Companies Ordinance 1984

COMPANY
What is a Company

Company means an association of a number of individuals

formed for some common purpose.
 When a company is registered, it is clothed with a legal personality

and has the same rights and powers as a human being has.
 Its existence is separate and separate from that of its members.

 The members may die or change but the company goes on till it is

wound up on the grounds mentioned in the ordinance.

 Thus a company is an artificial person.
 It can act only through some human agency called the board of

directors.
 They control and administer the affairs of the company and act as its

agent.
 But they are not the agent of members of the company.
Definition Of a Company
 A company is an association of persons united for a common

purpose .Justice James

A company is an association of many persons who contribute

money or money’s worth to a common stock and employs it in

some trade or business, and who share the profit and loss.

James Stephenson
Definition Of a Company In Companies Ordinance 1984: 

A company is an association of persons

 registered under the law

 having a distinctive name,

 recognized as a separate legal entity,

 with a common capital contributed by its members

 comprising transferable shares of a fixed denomination,

 carrying limited liability

 having a continuous existence and a common seal.

 CHARACTERISTIC/FEATURES OF A COMPANY 

 Artificial person created by law

 A company under the existing corporate law is an artificial legal person

 having an entity and personality distinct from the members of shareholders

constituting it.
 A company is a legal person because in law it is capable of having legal rights and

obligations just like a natural person.

 Like every other human being it can acquire and own property, transfer property,

enter into contracts and sue and be sued in its own name .
 Independent legal entity

 Since a company is an entity separate from its members hence all assets

and liabilities in a business are its own.

 No member can claim any ownership rights in it during its existence or

winding up.
Perpetual succession
 A company has a continued existence and its life is not affected by

the death, madness, insolvency or retirement of its members.

 Members may come and go but the company continues its operations as

long as requirements of law are fulfilled.

 Common seal
 A company must have a common seal for use as an symbol (logo, insignia)

in all legal documents.

The common seal is used as a device as the signature of the company.
 Any document bearing common seal of the company and duly signed by at

least two directors will be legally binding on the company.

Limited liability
 Here the word liability refers to the liability of the shareholders towards

the company.
 This is limited to the value of the shares subscribed to or the amount of guarantee given

by them.
 Separate ownership and management

Being in a large number it is not advisable for the shareholders to run and manage the
company.

Hence the law provides for the board of directors, elected by the members at their
general meeting to govern the affairs of the company
 There are there basic legal documents issued by a company these are.

 (i) Memorandum of association.

 (ii) Article of association.

 (iii) Prospectus.

Memorandum of Association :Under the existing law a limited company can

be formed by preparing certain legally specified documents and filing the
same with the registrar of companies The first essential document to be
prepared and filed with the registrar and without which a company cannot be
incorporated is named as Memorandum of Association.
Memorandum of Association is a public document, and every person who
deals with the company is presumed to have a sufficient knowledge of its
contents and provisions.
 The main purpose of memorandum of association is to enable

share holders, creditors and all those who concerned with the
company to know what is permitted range of the enterprise.
 Clauses of memorandum of association:

Name Clause:
 This clause states the name of the company. A company may select

any name but it should not resemble the name of any other company.
 Name should not be undesirable. Name should not be prohibited by

any law
Name should end with the word:
 i. ‘limited’ on case of public company.

 ii. ‘(private) Limited’, in case of private company.

 iii. ‘(guarantee) Limited’, in case of company limited by guarantee

Appearance of Name:
The name of the company must appear or every office or place of business
of company in a visible manner and on all cheques, bills, notices,
advertisement of the company.
Change of name of the company: The name of the company can be
changed at any time subject to the following conditions: (i)A special
resolution is passed. (ii)Approval in writing of the registrar is obtained.
(iii)Registrar notified the new name and issues a certificate
Situation clause: It is also known as Registered Office Clause. The
memorandum must state the name of the place of business of the company.
The company must have a registered office and its place must be notified to
the registrar.
Object clause: The statement of objects defines the sphere of the company
activities. It determines and restricts the powers of the company. The object
clause offer protection to the shareholders by ensuring them that amount
collected for undertaking is not risked in any other undertaking.
Scope of objects: The company can have any object provided that it is not
conflicting to law. Act done out side the objects: The company cannot do any
thing outside the powers specified in the object clause
Liability clause: clause in a memorandum of association is a statement that
liability of the company is limited to the extent of the shares purchased by
them. It is essential for companies in which the liability of its members is
limited.
Capital Clause: The clause must state the amount of the capital and the

way in which it is to be divided into shares. It must be stated in this

clause as to what funds are necessary to set the business going or, If its
proposed to buy on old concern, what sum is wanted as its price and what
is addition, is wanted to keep the business going.
 Association and subscription clause: This clause contains a declaration

by the subscribers that they are desirous of forming a company and agree
to have number of shares written against their respective names. Signature
and Attestation Each subscriber must sign the memorandum in the
presence of at least one witness who shall attest the signature.
 Time place for filing memorandum of association:

Memorandum of association is to be filed with the registrar at the time of

formation of a company.
 INTRODUCTION TO ARTICLES OF ASSOCIATION

 Contain the rules relating to the management of internal affairs of a company & are

basically for the benefit of the shareholders.

 Play a part subsidiary to the memorandum of association(MOA)

 Cannot extend the objects as defined in the memorandum

 Formalities of Articles of association shall be:

 Printed

 Divided into paragraphs

 Signed by each signatory of the memorandum in the presence of at least one

attesting witness