Business and

Corporate Law
COMMENCEMENT OF
BUSINESS BY A PUBLIC
COMPANY
1 Getting the Promoters Together

2 Appointment of Advisors

3 Preparation of Company Documents

4 Submitting the Application with the Registrar

5 Payment of the Registration Fee

6 Printing Share Certificates

7 Issuance of Registration Certificate

8 Publication of the Company Prospectus

9 Issuance of the Commencement Certificate

 Securities and Exchange
Commission of Pakistan (SECP)
Securities and Exchange Commission of Pakistan
(SECP) established under the Securities and
Exchange Commission of Pakistan Act 1997 was
operationalized as a Corporate body on 1st January
1999. SECP replaced Corporate Law Authority, the
former being corporate regulatory body. It has been
vested with adequate operational, administrative
and financial autonomy.
 Functions of the SECP
SECP’s main functions include:

• Regulation of securities market and related institutions

like Central Depository Company (CDC), Credit Rating
Companies and Modarabas (Funds operating on the
basis of Islamic economic principles)
• Administration of the company law
• Regulation of non-banking finance companies like
leasing companies, investment banks and mutual funds
• Regulation of insurance business and private pensions.
 Functions of the SECP
One important function of the SECP is the
incorporation/registration of companies. This task
has been entrusted to the Registration Department,
Company Law Division which has its field offices
known as Company Registration Offices (CROs) for the
purpose of incorporation / registration of different
type of companies.
 Incorporation of a Company
For the convenience of general public, promoters
and directors of companies, SECP has established its
eight CROs at Islamabad, Karachi, Lahore,
Peshawar, Faisalabad, Multan, Sukkur and Quetta.
Online facilities for incorporation of companies and
filing of returns have also been made available.
Functions of CRO also include registration of
companies and monitoring of their working
according to law, providing services, guidance and
also to ensure that the companies and their directors
comply with the statutory requirements as provided
under the Companies Ordinance, 1984.
 Step 1: Getting the Promoters
Together
Promotion is the first stage in the formation
of a company. It involves conceiving a
business opportunity & taking an initiative
to form a company so that practical shape
can be given to exploiting the available
business opportunity.
 Functions Of A Promoter
I. Identification of business opportunity.

II. Feasibility studies:

a) Technical feasibility
b) Financial feasibility
c) Economic feasibility

III. Name approval.

IV. Fixing up Signatories to the Memorandum of Association.

V. Appointment of professionals.

VI. Preparation of necessary document.

 Documents Required to be
Submitted
• Memorandum Of Association
• Articles Of Association
• Constant of Proposed Directors
• Agreement
• Statutory Declaration
• Payment of Fee
 Position Of Promoter
• Promoters undertake various activities to get a
company registered and get it to the position of
commencement of business.

• Promoters of a company enjoy a fiduciary position

with the company, which they must not misuse.

• Promoters are not legally entitled to claim the

expenses incurred in the promotion of the company.
Step 2: Appointment of Advisors
The next step prior the commencement of business is to appoint
legal advisors as directed under the Companies Act, 1974. It states
that every company must appoint at least one legal adviser who acts
as a retainer, a person you can go to for advice. Note that this legal
adviser is not liable to provide legal service during fixed times, nor
can their timings be fixed.

The purpose of this legal advisor is to simply advise the company on

the legal status of the performance of its functions. In other words, it
is their duty to ensure that the company’s functions are in
accordance with law.

The company may approach the appointed legal adviser(s) with a

prior appointment and acquire advice on legal procedures regarding
its activities, both current and future.
Step 2: Appointment of Advisors
However, there are certain criteria which must be met, including the
following:

The Appointment of a Rightful Person

In the case of a legal adviser, the right person can only be an advocate or
an actual registered law firm currently in operation. However, the
advocate cannot be registered for more than 3 companies.

Payment of at least Rs.1, 200/Month

Each legal adviser cannot be paid a legal fee, known as a retainer fee, of
less than Rs.1, 200 per month.

Acceptance of Denial
The court reserves the right to deny the appointment of a legal adviser.
Step 3: Preparation of Company
Documents
The Company Law requires for the registering
company to prepare certain Company documents in
accordance with its provisions before the company
applies for registration.
These include,

• Memorandum Of Association (MOA)

• Articles of Association (AOA)
• Prospectus
 Memorandum of Association
The Memorandum of Association (MOA) is a document that
regulates a company's external activities and must be
drawn up on the formation of a registered or incorporated
company. As such, its preparation prior to the
commencement of business is an absolute necessity.

The document can be inspected by anyone, including the

general public when asked. The MOA is kept at the
Registered Head Office of the Company, the location of
which is also mentioned in the MOA.
 Contents of MOA
• The document must contain the following information:

• The name of the company.

• The province in which the registered office is situated in

• The objectives of the company

• What you are authorized to do in order to achieve the

outlined business objectives

• Activities that you will not engage in

• Any and all provisions of the company

 Contents of MOA (Continued)
• The liabilities of all the stated members, whether limited
by shares or by guaranty

• The amount of authorized capital of the company,

including the division of the ordinary shares

• Any and all changes that can be made to the share capital

• The names of the people/subscribers who the shares are

given to

• Witness attestations
 Articles of Association
A document that specifies the rules and regulations
relating to the management of the Company’s internal
affairs.

Defines the company's purpose and lays out how tasks are
to be accomplished within the organization.

Defines the rights, powers and duties of the Management.

A public company limited by shares may register its own

Articles of Association or it may adopt Table A .

In simple words, the AOA, together with the MOA, is the

constitution of the company.
 Contents of AOA
• Names, Address, Qualification of the Chairman, Managing director, Directors,
Auditors and their Appointment and election.

• The term period for which the directors will hold their position in the company.

• The Salaries, Allowances, Fees etc. of the Chairman, Directors and Auditors.

• Procedure of Audit to be followed.

• Prospectus of the company.

• Company meetings, and procedures for calling these meetings.

• Premium or discount on shares.

• Calls on shares; their transfer procedure.

• Borrowing procedures of the company; Dividends and reserves of the company.

• Procedure of the winding up the business(under Article 297 till 305)

• Seal of the Company.

 Prospectus of the Company
A Prospectus is basically an invitation by the company, asking the public for
subscription or purchase of any shares, or debentures in the company, or
inviting deposits from the public.

The prospectus needs to be approved by SECP.

The prospectus is then required to be issued within 60 days from
the date of its approval.

Companies Required to Issue a Prospectus?

• Every public listed company who intends to offer shares or
debentures of the company to the public as a way of generating
capital for its operations.

• Every private company who ceases to be a private company and

converts into a public company and intends to offer shares or
debentures of the company to the public for capital funds.
 Prospectus of the Company
Essentials of the Prospectus:

For the prospectus to be legally valid, it must fulfil the following

conditions,

• Must invite the public to buy shares.

• Before its publication, a copy must be submitted to the Registrar of

the company, and it must be mentioned in the prospectus that a
copy of it has been deposited with the registrar.

• Must be properly dated.

• Should be signed by all the directors.

If all the above conditions are met, only then will this document be
valid for publication.
 Contents of the Prospectus
The Contents include:

• Contents of the Memorandum of Association, the main objectives of the

company, the name and addresses of the signatories of the memorandum of
association and the number of shares held by them.

• Names, addresses and occupation of (proposed or existing) CEO, directors,

secretary; And any other company in which they hold office.

• Remuneration of the CEO and the directors of the company.

• Total number, and classes of shares and debentures being issued by the
company.

• Names of underwriters of shares, if any.

• Minimum subscription (only in the case of first allotment). For allotment of

shares minimum subscription must have been received in cash.

• Opening and closing date and time of the subscription list, and the amount
payable on application of each share.
 Contents of the Prospectus
• Amount of time offered and allotted on each previous allotment.

• The number of promoter’s shares, the nature and extent of their

interest held in the company.

• Amount or benefits within two preceding years or intended to be

given to any promoter or officer.

• Names and addresses of the auditors ,bankers and legal advisors

of the company.

• Time and place where copies of balance sheets, profits and loss
account and the auditors report may be inspected.

• Preliminary Expenses of the company.

 Statement of Lieu of
Prospectus
Companies wanting to issue their shares privately
do not need to issue a Prospectus, instead they are
required to prepare a Statement of Lieu and
submit it with the registrar of the company 3 days
before the allotment of its shares. This document
must be signed by all the directors of the company
and should include all the contents of the
Prospectus stated earlier.
Step 4: Submitting the Application
with the Registrar
Once all the Company documents are prepared, an application containing all
the company documents is submitted to the registrar of the companies.

The documents attached with the application include,

• Memorandum Of Association

• Articles Of Association

• Prospectus of the company

• List of names and addresses of the Directors of the company

• A signed statement by either the directors or the secretary that all the legal
formalities have been completed.

• The address of the Registered Office of the company.

Step 5: Payment of Registration
Fee
Online (Rs.) Manual (Rs.)

Availability of name 200 500

For registration of a 2500 5000

company whose
nominal share capital
does not exceed 100,
000 rupees
For registration of a company whose nominal share capital exceeds 100, 000
rupees , the additional fee to be determined according to the amount of nominal
share capital as follows, namely:-

Online (Rs.) Manual (Rs.)

(i) For every 100,000 rupees 250 500
of nominal share capital or
part of 100,000 rupees, after
the first 100,000 rupees, up
to 5,000,000 rupees

(ii) For every 100,000 250 500

rupees of nominal share
capital or part of 100,000
rupees, after the first
5,000,000 rupees, up to
5,000,000,000

(iii) For every 100,000 100 200

rupees of nominal share
capital or part of 100,000
rupees, after the first
5,000,000,000 rupees, up to
 Online (Rs.) Manual (Rs.)

Registration Fees for 25000 50000

foreign companies

Registration Fees for

Associations not for
Profit under Section 42

License for it’s renewal 5000 10000

Registration 25000 50000

 Other Fees:
Online (Rs.) Manual (Rs.)

Filing fee per return 5000 1000

Registration/ satisfaction of 5000 7500

mortgage/charge fee

•Application/Appeal 500 500

/Complaint fee: By a member
•By a creditor 500 1000
•On behalf of a company 500 1000

Change of name fee 1000 2000

Alteration in Memorandum 5000 10000

fee

Extension in time period for For private Cos. 5,000 For private cos. 5000
holding of AGM For Other Cos. 15,000 For other Cos. 15000
Step 6: Printing Share Certificates

After making an application with the registrar, the

promoters go to the press for getting share
certificate printed. These shares are issues as a token
of their ownership in the company.
Step 7: Issuance of the Registration
Certificate
• A Certificate Authority or Certification Authority (CA), is an entity
that issues digital certificates.

• The digital certificate certifies the ownership of a public key by the

named subject of the certificate.

• This allows others (relying parties) to rely upon signatures or

assertions made by the private key that corresponds to the public key
that is certified. In this model of trust relationships, a CA is a trusted
third party that is trusted by both the subject (owner) of the certificate
and the party relying upon the certificate.
Step 8: Publication of the Company
Prospectus
• Prospectus is a formal legal document, which is required by and filed with
the Securities and Exchange Commission that provides details about an
investment offering for sale to the public. A prospectus should contain the
facts that an investor needs to make an informed investment decision. It is
also known as Offer Document.

• Every prospectus is supposed to be issued by the firm or on behalf of the

firm. It can also be issued by a person who has been engaged in the formation
of the firm.

• Sufficient number of copies shall be made available at the company’s

registered office, with the stock exchange with which the company is listed,
with the bankers to the issue, shall also be published in at least one Urdu and
one English daily newspaper.

• Nothing shall limit or diminish any liability which any person may incur
under the general law or under any other provision of this Ordinance.
Step 9: Issuance of Commencement
Certificate
A Private Limited Company can commence its business on receipt of the Certificate
of Incorporation. A public company however, has to wait to commence its business
till it receives the “Certificate of Commencement of Business” from the Registrar.
The certificate of commencement of business is granted on fulfilling the
following requirements:

• When a prospectus has been issued inviting the public for the subscription of shares.
• Shares payable in cash have been allotted to the amount of minimum subscription.
• Every director of the company has paid the full amount of the shares payable in cash.
• There is no money liable to be paid to applicants for shares which have been offered for
subscription.
• A statutory declaration by the chief executive or one of the directors and the security,
that the abovementioned conditions have been compared with.

It is issued if the registrar is fully satisfied that:

• The verified declaration has been filed.
• All other requirements of the ordinance have been compiled with.
 Initial Public Offering(IPO)
An initial public offering (IPO) or stock market launch is
a type of public offering where shares of stocks in a
company are sold to the general public, on a securities
exchange, for the first time.

Through this process, a private company transforms

into a public company. Initial public offerings are used
by companies to raise expansion capital, to
possibly monetize the investments of early private
investors, and to become publicly traded enterprises.
 Planning for an IPO
Planning of an IPO involves the following steps:
• Developing an impressive management and
professional team.
• Growing the company's business with an eye to the
public marketplace
• Obtaining audited financial statements using IPO-
accepted accounting principles
• Cleaning up the company's act
• Establishing antitakeover defenses
• Developing good corporate governance
• Creating insider bail-out opportunities and take
advantage of IPO windows.
 Advantages of an IPO
 Enabling cheaper access to capital.

 Attracting and retaining better management and

employees through liquid equity participation.

 Increasing exposure, prestige, and public image.

 Additional common share can be issued.

 Disadvantages of an IPO

 Loss of control.

 Restriction of buying shares.

 It is an expensive process.

 It can be a risky investment.

Thank
You!