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Company Law

Introduction:
(A) Nature of Business Environment: In an economy individuals & group of individuals are engaged in economic activity. Land, labor, capital & enterprises are employed to generate goods, services & wealth. (B) Uncertainty factor: In business & industry outcome of business activities needs to be predicted. Stability in Scio-economic field is of key factor. (C) Company: A legal person: Companies are formed to help bring predictability, ensure efficient & transparent running of economic life. The fundament idea behind company is the concept of limited liability. Liability of the members of the company is limited to the value of paid up share capital. In the event of winding up of a company the liability of the members, owner will restricted to the total assets of the company. There is no personal liability as in the case of partnership or a proprietor firm.

Types of Companies:
(1) Private Company: means (a) restricts the right to transfer the shares (b) Limits the number of its members to fifty (50). This does not include the number of persons who are in employment of the company. (c) Prohibits any invitation to the public to subscribe for the shares if any or debentures of the company. If two or more person holds a share jointly they will be treated as a single member. (Section: 2 subsection: 28) Limited by Shares: The share capital of the company is divided into shares of defined amounts. The total liability of the member of the company is equal to the face value of the shares held by him. Limited by Guarantee: Members guarantee to contribute to the company a definite amount in the event of the same being wounded up during the time they are members or within one year. Such companies may or may not have a capital divided into shares. Public Company: mean a company which is not a private company.

Memorandum of Association (MOA)


It is the charter of the company which defines its powers & states its objects. It is the constitution of a company. Contents of the Memorandum of Association of a company limited by shares. (1) Name Clause: Name of the company with limited as its last name. Private & public limited company. (2) Registered Office Clause: Address name of the province in which the registered office of the company will be situated. (3) Objects Clause: For what purpose the company is being formed. The area within it will be operating. Generally the wording of this clause is lengthy & gives it a wide scope. The company cannot legally take up any business not mentioned in the objects clause. Secondly nothing which is against the provision of the Companies Ordinance 1984 can be included in this clause. (4) Liability Clause: The fact that liability of the member will be limited by shares or guarantee has to be stated. (5) Share capital Clause: (a) the amount of capital with which the company proposes to be established. (b) The division thereof into shares of fixed amount. (6) Subscription Clause: (a) each subscriber is required to write opposite his name the number of shares he takes. Such subscriber must sign the memorandum in the presence of witness. (b) In a private company the minimum number of subscriber are two. In a public company the minimum subscribers are seven. (7) Alteration of Memorandum: Subject to the provisions of the Companies Ordinance 1984, a company may by special resolution alter the clauses of memorandum. The amendment may relate to following areas: - (a) To carry on the business more economically & efficiently (b) To attain its purpose by new & improved means (c) To enlarge & change the local area of its operations (d) To carry on a business not specified in the memorandum & which can advantageously combined with the existing business (e)

To restrict & abandon any of the objects mentioned in the memorandum (f) to sell or dispose of whole or part of the business of the company. (g) To merge the company with any other company.

Articles of association
Articles contain the different regulations of the company with regard to shares, classes of share, their transfer rules, voting rights of members of the company. (1) In case of company limited by shares or limited by guarantee or unlimited company; their articles must be signed by the member & registered. (2) Articles of Association may adopt all or any of the regulations contained in Table: A in the First schedule given in the Companies Ordinance 1984. The regulations given under the schedule relate to: (a) Issuance of shares, transfer of share, transmission of shares, securing loans against shares. (b) Alteration of the capital: The Company can through an ordinary resolution increase the share capital by such amount which will be divided by shares issued. (c) General Meetings: Notice & proceeding of such general meetings (d) Votes of Members (3) Share Capital: If the company has a share capital; the articles will state the amount of share capital with which company proposes to be registered. In case of unlimited company or company limited by guarantee then the number of members must be stated. (4) Voting rights: The articles must state the voting rights attached to different classes of shares. (5) Printing and Signature (6) Alteration of articles: Subject to the provisions of the Ordinance & conditions contained in the memorandum, a company can through a special resolution alter or add to the articles.