are the various kinds of companies that may be formed according to the law operating in the country.

Prepared By: H. ABDUL REHMAN

0321-6485593