Business Law & Taxation

COMPANIES ACT
2017

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 Business Law & Taxation
COMPANIES ACT

Definition of a Company

“A company is a legal entity formed by a group of individuals to engage in and

operate a business—commercial or industrial—enterprise. A company may be
organized in various ways for tax and financial liability purposes depending
on the corporate law of its jurisdiction”
“’A company is a type of business structure that is a separate legal entity from
its owners. It's a complex business structure, with higher set-up and
administrative costs because of extra reporting requirements and higher-level
legal obligations”

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COMPANIES ACT

Prevailing Status
• Companies Act 1984 has been repealed
• Prevailing Act , Companies Act 2017
• Companies (General Provision of forms) Regulation 2018
• Security and Exchange commission of Pakistan (Regularity Body)

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COMPANIES ACT

Company vs Partnership

NUMBER OF MEMBERS: A private company must have at least two members and
maximum 50 members. A partnership cannot consist of more than 20 persons (10
persons in case of banking business).
MANAGEMENT: Members of a company are not entitled to take part in the man-
agement of the company unless they become directors. Partners are entitled to
share in the management of the firm unless the articles provide otherwise.
AGENCY:A member of a company is not an agent of the company or that of other
members . Each partner is an agent of the firm and his partners.

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Company vs Partnership

LIABILITY OF MEMBERS: The liability of a member of a company may be limited by

shares or by guarantee. The liability of a partner is unlimited.
POWER: The company can only operate within the objects laid down in the memoran-
dum of association, though these can be altered to some extent by special resolution.
Partners may carry on any business as they please so long as it is not illegal and make
whatever arrangements they wish, with regards to the running of the firm from time to
time.
TERMINATION: No one member of a company can wind up the company. A partnership
may be dissolved by any partner at any time unless the partnership is entered into for
a fixed period.

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COMPANIES ACT

Types of Companies on basis of Status

1. Private Company
A company which share not available in market.
2. Public Company
A company which share are available in market.
Types of Companies on basis of Limited
2. Company Limited by share (Limited shares available in Market)
3. Company Limited by Guarantee (Company members bring shares, e.g NGO)
4. Unlimited Company

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COMPANIES ACT

Other Companies
1. Holding Company and Subsidiary company
Holding main company and subsidiary mean sub-branch e.g Google, Gmail,
Engro, Packages, TPL, DH corp etc.
2 . Association Not for profit
Non-Government Organization (NGO)

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COMPANIES ACT

Private Company
Private company mean a company which by its Article
• Limit the number of its members up to 50 (Members jointly holding share will be
counted as one member)
• Restricts the rights to transfer its rights
• Prohibit invitation to public to subscribe for share or debentures or redeemable
capital of the company.
• A private company must add word “Private Limited (Pvt Ltd)” at the end of his
name.

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COMPANIES ACT
Regulators of Companies in Pakistan
The commission
The Securities and Exchange Commission of Pakistan (SECP), pursuant to the SECP
Act of 1997 has been mandated to regulate and develop the corporate sector and the
non-bank financial markets; including the capital markets, mutual funds, non-bank-
ing financial companies (NBFCs), modarabas, insurance companies and private
https://www.youtube.com/watch?v=etLO0nsxLW4

Organization
Head office of SECP is in Islamabad and it has regional office (Called Companies
registration offices)

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COMPANIES ACT

Registrar
“Registrar mean a registrar, an additional registrar, an additional joint registrar, a
joint registrar, a deputy registrar, an assistant registrar or such other officers as may
be designed by SECP. Performing duties and function under this Act.
Power and Duties
• Registration of Companies
• Receiving different documents which companies are required to submit to author-
ities under Companies Act 2017.
• Keeping record of Mortgage and charges

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COMPANIES ACT

Power and Duties of Registrar

• Calling Information and Explanation from directors of officers of the companies.
• Inspection of Books of records of the companies
• Seize the book of records, if he believes that seizers is necessary to reach out
certain fact by commission.

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COMPANIES ACT
Process of Registration
Registration of a company is registration of its Memorandum (A constitutive document
of the company) . Promotors perform following procedures to incorporate a company.

1. Application filled by the Registrar with following document

• Memorandum of Association and Article of Association duly signed by subscribers.
Declaration of compliance with requirement of companies act 2017 regarding
incorporation
2. Registrar shall register the memorandum of association if he is satisfied that:
• The company is being formed for lawful purpose
• All the requirements of the companies Act 2017 regarding incorporation, have been
compiled with

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COMPANIES ACT

How to form a company

• A company is formed by applying to the registrar of the company

• The name of the first directors and members along with there share holding
is intimated to register “Incorporation”.

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How to form a company
Private Limited Company Registration

• Three Names of the proposed company

• Neat and Clear Scanned copies of CNIC's of all the proposed Directors / subscribers
• NTN of the proposed directors / subscribers
• Registered address / correspondence address of the proposed Company
• The principal business of the proposed company
• Nature of the business activity
• Authorized Capital
• Paid up Capital
• Value per share e.g.Rs. 10, Rs. 50 or Rs. 100 etc
• Combination of Shares agreed to be subscribed by each director / subscriber

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How to form a company

Private Limited Company Registration

• Name of the Chief Executive of the Proposed Company

• Authorization from other subscribers. (For Offline only)
• Telephone numbers and email ID of all the proposed directors
• Telephone numbers and email ID of all the proposed directors of the Company
• Name of declarant person
• SECP login details of the proposed directors / subscribers(if any)

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COMPANIES ACT

If Registration of Memorandum is refused

If the registrar thinks that any document or information filed with him contains
matters contrary of Law or does not comply with the requirements of Law or is not
complete (owing to any defect, error or omission) or is not properly authenticated.
The registrar either require the company to file a revised document or remove
deficiencies within the specified period. Registrar may refuse to register the
Memorandum if applicant fails to remove deficiency.
If registrar refuses the registration of Memorandum, the subscribers of the memo-
randum may file appeal within 30 days of refusal. Order of commission shall be final.

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COMPANIES ACT

MEMORANDUM OF ASSOCIATION
Memorandum is the constitution of the company
It define the scope of the company and describe briefly
What the company is
What it is for
Where it will be
What shall be the liability of its members
It binds all the members of the company irrespective of whether either member
have subscribed it or not.

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COMPANIES ACT

ARTICLES OF ASSOCIATION

Article are by laws of the company. They contain rules and regulations on day-to-day
issues and internal affairs of the company. e.g. Regulation regarding minimum
numbers of directors or right and liabilities of various classes of shareholders.

Articles and subordinate of Memorandum and companies Act 2017.

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COMPANIES ACT

Who is required to Register

A company limited by guarantee and unlimited company are required to register
their articles.
• If these companies have share capital, Article shall state amount of share capital,
which company propose to be registered.
• If the company have not a share capital, Article shall state numbers of members
with which company purpose to be registered.
A company Limited by share
• May register it’s Articles or
• May adopt Table A of the first schedule of the companies Act 2017

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COMPANIES ACT
Step wise Procedure for Alteration in Articles

1. Company shall pass special resolution to alter the Articles.

2. Within 30 days of resolution, company shall file with Registrar a copy of altered
article of association.
3. Registrar shall registrar the same

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COMPANIES ACT

Copies of Memorandum and Articles

Every member of a company can request company, after payment of prescribed

fee, to supply a copy of memorandum of article of company. Company shall supply it
to member within 30 days.
Every copied issued after alteration in memorandum or Article shall include such al-
teration. In case of violation, officers of company shall be liable to fine.

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COMPANIES ACT

TYPES OF MEETING
There are two types of meeting under companies act
1. Board Meeting (Meeting of directors of company)
2. General Meeting (Meeting of share holder)
Director cannot vote in General meeting unless they are also members

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COMPANIES ACT

Types of Meeting
1. Statutory Meeting
2. Annual General Meeting
3. Extraordinary General Meeting

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Types of Meeting

1. Statutory Meeting
• This is first General Meeting of a company. In which members discuss matters in
respect of formation of company and approve statutory report.
• Statutory meeting is 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.
• The Notice of statutory meeting shall be sent to the members at least 21 days
before the date of meeting along with the meeting of a statutory report.

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Types of Meeting

• Certification and filling of Statutory report (Minutes of Meeting)

1. This statutory report shall be certified by the chief executive of the company and
at least one director. In case of listed company CFO should also certify the re-
port.
2. Director shall also send one copy of statutory report, along with auditor's report,
to registrar for registration forthwith after sending the report to members.

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Types of Meeting
Statutory report
1. The total number of shares allotted (distinguish between shares allotted for cash and otherwise
than in cash). In case of allotment otherwise than in cash, consideration shall also be discussed.
2. Total cash received against share allotted.
3. Summary of the receipts and the payments of the company (up to a date not earlier than 15 days
from the date of statutory report)
4. Particulars of the directors, Chief executive, secretary, auditors and legal advisors.
5. Particulars of contract which are to be modified with approval of members.
6. Extent of carrying out or not carrying out of under writing contracts, along with reason of not car-
rying out.
7. Particulars of commission Paid against shares issued to directors, Chief executives or to the compa-
nies in which such persons are directors
8. Company’s affairs since its incorporation and the business plan.

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Types of Meeting

2 . Annual General Meeting (AGM)

• Every company (except a single member company) is required to hold AGM each
calendar year. In which members usually discuss ordinary business.
• Every company shall hold, an annual general meeting within sixteen months from
its date of incorporation.
• An annual general meeting shall, in the case of listed company be held in the town.
• Provided that at-least seven days prior to date of meeting, on the demand of the
members residing in a city who hold at-least ten percent of the total paid up capi-
tal.

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Types of Meeting

3. Extraordinary General Meeting (EGM)

Any General meeting, other than statutory meeting and annual general meeting is
called extraordinary general meeting. It is conducted when approval of members is
required on Special business e.g. Alteration of Article or memorandum or Association.

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RESOLUTION PASSES IN GENERAL MEETING AND THEIR FILLING:
RESOLUTION PASSES IN GENERAL MEETING AND THEIR FILLING:

RESOLUTION:
• Resolution is a decision reached by majority of the members. Resolution at gen-
eral meeting are usually proposed by directors. However, members having 10% or
more voting power may also give notice of resolution.

• There are two types of resolution i.e Ordinary resolution and Special resolution

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RESOLUTION PASSES IN GENERAL MEETING AND THEIR FILLING:
Ordinary Resolution
Ordinary resolution mean, which has been passed by simple majority of such mem-
bers which are entitled to vote and are present in person or by proxy or vote
through postal ballet at a general meeting.
Special Resolution:
• Which has been passed by at least three forth majority of such members. Which
are entitled to vote and are present in person or by proxy or vote through postal
ballot at a general meeting. And
• Notice of general meeting has been duly given at least 21 days before meeting
specifying the intention to propose the resolution as a special resolution.

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RESOLUTION PASSES IN GENERAL MEETING AND THEIR FILLING
Filling Requirements
A copy of every special resolution shall be field with registrar within 15 days of passing
the same(Authenticated by a director or secretary of the company) . If special resolution
alters Articles, then a copy of altered Articles should be filed along with special resolution.

Company shall keep all special resolution intact with its articles and whenever a copy of
articles is requested by a person, copy of such special resolution shall also be provided.
Note: Ordinary resolution are not required to be filed by registrar.

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WHEN A MEETING
CONDUCTD

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WHEN A MEETING CONDUCTD
Statutory Meeting
Statutory meeting is required to be conducted within 9 months from date of incorporation
or within 180 days from days of commencement of business. Whichever is earlier
Statutory meeting is not required in first AGM is held before the due date of statutory
meeting.
Annual General Meeting
First AGM is conducted within 16 months from the date of incorporation.
Subsequently, AGM is conducted at least once in each calendar year, within 120 days after
close of financial year.
Extraordinary General Meeting
EOGM in conducted whenever “Directors” or “Members” want to discuss and approve any
special business.

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PLACE OF MEETING

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PLACE OF GENERAL MEETING
PLACE OF GENERAL MEETING

Listed companies shall hold AGG in the town in which registered office of the com-
pany is situated, or in nearest city.
Members of a listed company, not residing in city where AGM is taking place, may require
company to provide the facility of video link, provided.
Members hold at lest 10% of share capital.
Written request is submitted to company at least 7 days before meeting.

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WHO CAN CALL MEETING

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WHO CAN CALL GENERAL MEETING
Statutory Meeting
Statutory meeting is called by directors of the company
Annual General Meeting
Annual General Meeting is called by directors of the company (members cannot call
such meeting)
Extraordinary General Meeting
Extraordinary General Meeting may be;
Called by directors when they require approval of members for a special business.
Requisition by members holding at least 10% voting power (in case of company
having share capital), or 10% of all members (in case company not having share
capital)

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NOTICE GENERAL MEETING

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NOTICE GENERAL MEETING
Notice of General Meeting:
Notice of General meeting shall be sent to the members and every person who
is entitled to receive notice of General meeting at least 21 days before the
date of meeting.
Whom to Sent Notice of General Meeting
Notice of General meeting shall be sent to
 Every member of the company
 Every director of the company
 Auditor of the company
 Legal representative of a deceased member (if company has been notified)
 Official receiver of an insolvent member (if company has been notified)
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QUORUM OF GENERAL MEETING

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QUORUM OF GENERAL MEETING
QUORUM OF GENERAL MEETING
Quorum means a certain minimum number of member of a company as is fixed to transact
business in a general meeting in the absence of the other member. A meeting without quo-
rum is void.
Quorum for Listed company
10 present member who presents 25% of total voting power presenting personally or
through video link.
Quorum for Un-Listed company
2 present members who present 25% of total voting power present personally or through
video link.
Quorum for Un-Listed company not having share capital.
As provided in Articles

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QUORUM OF GENERAL MEETING

If Quorum is not present at a meeting within half an hour:

If meeting was called by members, it shall be dissolved.

If meeting is called by directors, it shall be adjourned to the same day in next week
at the same time and place. If an adjourned meeting, quorum again not present, 2
present members (either personally or through video link) shall be quorum unless
article provide otherwise.

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VOTING AT GENERAL MEETING

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VOTING AT GENERAL MEETING
VOTING AT GENERAL MEETING
Every member has a statutory right to cost vote at general meeting. There are two methods of
costing votes i.e Show of hands and Poll
Process of Voting “by show of hands”
1. This method will be used at first instance
2. Chairman will ask members to raise their right hand if in the favor of resolution and shall
count vote.(each member have one vote, Proxy cannot vote)
3. Chairman will ask members to raise their right hand if against the resolution and shall
count vote
4. Chairman will declare the results of voting indicating weather resolution is passed or not.
5. Declaration of results by chairman and an entry in the minute book shall be evidence of
resolution, unless contrary is approved. Proof of number of votes (in favor or against) is
not required.
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PROXY

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PROXY

PROXY
A person appointed by a member to attend, speak and vote in general meeting on
his behalf. It is statutory right of each member to appoint proxy.

If a member is a natural person, he can appoint another person as his proxy. If a

member is an artificial person (e.g Company or Government) it can appoint a natu-
ral person as its representative.

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REPRESENTATION

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REPRESENTATION

Representation of certain cooperation at meeting of companies.

If a company is a member (or creditor) of another company, it may authorize any of

his official or any other person (through Board resolution) to act as his representa-
tive at a general meeting (or creditor meeting).

The person so authorized shall entitled to exercise the same power as are available
to the company to which he represent.

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REPRESENTATION

Representation of Government at meeting

Federal Government or Provincial Government (which is member of another company)

may authorized any person act as his representative at general meeting.

The person so authorized shall be entitled to exercise the same power including, the
right to appoint proxy, as are available to the Federal or Provincial Government. Which
he represents.

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PROSPECTUS

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PROSPECTUS

PROSPECTUS

A prospectus is a document that is given to investors for investment consideration and

hopeful funding. The document spells out the offering terms and what the investor will
receive in return for his or her capital. A popular entity to create, especially for funds,
is the limited partnership.
A prospectus is a notice, advertisement or any other document inviting the public to sub-
scribe for securities. It is compulsory for public limited companies to issue a prospectus be-
fore issuing securities.

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PROSPECTUS

PROSPECTUS IN GENERAL

1. Preliminary Prospectus
The preliminary prospectus doesn't contain the number of shares to be issued or price in-
formation. Typically, the preliminary prospectus is used to gauge interest in the market
for the security being proposed.

2. Final Prospectus
The final prospectus contains the complete details of the investment offering to the pub-
lic

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PROSPECTUS

PROSPTCTUS IN COMPANY LAW

The prospectus is a legal document, which outlines the company’s financial securi-
ties for sale to the investors. According to the companies act , there are four types of the
prospectus.

1. Abridged prospectus
2. Deemed prospectus
3. Red herring prospectus
4. Shelf prospectus

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PROSPECTUS
1. Abridged prospectus
• Attached with the application form for shares
• Include main content of a prospectus (Brief)
• Issued in case of public offer
2. Shelf Prospectus
Public company may raise fund from company
Fresh prospectus is to be issued
Process of preparing and registering is very time consuming
Instead of preparing fresh prospectus, prepare shelf prospectus
Information of Memorandum is to be filed with registrar of company (ROC)

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PROSPECTUS

3. Red herring prospectus

For emergency use only
In complete Prospectus
It does not include complete particulars of the quantity or the issue price of securities
4. Latter of offer
Farther issue of shares by making share issue
Offering shares to its existing share holders
Letter of offer issue to existing share holders
Contain the detail of offer

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Public
Private
Company
Company

Outsiders

DEBENTURES Money

Share
Holder
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PROSPECTUS

Prospectus shall not be issued by or on behalf of company unless

• On or before the date of its publication, a copy thereof
• Signed by every person who is named therein as a director or proposed direc-
tor of the company has been filed by the registrar,
• Submitted to SECP at least 21 days before of publication
• Published in Newspaper(Urdu/English) at least 7 days before maximum 30 days.

In case of any contravention, the company and every person who is a party to the
issue, publication or circulation of the prospectus, shall be liable to penalty.

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• https://www.secp.gov.pk/company-formation/formsapplications-schedule-of-filli
ng-of-returns/applications/

• https://www.youtube.com/watch?v=etLO0nsxLW4

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