LECTURE – 4

CORPORATE LAW

COMMENCEMENT OF BUSINESS BY A PUBLIC COMPANY

19. Commencement of business by a public company.—(1) A public company shall not start
its operations or exercise any borrowing powers unless—

(a) shares held subject to payment of the whole amount thereof in cash have been allotted to
an amount not less in the whole than the minimum subscription and the money has been
received by the company;

(b) every director of the company has paid to the company full amount on each of the shares
taken or contracted to be taken by him and for which he is liable to pay in cash;

(c) no money is or may become liable to be repaid to applicants for any shares which have
been offered for public subscription;

(d) there has been filed with the registrar a duly verified declaration by the chief executive or
one of the directors and the secretary in the specified form that the aforesaid conditions
have been complied with; and

(e) in the case of a company which has not issued a prospectus inviting the public to
subscribe for its shares, there has been filed with the registrar a statement in lieu of
prospectus as per the Second Schedule annexed to this Act.

Explanation.—―minimum subscription‖ means the amount, if any, fixed by the

memorandum or articles of association as minimum subscription upon which the
directors may proceed to allotment or if no amount is so fixed and specified, the whole
amount of the share capital other than that issued or agreed to be issued as paid up
otherwise than in cash.

(2) The registrar shall, on filing of a duly verified declaration in accordance with the provisions
of sub-section (l) and after making such enquiries as he may deem fit to satisfy himself that all
the requirements of this Act have been complied with in respect of the commencement of
business and matters precedent and incidental thereto, accept and register all the relevant
documents.

(3) The acceptance and registration of documents under sub-section (2) shall be a conclusive
evidence that the company is entitled to start its operations and exercise any borrowing powers.

(4) Nothing in this section shall apply—

(a) to a company converted from private to a public;

(b) to a company limited by guarantee and not having a share capital.

20. Consequences of non-compliance of section 19.—(1) If any company starts its business
operations or exercises borrowing powers in contravention of section 19, every officer or other

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person who is responsible for contravention shall without prejudice to other liabilities be liable to
a penalty not exceeding level 2 on the standard scale.

(2) Any contract made by a company before the date at which it is entitled to commence business
shall be provisional only and shall not be binding on the company until that date and on that date
it shall become binding.

REGISTERED OFFICE AND PUBLICATION OF NAME

21. Registered office of company.—(1) A company shall have a registered office to which all
communications and notices shall be addressed and within a period of thirty days of its
incorporation, notify to the registrar in the specified manner.

(2) Notice of any change in situation of the registered office shall be given to the registrar in a
specified form within a period of fifteen days after the date of change:

Provided that the change of registered office of a company from—

(a) one city in a Province to another; or

(b) a city to another in any part of Pakistan not forming part of a Province;

shall require approval of general meeting through special resolution.

(3) If a company fails to comply with the requirements of sub-section (1) or (2), the company
and its every officer who is responsible for such non-compliance shall be liable to a penalty not
exceeding of level 1 on the standard scale.

22. Publication of name by a company.—Every company shall—

(a) display in a conspicuous position, in letters easily legible in English or Urdu characters
its name and incorporation number outside the registered office and every office or the
place in which its business is carried on;

(b) display a certified copy of certificate of incorporation at every place of business of the
company;

(c) get its name, address of its registered office, telephone number, fax number, e-mail and
website addresses, if any, printed on letter-head and all its documents, notices and other
official publications; and

(d) have its name mentioned in legible English or Urdu characters, in all bills of exchange,
promissory notes, endorsements, cheques and orders for money or goods purporting to be
signed by or on behalf of the company and in all bills of parcels, invoices, receipts and
letters of credit of the company.

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23. Company to have common seal.—(1) Every company shall have a common seal.

(2) A company‘s common seal must be a seal having the company‘s name engraved on it in
legible form.

(3) If any of the provision of this section is contravened or an officer of a company or a person
on behalf of a company uses or authorises the use of another seal that purports to be the
company‘s common seal, shall be liable to a penalty not exceeding of level 1 on the standard
scale.

24. Penalties for non-publication of name.—(l) If a company does not display its name in the
manner provided for by this Act, it shall be liable to a penalty not exceeding level 1 on the
standard scale and every officer of the company who authorises or permits the default shall be
liable to the like penalty.

(2) If any officer of a limited company issues or authorises the issue of any bill-head, letter
paper, document, notice or other official publication of the company, or signs or authorises to be
signed on behalf of the company any bill of exchange, promissory note, endorsement, cheque or
order for money or goods, or issues or authorises to be issued any bill of parcels, invoice, receipt
or letter of credit of the company, wherein its name is not mentioned in the manner aforesaid, he
shall be liable to a penalty not exceeding of level 1 on the standard scale and shall further be
personally liable to the holder of any such bill of exchange, promissory note or order for money
or goods, for the amount thereof unless the same is duly paid by the company.

25. Publication of authorised as well as paid-up capital.—(1) Where any notice,

advertisement or other official publication of a company contains a statement of amount of
authorised capital of the company, such notice, advertisement or other official publication shall
also contain a statement in an equally prominent position and in equally conspicuous characters
of amount of the paid up capital.

(2) Any company which makes default in complying with the requirements of sub-section (1)
and every officer of the company who is party to the default shall be liable to a penalty not
exceeding of level 1 on the standard scale.

26. Business and objects of a company.—(1) A company may carry on or undertake any lawful
business or activity and do any act or enter into any transaction being incidental and ancillary
thereto which is necessary in attaining its business activities:

Provided that—

(i) the principal line of business of the company shall be mentioned in the memorandum
of association of the company which shall always commensurate with name of the
company; and

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(ii) any change in the principal line of business shall be reported to the registrar within
thirty days from the date of change, on the form as may be specified and registrar
may give direction of change of name if it is in violation of this section.

Explanation.—―principal line of business‖ means the business in which substantial assets

are held or likely to be held or substantial revenue is earned or likely to be earned by a company,
whichever is higher.

(2) A company shall not engage in a business which is—

(a) prohibited by any law for the time being in force in Pakistan; or

(b) restricted by any law, rules or regulations, unless necessary licence, registration,
permission or approval has been obtained or compliance with any other condition has
been made:

Provided nothing in sub-section (1) shall be applicable to the extent of such companies.

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