Lecture No.

04 1|Page

Class: M.COM-2
Course Title: Corporate Law
Course Instructor: Zahid Hussain
Topics: Incorporation of Companies and matters incidental
thereto
Relevant Provisions: Sections 9 to 15 of Companies Act, 2017

References: Students are advised to visit the following links:

1. www.pakistancode.gov.pk
2. www.secp.gov.pk
3. https://www.secp.gov.pk/laws/acts/

PART IV

INCORPORATION OF COMPANIES AND MATTERS

INCIDENTAL THERETO
Section 9. Obligation to register certain associations, partnerships as
companies.—

(1) No association, partnership or entity consisting of more than twenty persons

shall be formed for the purpose of carrying on any business that has for its
object the acquisition of gain by the association, partnership or entity, or by the
individual members thereof, unless it is registered as a company under this
Act and any violation of this section shall be an offence punishable under
this section.

(2) A person guilty of an offence under this section shall be liable to a penalty not
exceeding of level 1 on the standard scale and also be personally liable for
all the liabilities incurred in such business.

(3) Nothing in this section shall apply to—

(a) any society, body or association, other than a partnership, formed or

incorporated under any law for the time being in force in Pakistan; or

(b) a joint family carrying on joint family business; or

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.04 2|Page

(c) a partnership of two or more joint families where the total number of
members of such families, excluding the minor members, does not
exceed twenty; or

(d) a partnership formed to carry on practice as lawyers, accountants or

any other profession where practice as a limited liability company is not
permitted under the relevant laws or regulations for such practice.

PROVISIONS WITH RESPECT TO NAMES OF COMPANIES

Section 10. Prohibition of certain names.—

(1) No company shall be registered by a name which contains such word or

expression, as may be notified by the Commission or in the opinion of the
registrar is—

(a) identical with or resemble or similar to the name of a company; or

(b) inappropriate; or

(c) undesirable; or

(d) deceptive; or

(e) designed to exploit or offend religious susceptibilities of the people; or

(f) any other ground as may be specified.

(2) Except with prior approval in writing of the Commission, no company shall be
registered by a name which contains any word suggesting or calculated to
suggest—

(a) the patronage of any past or present Pakistani or foreign head of state;

(b) any connection with the Federal Government or a Provincial

Government or any department or authority or statutory body of any such
Government;

(c) any connection with any corporation set up by or under any Federal or
Provincial law;

(d) the patronage of, or any connection with, any foreign Government or any
international organisation;

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.04 3|Page

(e) establishing a modaraba management company or to float a modaraba;

or

(f) any other business requiring licence from the Commission.

(3) Whenever a question arises as to whether or not the name of a company is in

violation of the foregoing provisions of this section, decision of the
Commission shall be final.

(4) A person may make an application, in such form and manner and accompanied
by such fee as may be specified, to the registrar for reservation of a name set
out in the application for a period not exceeding sixty days.

(5) Where it is found that a name was reserved under sub-section (4), by furnishing
false or incorrect information, such reservation shall be cancelled and in case
the company has been incorporated, it shall be directed to change its name.
The person making application under sub-section (4) shall be liable to a
penalty not exceeding level 1 on the standard scale.

(6) If the name applied for under sub-section (4) is refused by the registrar, the
aggrieved person may within thirty days of the order of refusal prefer an
appeal to the Commission.

(7) An order of the Commission under sub-section (6) shall be final and shall
not be called in question before any court or other authority.

Section 11. Rectification of name of a company.

(1) A company which, through inadvertence or otherwise, is registered by a name

in contravention of the provisions of section 10 or the name was obtained by
furnishing false or incorrect information—

(a) may, with approval of the registrar, change its name; and

(b) shall, if the registrar so directs, within thirty days of receipt of such
direction, change its name with approval of the registrar:

Provided that the registrar shall, before issuing a direction for change of the
name, afford the company an opportunity to make representation against
the proposed direction.

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.04 4|Page

(2) If the company fails to report compliance with the direction issued under
sub-section (1) within the specified period, the registrar may enter on the
register a new name for the company selected by him, being a name under
which the company may be registered under this Act and issue a certificate of
incorporation on change of name for the purpose of section 13.

(3) If a company makes default in complying with the direction issued by the
registrar under sub-section (1) or continue using previous name after the name
has been changed by the registrar under sub-section (2), shall be liable to a
penalty of level 1 on the standard scale.

Section 12. Change of name by a company.—

A company may, by special resolution and with approval of the registrar signified
in writing, change its name:

Provided that no approval under this section shall be required where the change in the
name of a company is only the addition thereto, or the omission therefrom, of the
expression “(Private)” or “(SMC-Private)” or “(Guarantee)”, “Limited” or
“Unlimited”, as the case may be, consequent upon the conversion of the status of a
company in accordance with the provisions of sections 46 to 49.

Section 13. Registration of change of name and effect thereof.—

(1) Where a company changes its name the registrar shall enter the new name
on the register in place of the former name, and shall issue a certificate of
incorporation altered to meet the circumstances of the case and, on the issue
of such a certificate, the change of name shall be complete.

(2) Where a company changes its name it shall, for a period of ninety days from
the date of issue of a certificate by the registrar under sub-section (1),
continue to mention its former name along with its new name on the
outside of every office or place in which its business is carried on and in every
document or notice referred to in section 22.

(3) The change of name shall not affect any rights or obligations of the
company, or render defective any legal proceedings by or against the company
and any legal proceedings that might have been continued or commenced

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.04 5|Page

against the company by its former name may be continued by or commenced

against the company by its new name.

Section 14. Mode of forming a company.—

(1) Any—

(a) three or more persons associated for any lawful purpose may, by
subscribing their names to a memorandum of association and complying
with the requirements of this Act in respect of registration, form a public
company; or

(b) two or more persons so associated may in the like manner form a
private company; or

(c) one person may form a single member company by complying with
the requirements in respect of registration of a private company and such
other requirement as may be specified. The subscriber to the
memorandum shall nominate a person who in the event of death of the
sole member shall be responsible to—

(i) transfer the shares to the legal heirs of the deceased subject
to succession to be determined under the Islamic law of
inheritance and in case of a non-Muslim members, as per their
respective law; and

(ii) manage the affairs of the company as a trustee, till such time
the title of shares are transferred:

Provided that where transfer by virtue of this sub-section is made to more

than one legal heir, the company shall cease to be a single member
company and comply with the provisions of section 47.

(2) A company formed under this section may be a company with or without limited
liability, that is to say—

(a) a company limited by shares; or

(b) a company limited by guarantee; or

(c) an unlimited company.

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.04 6|Page

Section 15. Liability for carrying on business with less than three or, in the case
of a private company, two members.—

If at any time the number of members of a company is reduced, in the case of a

private company other than a single member company, below two or in the case of
any other company, below three and the company carries on business for more than
one hundred and eighty days while the number is so reduced, every person who is
a member of the company during the time that it so carries on business after those
one hundred and eighty days and is cognizant of the fact that it is carrying on business
with fewer than two members or three members, as the case may be, shall be
severally liable for payment of whole debts of the company contracted during
that time and may be sued therefor without joinder in the suit of any other
member.

NOTES
Penalties & Fines

A standard scale has been provided with penalties ranging from Level 1 to Level 3,

each with its upper threshold of pecuniary fine. Most sections of the Act attracting

penalty states the level in which the default falls.

The Standard Scale

Per day Penalty during which
Limit of Penalty
the default continues
Level
UPTO UPTO

1 Rs.25,000 Rs.500

2 Rs.500,000 Rs.1,000

3 Rs.100 Million Rs.500,000

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020