Financial Accounting II

Lecture 02
 Types Of Companies
Companies Ordinance 1984
Classification of Companies [Section 15 (2)]

o Companies Limited by Shares

o Companies Limited by Guarantee
o Unlimited Companies
Companies Limited By Shares [Section 2(8)]
• “Company Limited by Shares" means a
company having the liability of its members
limited by the memorandum to the amount,
if any, unpaid on the shares respectively
held by them.
Companies Limited By Guarantee [Section 2 (9)]
• “Company Limited by Guarantee" means a
company having the liability of its members
limited by the memorandum to such amount as
the members may respectively thereby undertake
to contribute to the assets of the company in the
event of its winding up.
Types of Companies Limited by Shares
• Private Limited Companies
• Single Member Companies
• Public Limited Companies
o Public Listed Companies
o Public Unlisted Companies
Formation Of Companies
• Any 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 Ordinance in
respect of registration, form a public company
and any one, or more persons so associated may
in like manner from a private company.
Approval Requirements in Case of
Specialized Business

 A banking company
Non-banking finance
company (NBFC)
Security service providing
company
Corporate brokerage house
I) Ministry of Finance
II) State Bank of Pakistan
Securities and Exchange Commission
of Pakistan
Interior Division
Stock Exchange (for transfer of
member ship card in favour of
proposed company)

Money exchange company State Bank of Pakistan

Association not for profit u/s 42

Licence from Securities and Exchange
of the Companies Ordinance,
Commission of Pakistan
1984

Trade organization u/s 42 of the

Licence from Ministry of Commerce
Companies Ordinance, 1984
Memorandum Of Association
Contents of Memorandum of Association
• Common Contents [Sections 16, 17 and 18]
o Name of the company
o Place of registered office of the company.
o Objects of the company and
o In case of companies other than trading
companies the territories in which the company
will operate.
Contents of Memorandum of Association
• Specific clauses – Companies Limited by Shares
[Section 16]
o The memorandum shall state that the liability
of the members is limited.
o Total share capital with which the company
proposes to be registered along with its
division.
o Each member shall take at least one share and
the number of shares taken by each member
will be mentioned in memorandum of
association.
Contents of Memorandum of Association
• Specific clauses – Companies Limited by Guarantee
[Section 17]
o The memorandum shall state that the liability of the
members is limited.
o The extent of liability of each member.
o In case the company has a share capital:
o Total share capital with which the company
proposes to be registered along with its division.
o Each member shall take at least one share and the
number of shares taken by each member will be
mentioned in memorandum of association.
Articles Of Association
• Articles of association lay down the general
rules of business of the company.
• Standard forms are available in the First
Schedule of the Companies Ordinance 1984
• The promoters may if they wish use the
standard formats or draft their own Articles
of Association.
Standard Forms of Memorandum and
Articles of Association
• Memorandum of Association of a company limited
by shares Table B, First Schedule.
• Articles of Association of a company limited by
shares Table A, First Schedule.
Standard Forms of Memorandum and
Articles of Association
• Memorandum and Articles of association of a
company limited by guarantee and not having a share
capital Table C, First Schedule
• Memorandum and articles of association of a
company limited by guarantee and having a share
capital Table D, First Schedule
Standard Forms of Memorandum and
Articles of Association
• Memorandum and Articles of association of an
unlimited company having a share capital Table E,
First Schedule
Steps in Formation of Companies
o Approval of the name of the company from
SECP.
o Preparation of Memorandum and Articles of
Association and other documents.
o Filing of documents with SECP.
o Certificate of incorporation
Statutory Meeting [Section 157]
• Only public limited companies are required
to hold statutory meeting.
• Required to be held within 3 to 6 months of
date of Certificate of Commencement of
Business.
• 21 days notice is required to be sent to
members.
Annual General Meeting [Section 158]
• First Annual General Meeting (AGM) to be
held within 18 months of incorporation
• Thereafter once in every calendar year
within 4 months of closing of financial year.
• Gap between two AGMs should not be
more than 15 months.
• 21 days notice is required to be sent to
members.
Extraordinary General Meeting [Section 159]
• All meetings of members other than AGM,
are called Extraordinary General Meetings.
• Directors or shareholder having 10% voting
power can summon EOGM.
• 21 days notice is required to be sent to
members.
Resolutions
• There are two types of resolutions that can be
passed at meeting of members of the company.
 Ordinary resolution
 Special Resolution
Meetings of Directors [Section 193]
• The quorum for a meeting of directors of a listed
company shall not be less than one-third of their
number or four, whichever is greater.
• The directors of a public company shall meet at
least once in each quarter of a year.