Lecture 2

Constitution, formation of companies and

its categories
Why is Constitution of a Business Entity
Important?
• Pre-define rights and obligations of stakeholders, along with
company’s policies and processes

• Ensure a balance of power between shareholders and directors,

especially in cases of evident gaps in control

• Retain control over your company as it grows and provide flexibility

and certainty in governance
Constitution of a Business Entity
• Association of Persons
• Partnership Agreement

• Limited and Unlimited Liability Companies under Companies Act

• Memorandum of Association
• Articles of Association
Association of Persons – Partnership Act
1932
• Partnership Agreement
• Name of the Firm
• Place of Business
• Type of Business
• Particulars of the Partners and their Profit and Loss Ration
• Dissolution of the Firm
• Other Rules, Powers and Responsibilities
• Operation of Bank Account
• Power to bring more capital
• Roles and Responsibilities of the Partners
• Incoming and Outgoing Partners
• Dispute Resolution mechanism
Limited and Unlimited Liabilities Companies
– Companies Act 2017
• Memorandum of Association
• Memorandum of Association is a document that contains all the fundamental
information which are required for the incorporation of the Company.

• Articles of Association
• Articles of Association is a document containing all the rules and regulations
that governs the company.
Memorandum of Association – Key Features
• Name Clause
• Situation Clause
• Object Clause
• Liability Clause
• Capital Clause
• Subscription Clause
Articles of Association – Key Features
• The document which defines the rules and regulations made by the
company for its administration and day-to-day management.
• It contains rights, responsibilities, powers, and duties of members and
directors of the company.
• It also includes information about the accounts and audits of the company.
• Draft your own or use provided by the SECP.
• It comprises all the necessary details regarding the internal affairs and the
management of the company.
• The governance of the company is done according to the rules prescribed
in it.
Types of Corporate Entities
• Association of Person
• Single Member Company
• Private Limited Company, limited by Share
• Public Company
• Company Limited by Guarantee with or without Share Capital
• Unlimited Public and Private Company
• Not For Profit Companies
Formation of Association of Persons
Required documents
• CNIC and NTN of Partners
• Partnership deed on Stamp paper
• Proof of Address document
• Form I and II

Submission of documents to Registrar of Firms for acquiring

Registration Certificate under Partnership Act.
 Formation of Limited and Unlimited Companies.

Companies Act 2017

Part IV – Incorporation of Companies and Matters Incidental

thereto (section 9 to 56)