Business Law & Taxation

Company Law
Lecture 3
Hamza Hashmi
Advocate High Court
 Prevailing Statute
• Companies Ordinance 1984 has been
repealed.
• Prevailing Act - Companies Act, 2017
• Companies (General Provisions and Forms)
Regulations, 2018.
• Securities & Exchange Commission of Pakistan
(SECP) is regulatory body
 The Company
• A company is formed by applying to the
registrar of company
• The names of the first directors and members
along with their shareholding is intimated to
the registrar- “Incorporation”
 The Constitution of the company
• Companies must provide a constitution which
sets out the powers of the company &
allocates them to company’s organs, usually
the general meeting and the board of
directors.
 The Memorandum
• Object Clause
• The object of the company initially was a
complex area of study for company lawyers.
• After the CA 2017, Companies can do any
other businesses, even if not specified in the
object clause of memorandum subject to the
exclusion as specified in the law or by the
Commission.
 Memorandum of company limited by
shares- Section 27
The Memorandum shall state:-
1) The name of the company with the word “Limited” as
last word of the name in the case of a public limited
company
- (Private) Limited” as last words of the name in the case of
a private limited company
- (SMC-Private) Limited” as last words of the name in the
case of a single member company
- the name of the company with the parenthesis and words
"(Guarantee) Limited in company limited by Gurantee
2) the Province or the part of Pakistan not forming part of a Province, as the
case may be, in which the registered office of the company is to be situate.
3) principal line of business
4) the existing companies or the companies to be formed to carry on or
engage in any business which is subject to a licence or registration,
permission or approval shall mention the businesses as required under the
respective law and the rules and regulations made thereunder.
5) no subscriber of the memorandum shall take less than one share; and
6) each subscriber of the memorandum shall write opposite to his name the
number of shares he agrees to take.
6) that the liability of the members is limited
7) the amount of share capital with which the company proposes to be
registered and the division thereof into shares of a fixed amount;
 Alteration of Memorandum
32. Alteration of memorandum.—(1) Subject to the provisions of this Act, a company may by
special resolution alter the provisions of its memorandum so as to—
• (a) change the place of its registered office from.-

• (i) one Province to another Province or Islamabad Capital Territory and vice versa; or
• (ii) one Province or Islamabad Capital Territory to a part of Pakistan not forming part of a
Province and vice versa; or
• (b) change its principal line of business; or

• (c) adopt any business activity or any change therein which is subject to licence, registration,
permission or approval under any law.

• (2) The alteration shall not take effect until and except in so far as it is confirmed by the
Commission on petition:
• Provided that an alteration so as to change its principal line of business shall not require
confirmation by the Commission.
 The Article of Association- Section 36
• The article of association are set of rules for running the
company.
• Heart of company’s organization structure by allocating
power between the board of directors (the management
organ) and the general meeting (the shareholder organ)
• The persons named in the articles of association as
proposed directors, are deemed to have been appointed
to that office.
• Authorize and paid up Capital is specified.
• Share price
 Authorize Capital and Paid Up Capital

Share capital:-
-represents the amount of share capital that could be issued to
investors/directors/shareholders.
- The authorized capital of a company is the maximum amount of share
capital that the company is authorized by its constitutional documents to
issue to shareholders

Paid Capital:-
- Once the amount is issued to the investors/directors/shareholders.
- Paid-up capital is the amount of money a company has received from
shareholders in exchange for shares.
Effect of Memorandum- Section 17
• Memorandum and Article shall bind the
company and the members
 Types of Companies

1) Single Member Company (SMC Pvt Ltd)

2) Private Limited Company
3) Public Limited Company
a) Listed Company
b) Un-listed Company
4) Limited by Guarantee
5) unlimited company
 Mode of forming a company- Section 14 of
the Act
Minimum Number of Members:-
1) Single Member Company (SMC)
- one person may form a single member company by complying with the
requirements in respect of registration of a private company.
- The subscriber to the memorandum shall nominate a person who in the
event of death of the sole member to distribute shares to legal heirs.
2) Private limited by shares
Two or more persons
3) Public Unlisted
- 3 or more persons associates for any lawful purpose .
4) Public Listed
7 or more persons associates for any lawful purpose .
 Difference
• Investment comes either from the founding
members in the form of personal saving or
from a bank loan. Whereas, public limited
companies, are formed specifically to raise
large amounts of money from general public.
• In case of transfer of shares, CA limit members
to first offer shares to its existing members.
 Limited Liability
• Members of the company have limited
liability.
• Members only liable for the amount unpaid
on their shares and not for debts of the
company.
• The shareholders will lose their initial
investment in the company but they will not
be responsible for the debts of the company.
 Corporate Personality
• “a company really exists.”
• It can sue and be sued in its own name, hold
its own property and crucially be liable for its
own debts.
• In the above concept, that allows limited
liability for shareholders as the debts belong
the legal entity of the company and not to the
shareholders in that company/
 Continue:- Corporate Personality
- Salomon v Salomon & Co.
- Macaura
- Lee
 Lifting the Veil of Incorporation
• Introduced, as corporate forum was used to
commit fraud that prompted the introduction
of a number of civil and criminal provisions.
• Re produce Marketing Consortium Ltd (No.2)
(1989)
• Jones V Lipman
• Adam V Cape Industries plc 1990
 MEETING & PROCEDINGS
• TO BE PRESENTED BY STUDENTS IN NEXT
CLASS. SECTION 131 TILL 140 IS RELEVANT
 Meeting and
Procedures

3/22/21
 131. Statutory meetings

●
Statutory meetings are for public limited companies, within a
period of six months from the date at which the company is
entitled to commence business or within nine months from
the date of its incorporation whichever is earlier,
One time meeting
●

●
The notice of a statutory meeting shall be sent to the members at
least twenty-one days before the date fixed for the meeting along
with a copy of statutory report.
 Statutory report

●
The directors shall cause a list showing the names, occupations,
nationality and addresses of the members of the company
●
the members of the company present at the meeting shall be at
liberty to discuss any matter relating to the formation of the
company
●
The provisions of this section shall not apply to a public company
which converts itself from a private company after one year of
incorporation.
 Continued…

●
Any contravention or default in complying with requirement of this
section shall be
an offence liable-
●

●
(a) in case of a listed company, to a penalty of level 2 on the
standard scale; and
●
(b) in case of any other company, to a penalty of level 1 on the
standard scale.
 132. Annual general meetings

●
Every company, shall hold, an annual general meeting within
sixteen months from the date of its incorporation
●
An annual general meeting shall, in the case of a listed company,
be held in the town
●
Provided that at least seven days prior to the date of meeting, on
the demand of members residing in a city who hold at least ten
percent of the total paid up capital
 Continued…

●
The notice of an annual general meeting shall be sent to the
Commission, members and every person who is entitled to receive
notice of general meetings at least twenty-one days
before the date fixed for the meeting.
●

●
Any contravention or default in complying with requirement of this
section shall be an offence liable
(a) in case of a listed company, to a penalty of level 2 on the
standard scale; and
(b) in case of any other company, to a penalty of level 1 on the
standard scale.
 SEC 133. “CALLING OF
EXTRAORDINARY GENERAL MEETING”

All general meetings of a company, other than the annual general meeting
referred to in section 132 and the statutory meeting mentioned in section
131, shall be called extraordinary general meetings.

The board may at any time call an extraordinary general meeting of the
company to consider any matter which requires the approval of the
company in a general meeting.
Any reasonable expenses incurred by the requisitionists in calling a


meeting under sub-section.


Any contravention or default in complying with requirement of this section
shall be an offence liable-
(a) in case of a listed company, to a penalty of level 2 on the standard scale;
and
(b) in case of any other company, to a penalty of level 1 on the standard
scale.
 SEC 134. “PROVISIONS AS TO MEETING
AND VOTES”
The following provisions shall apply to the general meetings of a company or


meetings of a class of members of the company, namely:

●
(a) notice of the meeting specifying the place and the day and hour of the
meeting along with a statement of the business to be transacted at the meeting
shall be given - to every member or class of the members of the company as the
case may be; to every director; to the auditors of the company.
●
(b) in case of a listed company, if certain members who hold ten percent of the
total paid up capital or such other percentage as may be specified, reside in a
city, it shall be mentioned in the notice that such members, may demand the
company to provide them the facility of video-link to for attending the meeting.

Members of a company may participate in the meeting personally, through
video-link or by proxy.
 CONTINUED…

No member holding shares or other securities carrying voting
rights shall be debarred from casting his vote, nor shall anything
contained in the articles have the effect of so debarring him.


Any contravention or default in complying with requirement of this
section shall be an offence liable-
●
(a) in case of a listed company, to a penalty of level 3 on the
standard scale; and
●
(b) in case of any other company, to a penalty of level 2 on the
standard scale.
 135. Quorum of general meeting:

●
(a) in the case of a public listed company, unless the
articles provide for a larger number, minimum ten
members present personally, or through video-link

●
(b) in the case of any other company having share
capital, unless the articles provide for a larger number, at least
two members present personally, or through video-link
●


EFFECT OF QUORUM NOT BEING PRESENT :
 136. Power of the Court to declare the
proceedings of a general meeting invalid:
●
The proceedings of a general meeting be declared
invalid by reason of a material defect or omission in the
notice or irregularity in the proceedings of the meeting,
which prevented members from using effectively their
rights, declare such proceedings or part there of invalid
and direct holding of a fresh general meeting.
 137. Proxies:

●
A member of a company entitled to attend and vote at a meeting of the
company may appoint another person as his proxy to exercise all or any
of his rights to attend, speak and vote at a meeting.

1: A member shall not be entitled to appoint more than one proxy to

attend any one meeting

2: Proxy must be a member unless the articles of the company permit

appointment of a non-member as proxy.

3: Every notice of a meeting of a company shall prominently set out the

member's right to appoint a proxy and the right of such proxy to attend,
speak and vote in the place of the member at the meeting and every such
notice shall be accompanied by a proxy form
 138. Representation of body corporate or
corporation at meetings.
(1) A body corporate or corporation (whether or not a company within the
meaning of this Act) which is a Member of another company
●
Resolution of its board or other governing body to authorize an individual to
act as its representative at any meeting of that other company
●
Entitled to exercise the same powers on behalf of the corporation which he
represents.
(2) A body corporate or corporation (whether or not a company within the
meaning of this Act) which is a creditor of another company may
●
Resolution of its board or other governing body authorize an individual to
act as its representative at any meeting of the creditors of that other
company held in pursuance of this Act or any other meeting
●
Entitled to exercise the same powers on behalf of the corporation which he
represents.
 139. Representation of Federal
Government at meetings of companies.
(1) The concerned Minister-in-Charge of the Federal Government,
or a Provincial Government, if a member of a company
●
May appoint such individual as it thinks fit to act as its
representative at any meeting of the company or at any meeting of
any class of members of the company.
(2) An individual appointed to act as aforesaid shall, for the
purpose of this Act, be deemed to be a member of such a
company
●
Entitled to exercise the same rights and powers, including the right
to appoint proxy
 140. Notice of Resolution.
(1) The notice of a general meeting of a company shall state the general
nature of each business proposed to be considered and dealt with at a
meeting, and in case of special resolution, accompanied by the draft
resolution.
(2) The members having not less than ten percent voting power in the
company
●
May give notice of a resolution and such resolution together with the
supporting statement, if any, which they propose to be considered at the
meeting, shall be forwarded so as to reach the company-
(a) in the case of a meeting requisitioned by the members, together
with the requisition for the meeting;
(b) in any other case, at least ten days before the meeting; and the
company shall forthwith circulate such resolution to all the members.
 CONTINUED…

●
(3) Any contravention or default in complying with requirement of
this section shall be an offence liable-
(a) in case of a listed company, to a penalty of level 2 on the
standard scale; and
(b) in case of any other company, to a penalty of level 1 on the
standard scale.