THE ORDINANCE, 1984

The corporate sector in Pakistan is governed by the Companies Ordinance 1984 which was promulgated on 8th
October 1984 and repealed the Companies Act, 1913 .The Companies Ordinance 1984 is a broad piece of Pakistani
legislation that, according to its own preamble, is An Ordinance to consolidate and amend the law relating to
companies and certain other associations. It encompasses all legal rules and regulations for businesses registered
with Security and Exchange Commission of Pakistan (SECP) and is enforced by that agency. The Companies
Ordinance extends to all provinces and federally administered areas of Pakistan. It does not extend to Azad Jammu
and Kashmir, as AJK is not part of Pakistan according to the Constitution of Islamic Republic of Pakistan. The
government of Azad Jammu and Kashmir has, however, adopted the Companies Ordinance, 1984 in toto through a
special enactment in 1989.
HISTORICAL FEATURES OF COMPANY LAW
Englands History:
Regulated Companies: At the end of l6th century, the Crown gave the charter for formation of trading
companies such as Levant Company, East India Company and notorious South Sea Company. These
companies were legal entities quite distinct from their members. These were regulated companies in which the
members traded with their own stocks and commodities subject to the rules of the companies and had to
contribute to the expenses of the companies from their profit.
Joint Stock Companies: At the end of 17th century, joint stock companies were formed and even the regulated
companies switched over to joint stock companies. Such companies had the joint stocks of the members and
companies had to trade and pay dividends to the members. The companies could be formed through special
Act of Parliament.
Bubble Act, 1720: The Act was passed to regulate the activities of the joint stock companies.
Bubble Companies etc. Act, 1825: Members were made personally liable for the debts of the Companies to
the extent, as the Crown should think proper. The Act repealed Bubble Act, 1720.
Chartered Companies Act, 1837: The Crown was empowered to grant letter of patent.
Joint Stock Companies Act, 1844: Provision was made for registration of joint stock, companies instead of
granting charter.
Limited Liability Act, 1855: Members liabilities were made limited up to his share in the capital.
Joint Stock Companies Act, 1856: Introduced memorandum and articles of association of joint stock
companies.
Companies Act, 1862: Repealed and consolidated all previous Acts.
Companies (Memorandum of Association) Act, 1862: Provided the procedure of alteration in object clauses of
memorandum of association.
Companies Act, 1867 Contained the power of reduction of capital.
Directors liability Act, 1890: introduced principle of liability for directors.
Corporate Law and Secretarial Practice 2 Companies Ordinance, 1984
Companies Act, 1900: Introduced prospectus, audit of accounts and registration of mortgage charges.
Companies Act, 1907: Provisions were provided for private companies.
Company Law History in Pakistan:
Companies Act, 1913: Consolidated Act for companies was issued in 1913 and the Act was adopted in
Pakistan after independence. The companies law was administered by the provinces until 1973 when the
new Constitution of Islamic Republic of Pakistan placed the companies law in concurrent list and therefore,
was taken over by the Federal Government except that the companies operating within the provinces could be
regulated by the Provincial Governments.
Companies Ordinance, 1984: Companies Ordinance, 1984 as promulgated on 8th October, 1984 that
repealed previous Companies Act, 1913.
Scope of Company Law:
Company Law covers the following areas:
Rules regarding incorporation of companies
Rules regarding issue of prospectus
Conditions with regard to issue of shares
Rights of various classes of shares
Transfer of shares
Rights, duties and obligation of promoters, directors, managers, secretaries, chief executives and other
officers of the company
Rights and duties of members, auditors, liquidators, creditors of the company
Rules regarding the preparation of memorandum and articles of association
Objects of Companies Ordinance, 1984:
Consolidate and amend the law relating to companies.
Healthy growth of corporate sector
Setting minimum standards of integrity and management
Prevention of malpractices
Promotion of investment
Protection of interests of share holders
Full and fair disclosure of information
Empowering government to intervene and investigate
Advantages of Incorporation:
Company a separate legal entity
Artificial person
Perpetual succession
Company has legal capacity to sue and can be sued in its own name.
Liability of members is limited
Shares are freely transferable.
NON-APPLICATION OF COMPANIES ORDINANCE, 1984
Incorporation of Company with a Province: Companies can be incorporated with the Provinces as well.
Mostly, the Directors, Industrial and Mineral Development of the provinces have the powers of Registrars of
Firms and acts a Registrars of companies as well.
Non-Trading Companies: Only non-trading companies can be incorporated with the provinces. Mostly the
companies established not for profit and having welfare objects are incorporated with the provinces.
Procedure: Procedure for incorporation of the companies with the provinces is almost same as narrated in
subsequent provisions. (Section 4)
COMPANIES ORDINANCE TO OVERRIDE MEMORANDUM, ARTICLES. ETC.
Any provision of Memorandum of Association repugnant to the provisions of the Companies Ordinance,
1984 shall be void.
Any clause of Articles of Association of a company repugnant to the provisions of the Companies Ordinance,
1984 and Memorandum of Association of the company shall be void.
Agreements, resolutions etc., which are not in conformity with the provisions of the Companies Ordinance,
1984 and Memorandum and Articles of Association of the company, shall be void. (Section 6)
Section 6 overrides provisions of Memorandum and Articles of Association only to the extent it is
inconsistent with the Companies Ordinance, 1984.
Agreements or resolutions conflicting with the provisions of Companies Ordinance will have no effect.
If the Companies Ordinance requires all the existing companies to modify their Memorandum and Articles so
as to bring in conformity with the Companies Ordinance and the companies which do not do so, the
inconsistent provisions contained in their Memorandum and Articles of Association shall be null and void.

JURISDICTION OF COURTS
The Court having jurisdiction under this Ordinance shall be the High Court having jurisdiction in the place at which
the registered office of the company is situate:
Provided that the Federal Government may, by notification in the official Gazette and subject to such restrict ions and
conditions as it thinks fit, empower any civil Court to exercise all or any of the jurisdiction by this Ordinance
conferred upon the Court, and in that case such Court shall, as regards the jurisdiction so conferred, be the Court in
respect of companies having their registered Office within the territorial jurisdiction of such Court.
For the purposes of jurisdiction to wind up companies, the expression registered office means the place which has
longest been tile registered office of the company during the six months immediately preceding the presentation of the
winding up.
Nothing in this section shall invalidate a proceeding by reason of its being taken in a Court other than the High Court
or a Court empowered under sub-section (1).
Constitution of Company Benches: There shall in each High Court be one or more benches, each to be known as the
company Bench to be constituted by the Chief Justice of High court to exercise the jurisdiction vested in the High
Court under section 7.
The High Court in whose jurisdiction the registered office of the company situates has jurisdiction under the
Companies Ordinance, 1984.
A Civil Court through notification in the official Gazette by the Federal Government can be empowered to exercise all
or any of the jurisdiction.
The Chief Justice of the High Court constitutes one or more company benches to exercise the jurisdiction under the
Companies Ordinance, 1984.
Procedure of the Court: Notwithstanding anything contained in any other law, all matters coming before the Court
under this Ordinance shall be disposed of and the judgment pronounced as expeditiously as possible but not later than
ninety days from the date of presentation of the petition or application to the Court and, except in extraordinary
circumstances and on grounds to be recorded, the Court shall hear the case from day-to-day.
Explanation: In this sub-section, judgment means a final judgment recorded in writing.
(2) The hearing of the matters referred to in sub-section (1) shall not be adjourned except for sufficient cause to be
recorded, or for more than fourteen days at any one time or for more than thirty days in all.
(3) In the exercise of its jurisdiction as aforesaid, the Court shall, in all matters before it, follow the summary
procedure.
Appeals against Court orders:
(1) Notwithstanding anything contained in any other law, an appeal against any order, decisions or judgment of the
court under this Ordinance shall lie to the Supreme Court where the company ordered to be wound up has a paid-up
share capital of not less than one million rupees; and, where the company ordered to be wound up has paid-up capital
of less than one million rupees, or has no share capital, such appeal shall lie only if the Supreme Court grants leave to
appeal.
(2) such as provided in sub-section
i. an appeal from any order made or decision given by the Court shall lie in the same manner in which
and subject to the same conditions under which appeals lie from any order or decision of the Court.
(3) An appeal preferred under sub-section (2) shall be finally disposed of by the Court hearing the appeal within ninety
days of the submission of the appeal.
APPEALS AGAINST COURT ORDERS
>An appeal against any order of the Court in winding up case of a company having paid-up share capital of not less
than Rs. 1,000,000 under the Companies Ordinance lies to the Supreme Court.
>If company has paid-up capital of less than Rs. 1,000,000, or has no share capital, appeal lies to the Supreme Court
only if the Supreme Court grants leave to appeal.
> An appeal from any order made or decision given by the Court lies in the same manner in which and subject to the
same conditions under which appeals lie from any order r decision of the Court.
> In case decision is made by the Honourable High Court, inter court appeal (ICA) would lie before same High Court
comprising of Double Bench excluding the judge exercising original jurisdiction.
In case of split decision in Double Bench, referee judge makes decision. An appeal is finally disposed of by the Court
hearing the appeal within ninety days of the submission of the appeal.
BRITISH HISTORY OF EVOLUTION OF THE COMPANY
Just as the partnership developed out of the need for more capital than the individual trader could himself Provide so
the joint stock company was a development from the partnership for much the same reason. The early joint stock
companies were in fact nothing more than large partnerships, the liability of each member of the company like that of
the partner being unlimited. Following the speculation that led to the collapse of the South Sea Bubble, legislation was
passed in 1720 to control the setting up of joint stock companies. These companies were to be either chartered
companies operating under royal charter, or statutory companies operating under specific Acts of Parliament.
The charter is the oldest method of creating a corporation and is still used for granting borough status to local
authorities and for conferring official recognition on professional and other bodies, of which the Royal society of Arts
(1847) and the British Broadcasting Corporation (1927) are examples. Towards the end of the eighteenth century
incorporation by special Act of Parliament became customary for what are now termed public utilities. The canal
companies and early railway companies were incorporated in this way and, more recently, such bodies as the Port of
London Authority (1908), British Railways (1962) and British Airways (1971). The earliest surviving company is the,
Hudsons Bay Company, incorporated by royal charter in 1670.
The elaborate and expensive incorporation procedures referred to in the previous section were unsuited to the rapid
expansion of business enterprise associated with the industrial revolution. The increasing popularity of the joint stock
form of enterprise called for a simpler and speedier method of organizing capital, and with the passing of the Joint
Stock Companies Act 1844, a third type of joint stock organization in the form of registered company was recognized.
The Act greatly simplified procedure for forming companies and considerably reduced its cost. All that was required
was the registration of memorandum of association and the payment of certain fees. There has since been a
multiplicity of amendments and court decisions affecting company law and these are now embodied in the currently
operative Companies Acts of 1948 to 1967. Still further amendments are included in the Companies Act 1976. It
incorporates many of the recommendations of the Jenkins Committee not included in the 1967 Act and tightens the
requirements on disclosure by directors of their interests in their companies securities. (L. Gartside).
The corporation won its way to wide use in the mid-nineteenth century. As the century drew to its close, it had become
a commercial instrument of formidable effectiveness, feared because of its power, hated because of the excesses with
which that power was used, suspect because of the extent of its political manipulations within the political State,
admired because of its capacity to get things done. From the turn of, the twentieth century to the present, nevertheless,
its position as a major method of business organization has been assured. Although it was abused, no substitute form
of organization was found. The problem was to make it a restrained, mature, and socially useful instrument. (E. S.
Mason).
JOINT STOCK COMPANY
In British terminology is termed as a corporation in American vocabulary. In U.S. terminology joint stock Company
refers to a form of business ownership that Issues freely transferable shares which carry unlimited liability. It is
regarded as a hybrid of the partnership and the corporation.
It is defined both as a securities-issuing partnership and as a quasi corporation. However, we use the term joint
stock company as synonym of corporation. Initially, the company was special purpose form of ownership to be formed
only in those necessary situations where the needs of society could not be fulfilled by sole proprietorships or
partnerships e.g. canals, railways, and communication systems. At that time, each request for the incorporation of a
company required submission of a special bill to the state legislature and only after the legislative approval could a
Royal Charter be obtained to establish the company. The company form of ownership proved so useful that as the time
passed by the restrictions on the formation of company gradually disappeared to the point where every group of
persons, having reasons to do so, can get themselves incorporated. Now a company can be formed for any purpose, of
course, not prohibited by law, though it involves a cumbersome process.
In Indo-Pak subcontinent the first Companies Act was passed in 1866, which was followed by the Companies Act
1882 and the Companies Act 1913. Now-a-days in Pakistan there is the Companies Ordinance 1984 that applies to the
matters connected with the joint stock companies
Definition:
A Joint Stock Company is a voluntary association where people become members of the company and earn profit the
capital is easily transferred. A company is a corporation. In the eye of law, it is a person which is different from its
members. As company is person in the eye of law, it can own property. It can have rights and it can also be subject to
the liabilities. A company is not agent of its members. The company cannot sue the members in case of liabilities and
members of the company cannot sue it to enforce rights.
The essential features of a Joint Stock Company are:
1) Compulsory Incorporation: A company is a voluntary association of persons formed and incorporated
under the existing Corinne law. Only when it gets certificate of incorporation it comes into existence as a
body corporate.
2) Artificial person: A company is an artificial person created by law. It is created by legal process and not by
natural birth. Even though it has no natural personality, it has legal personality. Therefore it can enter into
contracts, sue and can be sued, own property, appoint employees and borrow money like any other natural
person.
3) Common Seal: Since a company is an artificial person having no physical features like a natural person, it
cannot sign. Hence every company by law must have a common seal on which its name is engraved. The
common seal can serve as its signature. The common seal is affixed on all important documents and contracts
which is witnessed by signature of two directors and countersigned by secretary where ever required. The
common seal is kept under the custody of directors.
4) Perpetual succession: Since the company has a separate existence from its members, directors and
employees, their death, insolvency or insanity will not affect its life and existence men may come and men
may go but a company remains forever. It can be wound up only under the provisions of the act.
5) Limited liability: Usually the liability of members of a company is limited to the extent of uncalled or
unpaid value of shares held by them. Their personal property cannot be seized to meet the companys
liability beyond the above mentioned liability.
6) Share capital: The capital required by the company is raised by issues shares. A share is a share in the share
capital of the company. The member who holds the shares of a company can transfer its ownership any other
person, without the companys permission.
7) Separation of ownership and management: In company organisation the ownership and management are
separated. The shareholders who are the owners do not take active part in the everyday affairs of the
company. Instead, they elect their representatives known as Directors, who with the help of managers and
employees manage the company. Thus, there is division of labour and specialisation.
8) Legal Entity: Since the company is created by law it has separate legal existence compared to its members.
Therefore the members cannot be personally held responsible for the acts of the company.
9) Large membership: The company is owned by a larger number of members, maximum of 50 in the case of
private limited company and unlimited number of members in the case of a public limited company.
CLASSIFICATION OF COMPANIES
Various classifications of joint stock companies that are formed for business purposes are as follow:
Classification on the Basis of Mode of Incorporation.
On the basis of mode of formation the companies are grouped as follow:
a) Chartered Company. In England joint stock companies were originated through the idea of raising money
for financing the Government and in return securing some monopoly or special privileges for the companies.
 These early companies were formed by the grant of Royal Charter and are termed as chartered companies.
The East India Company was established in 1600 by the grant of a Charter by Queen Elizabeth. Its objects
were financing the Government, and at the same time carrying on its own trade. Subsequently, for the same
purpose, Hudson Bay Company was founded in 1670 and The Bank of England in 1694 by the grant of Royal
Charters. The Royal Charter is the oldest method of creating a company and it is still used in England for
granting the status of legal entity to local authorities, professional and other bodies. For example, Royal
Society of Arts (1847) and British Broadcasting Corporation (1927) are also chartered companies. Charter
means permission from a government to do something, or, a written statement of rights.
b) Statutory Company. Formation of a company under the authority of a special Act of Parliament is the second
oldest mode which was common in England by the end of eighteenth century for incorporating bodies
responsible for canal, communication, railroad, and other public utility systems. The companies formed by
special statutes are categorized as statutory companies. In our country the statute that constitutes a company
may be an Act of the legislative assembly or an Ordinance passed by the President (when there is no
legislative assembly). State Bank of Pakistan, Pakistan Railways, Water and Power Development Authority,
Pakistan Television Corporation, and The Institute of Chartered Accountants of Pakistan are a few examples
of statutory companies. These companies are formed primarily to carry out essential projects of public utility.
Objects and powers of a statutory company and the bylaws for its management are contained in the statute that
constitutes the company..
c) Registered Company. The most recent mode of incorporating a company dates back to 1844 when the first
Companies Act was passed in England. The companies registered under the Companies Act/Ordinance
prevalent at the time of their formation are grouped as registered companies. In Pakistan since 1984 the
registered companies are incorporation under the Companies Ordinance 1984. Today this is the most common
form of joint stock companies. Objects and powers of a registered company are defined in its memorandum of
association; and bylaws for day to day management of the company are contained in its articles of association.
Classification on the Basis of Liability.
Memorandum of Association of a registered company states the nature and extent of liability of the members. The
registered companies, with respect to the liability, are further categorized as follow:
a) Company Limited by Shares. Where memorandum of association of a company contains the statement: that
liability of the members is limited, the company is termed as a company limited by shares. Liability of
members of such a company is limited up to the face value of shares subscribed by them. If the shares are
fully paid, the shareholders are not liable to pay anything out of their personal property in case the company
fails; but if the shares are partly paid, the shareholders are liable to pay out of their personal assets an amount
not exceeding the unpaid amount of share held by them*.
* Section 91 of the Companies Ordinance 1984 provides that no company shall issue partly paid share; and
where a company has partly paid share, it shall not issue any further share capital until all the shares
previously issued have become fully paid up. It means that since the promulgation this Ordinance no company
can be registered with partly paid shares, however, share of companies incorporated under the Companies Act
1913 may be partly paid up.
b) Company Limited by Guarantee. A company is termed as a company limited by guarantee if its
memorandum of association states that liability of the members is limited and further states that each member
undertakes to contribute to the assets of the company in the event of its being wound up such amount as may
be required, not exceeding a specified amount. In other words, liability of the members is limited up to the
amount so specified in the memorandum of association, and the members are not liable to contribute anything
more than the specified amount to make up the deficiency of assets, if any, at the time of winding up of the
company.
c) Unlimited Company.
If memorandum of association of a company does not contain any statement regarding liability of the
members, the liability is considered as unlimited. Although the Companies Ordinance 1984 provides for the
formation of a company with unlimited liability of its members, yet on account of risk of unlimited liability
such companies are rare.
Classification on the Basis of Membership
Articles of association of a registered company contain rules and regulations regarding membership of the company.
On the basis of membership, the registered companies are classified into following two groups:
a) Private Company. A private company means a company which, under the provisions of its articles of
association: (i) restricts free transfer of its shares, (ii) limits number of its members to fifty, and (iii) prohibits
any invitation to general public to subscribe for its shares or debentures. The minimum number of members
may be as few as two. Because in a private company money of large public is not involved, therefore, it is free
form many legal formalities that apply to a public company.
b) Public Company. When we use the word company, generally, what we mean is a public company. The
Companies Ordinance 1984 defines a public company as: public company means a company which is not a
 private company. It means a public company is one the shares of which are freely transferable, for whose
members there is no limit on the maximum number, and that invites general public to subscribe for its shares
or debentures. There should be at least seven members to form a public company.

THE PROMOTORS
The promoters of a company are discussed as follows:
Who are the Promoters?
The promoters are the founders of a company and may be defined as The promoters are the persons who assume the
primary responsibility to complete the process by which a company is brought into existence as a corporate body and
established financially by the issue of prospectus and allotment of shares The term promoters is a term not of law
but of business. Primarily it is used to denote only those founders who form a company to carry it on to conduct the
business. In its broader sense the term promoters also includes the professionals like solicitors or chartered
accountants who join the promoters in completing the process of formation of a company by providing their
professional services.
Classification of the Promoters
There are two types of promoters as discussed below:
1) Director Promoters. They are the persons who originate the idea of forming a company and initiate the
process of promotion. They promote the company to carry it on to do their business:
They are also the proposed directors of the company being incorporated. Director promoters make all
preliminary arrangements for the formation of company including the engagement of professional promoters
to assist in the process of promotion.
2) Professional Promoters. Promotion of a company is a complicated process involving legal and financial
technicalities. It is common for director promoters to get assistance of solicitors or chartered accountants etc.
to comply with the formalities for the formation of company. They are termed as professional promoters,
The professional promoters perform their functions under the directions of director promoters. Professional
promoters get remuneration for their services in cash and/or in shares or debentures of the company formed by
them. After the company is formed they do not take part in management of the company.
3) Functions of the Promoters.
The promoters are the persons who promote a company. Consequently, their functions include doing
everything that is necessary for the formation of a company. Functions of promoters can be discussed in detail
as follows:
i. Preliminaries. The promoters conceive the idea of forming the company and prepare feasibilities to
assess viability of the idea. For their assistance in the process of formation of the company, they
engage professional promoters. They chose a name for, the company; decide the objectives of the
company and the amount of capital with which the company is to be registered. They select bankers,
auditors, legal advisors and underwriters of the proposed company. The promoters make preliminary
contracts i.e. the contracts for the purposes of formation of the company before its incorporation. The
promoters are also responsible to provide funds to meet the expenses of formation of the company.
ii. To Prepare Necessary Documents. The promoters prepare draft of memorandum of association,
articles of association and prospectus and get these documents printed. They also prepare other
documents necessary for the purpose of promotion of the company. They subscribe their names as
Signatories to the memorandum and the articles, and as the proposed first directors of the company.
iii. To Apply for Incorporation. The promoters apply for registration of the company by filling
necessary documents and depositing necessary fees with the registrar of joint stock companies.
iv. To Allot Shares. After the company is incorporated, the promoters take all necessary steps for
issuance of prospectus or filling of statement in lieu of prospectus, as the case may be. They make
allotments of shares to the applicants and issue share certificates to the allottees in this way they raise
the required capital.
v. To Apply for Commencement of Business. Lastly, the promoters of a public company fulfill the
legal formalities necessary to be complied with before a public company is allowed to start its
business. Then they apply to the registrar to obtain the certificate of commencement of business.
Rights of Promoters
Promoters of a company have the following rights:
i. To Recover Preliminary Expenses. After the company is incorporated, the promoters are entitled to be
reimbursed by the company all preliminary expenses incurred by them. The promoters may be allotted share
or debentures of the company in consideration of the amount spent by them or they may recover cash out of
the proceeds of allotment of shares.
ii. To Receive Remuneration. The promoters are entitled to receive remuneration from the company for
services they have rendered in connection with its formation. Remuneration of promoters may be paid in cash
and/or shares or debentures of the company.
Liability of Promoters.
Liability of promoters may be discussed as follows:
i. To Account For the Moneys Received. Every promoter is liable to account for all moneys received by him
in the course of formation of the company. Consequently, a promoter shall act honestly, and shall not make
any secret profit in the process of formation of the company. If he does so, he is liable to account for it and
pay it to the company.
ii. Liability for Preliminary Contracts. The promoters are not agents of the company, because a person cannot
act as agent of another who is not yet in existence. Therefore, the promoters are personally liable for the
preliminary contracts made by them before incorporation of the company for the purposes of its promotion.
However, after the company is incorporated, such contracts may be enforced by or against the company under
the provisions of the Specific Relief Act 1877.
PROMOTION OF A JOINT STOCK COMPANY
Promotion of a company means formation of a company. It is a comprehensive term that denotes the whole process by
which a company is incorporated or brought into existence as a corporate body, and floated or established financially
as a going concern by the issue of a prospectus and allotment of shares and debentures. The process of formation of
the company may be divided into three stages: (I) Pre-incorporation, (ii) Incorporation, and (iii) Post- incorporation, as
discussed below:
1.Pre-incorporation.
Following steps taken by the promoters for the formation of the company are classified into pre-incorporation stage:
i. Preliminaries Arrangements. Preliminary arragemens include originating idea of forming the company,
testing its feasibility, engaging professional promoters, selecting bankers, auditors, legal advisors and
underwriters, making preliminary contracts etc.
ii. Approval of the Name. The Companies Ordinance 1984 places certain restrictions on the choice of a name of
a company. Therefore, before finalizing name of the company the promoters make an application to the
registrar asking for information as to whether the proposed name is or is not available for adoption. The
registrar furnishes this information in writing within ten day of the receipt of the application.
iii. Preparing the Memorandum and the Articles. Promoters prepare draft of the memorandum and the articles,
subscribe their names as the signatories to the memorandum and the articles and get them printed as required
by law. If the promoters opt to adopt Table A of the First Schedule of the Companies Ordinance 1984 as the
articles of the company being promoted, they need not to prepare the articles.
2. Incorporation
After completing the above formalities, the promoters apply for incorporation of the company. For this purpose the
promoters are required to fulfill the following formalities:
i. Deposit of Fees. The promoters are required to deposit the registration fee and fee for filing various
documents to the registrar as prescribed in the Sixth Schedule of the Companies Ordinance 1 984. The fees are
deposited in the State Bank of Pakistan or in any other bank acting as agent of the State Bank of Pakistan or a
Government Treasury.
ii. Filing of the Memorandum and the Articles. The promoters then file with the registrar the memorandum
and the articles. The memorandum and the articles shall be properly stamped as required by the Stamp Act 1
899, and shall be accompanied by three copies thereof duly subscribed and witnessed.
iii. Statutory Declaration. Alongwith the memorandum and the articles the promoters are required to file with
the registrar a declaration that all requirements of law as to the registration have been complied with. This
statutory declaration may be made either by an advocate of the high court or a chartered accountant or a cost
and management accountant or a person named in the articles as director or other officer of the company. The
declaration must be in the prescribed form.
iv. Issuance of Certificate of Incorporation. If the registrar is satisfied that the company is being formed for
lawful purposes and requirements of law in respect of registration have been complied with, he shall register
the memorandum and the articles, if any, and shall issue a certificate of incorporation to the company.
v. Effect of Incorporation. From the date of incorporation mention in the certificate of incorporation, the
subscribers of the memorandum together with such other persons as may from time to time become members
the company shall be a body corporate by the name contained in the memorandum, having perpetual
succession and a common seal.
3. Post-incorporation.
i. After incorporation a private company is entitled to commence its business but a public company is required
to fulfill certain other formalities before a certificate of commencement of business is issued by the registrar.
Following formalities are classified in the post-incorporation stage:
ii. Notice of Situation of Registered Office. A company shall as from the day on which it begins to carry on
business, or as from the twenty-eighth day after the date of its incorporation, whichever is the earlier, have a
registered office to which all communication may be addressed. Notice of situation of the registered office
shall be given to the registrar within twenty-eight days after the date of incorporation.
 iii. List of Directors and their Consent. Within seven days of the issue of certificate of incorporation of a
company, the subscribers to the memorandum of association shall file with the registrar a list of persons who
have consented to act as directors of the company alongwith their consent to do so. However, a private
company is not required to file the list and the consent.
iv. Issue of Prospectus. The promoters issue a prospectus in order to. invite general public to subscribe for
shares of the company. If the promoters intend to make an application for listing of the shares and securities,
they also obtain approval for issue of prospectus from The Securities and Exchange Commission. Before
publication of prospectus the promoters file a copy of the prospectus with the registrar. If the promoters do not
intend to invite general public to subscribe for shares of the company, they are required to file a statement in
lieu of prospectus with the registrar.
v. Allotments of Shares. If the public company receives applications for allotment of share upto the amount of
minimum subscription, the promoters make allotments of shares. In the course of allotments, the promoters
ensure that the directors have taken up the qualification shares and paid full amount to the company.
vi. Filling of Statutory Declaration. A declaration is then filed with the registrar that all requirements of the
Companies Ordinance with respect to commencement of business by a public company have been complied
with. This statutory declaration is made in the prescribed form either by the chief executive or by one of the
directors and the secretary of the company.
vii. Issuance of Certificate of Commencement of Business. On filing of the statutory declaration, the registrar
may make such enquiries as he may deem fit to satisfy him that all the requirements of the Companies
Ordinance in respect of commencement of business by a public company have been complied with, and shall
certify that the company is entitled to commence business.
PUBLIC COMPANY VS PRIVATE COMPANY.
Private companies are frequently found in those case where the business is confined to family (for convenience of
future division of property) or to a small group of persons (usually close friends and relatives). A private company
enjoys best of the both, a partnership and a company. It is a small group of entrepreneurs, free from most of legal
restriction that apply to public companies, and they have limited liability and perpetual succession.
Privileges of a Private Company
Privilege means some special right, advantage, or immunity available to a person or class of persons. The privileges
that a private company enjoys over a public company are as under:
1. Number of Subscribers to Memorandum.
In order to form a public company there should be seven or more persons who subscribe their names as
signatories to memorandum of association. A private company has the privilege that it can be formed by only
two or more subscribers to the memorandum.
2. Number and Appointment of Directors.
A public company must have at least seven directors to look after the management of the company. A private
company may have as many directors as appropriate for proper functioning of the company but the statutory
requirement as to the minimum number of directors is only two directors. Moreover, a private company is
exempt from the legal formalities prescribed for the appointment of first directors.
3. Number of Members.
The court may order winding up of a public company if number of its members reduces below seven. But a
private company can survive even if its membership is reduced up to two members.
4. Issue of Prospectus.
It is not obligatory for a private company to issue and file with the registrar a prospectus or a statement in lieu
of prospectus before it can make allotment of its shares.
5. Minimum Subscription.
A public company cannot proceed to allot its share unless it has received applications for subscription of
shares up to the amount of minimum subscription. The prerequisite of minimum subscription for the allotment
of shares does not apply to private companies. Minimum subscription is the amount which in the opinion of
the directors or of the signatories to the memorandum of association must be raised by the issue of shares to
provide the sums for: (1) the purchase of assets to be paid out of the proceeds of the issue, (ii) the preliminary
expenses of the company, (iii) the repayment of any moneys borrowed for the foregoing purposes, (iv)
working capital, and for (v) any other necessary expenses. This amount is stated by the directors in the
prospectus or the statement in lieu of prospectus.
6. Commencement of Business.
After its incorporation a public company cannot start its business unless it has complied with certain legal
formalities and has obtain the certificate of commencement of business from the registrar. But a private
company is exempt from the legal formalities necessary to obtain the certificate of commencement of
business. A private company can start its business immediately after its incorporation.
 7. Statutory Meeting
The Companies Ordinance 1984 provides that Section 44 of the Companies Ordinance 1984
every company shall, within a period of three to conferred the power to approve conversion of
six from the date the company is entitled to public companies into private companies to The
commence business, hold a general meeting of Corporate Law Authority But S.R.O. 862(1)/2000,
its shareholders called of the statutory dated 6-12- 2000 has entrusted this function to The
meeting and shall forward a report to the Securities and Exchange Commission of Pakistan
shareholders and to the registrar called the constituted under the Securities and Exchange
statutory report. But a private company is exempt Commission of Pakistan Act 1997.
from these provisions of law.
8. Qualification of Auditor.
Auditor of a public company must be a chartered accountant. But no qualification is prescribed by the
Companies Ordinance for the auditor of a private company, unless the private company is a subsidiary of a
public company.
9. Submission of Annual Accounts and Reports
Every public company which is listed on stock exchange is required to send to each of its members a copy,
and to The Securities and Exchange Commission of Pakistan, the stock exchange and the registrar five copies
of annual audited balance sheet and profit and loss account, the auditors report and the directors report. A
private company is required to send the accounts and reports only to its members and not to the other
authorities. However, a private company having paid up capital of three million or more is required to submit
only to the registrar the two copies annual accounts after they have been laid down before the company in the
annual general meeting.
10. Loans to Directors.
The Companies Ordinance 1984 places certain restriction on public companies on advancing loans to their
directors, relatives of directors or to companies and firms in which the directors are directors or members or
partners. These restrictions do not apply to private companies.
CONVERSION OF PUBLIC COMPANY INTO A PRIVATE COMPANY
Following procedure is prescribed by the Companies Ordinance 1984 for conversion of a public company into a
private company.
1. Approval of the S.E.C.P.
A public company is required to obtain approval for its conversion into a private company from The Securities
Exchange Commission of Pakistan. The Commission may impose some conditions for the conversion; these
conditions must be fulfilled by the company.
2. Alteration in the Articles.
After obtaining the necessary approval, the company shall pass a special resolution to alter its articles of
association so as to include therein the conditions that make a company a private company namely: (i) restricts
free transfer of its shares, (ii) limits number of its members to fifty, and (iii) prohibits any invitation to
general public to subscribe for its share or debentures.
CONVERSION OF PRIVATE COMPANY INTO A PUBLIC COMPANY
The procedure for conversion of a private company into a public company is as follow:
1. Alteration in the Articles.
If a company, being a private company, alters its articles in such a manner that they no longer include the
provisions which are required to be included in the articles of a company in order to constitute it a private
company, the company shall as on the date of the alteration cease to be a private company.
2. Filing of Prospectus.
The company after making the above amendment in the articles shall, within fourteen days, file with the
registrar either a prospectus or a statement in lieu of prospectus.
3. Conversion by Default.
Where a private company makes a default in complying any of the conditions (mentioned above) which are
included in its articles of association to Constitute it as a private company, the company shall cease to be
entitled to the privileges and exemption conferred on private company by the Companies Ordinance 1984, and
the company shall be considered as a public company.
 THE MEMORANDUM AND THE ARTICLES
Memorandum of association, articles of association and prospectus are regarded as the three basic legal documents of
a joint stock company. In this topic we will study the first two.
MEMORANDUM OF ASSOCIATION
Memorandum of association is constitution* or charter of a joint stock company, therefore, it is considered as the most
important document of the company. Being an artificial person, a company cannot do any business as a natural person
can do. A company can deal only in that business for which it is empowered by its memorandum. The memorandum
defines powers or scope of activities of the company. It regulates relation of the company with the outside world. Its
purpose is to enable the shareholders, the creditors and those who deal with the company to know the permitted range
of companys enterprise. Acts done by a company beyond the powers conferred on it by its memorandum are ultra
vires and void.
Clauses of Memorandum of Association
Memorandum of association of a company contains following clauses:
(i) Name. Name of the company with the last word or words limited, private limited, or guarantee
limited, as the case may be, to describe the nature of the company.
(ii) Situation. The province in which the registered office of the company is to be situated. It is also termed as
domicile clause. The purpose is to determine jurisdiction of the High Court to which the company is
subordinate.
(iii) Objects. This clause states the objects, powers, or scope of the company. Generally, this clause states not
only that business which the company will be doing immediately after its formation but it also covers a
broad range of businesses which the company may undertake at any future time. Such a broad statement
of objectives provides flexibility of operations to the company.
(iv) Liability. In case of a company limited by shares this clause states that the liability of the members is
limited. In case of a company limited by guarantee this clause also states the amount that each member
undertakes to contribute to the assets of the Company in the event of its being wound up, if the need
arises. In case of an unlimited company, the liability clause is not inserted in the memorandum.
(v) Capital. This clause of the memorandum of a company limited by shares or limited by guarantee states
the amount of share capital with which the company proposes to be registered and the division thereof
into shares of a fixed amount. The memorandum of an unlimited company does not contain a statement as
to the amount of capital and its division into shares.
Subscribers to the Memorandum
The persons who contribute their names as signatories to the memorandum are termed as subscribers to the
memorandum. In case of a public company there must be at least seven subscribers to the memorandum and in
case of a private company at least two. Each of the subscribers is required to state opposite to his name the
numbers of shares he shall take in the company. It is obligatory for each subscriber to take at least one share in the
company.
Printing, Signature etc. of the Memorandum
The memorandum shall be: (a) printed, (b) divided into paragraphs numbered consecutively, (c) signed by each
subscriber in the presence of at least one witness who shall attest the signature, and (d) dated.
ALTERATION IN THE MEMORANDUM
A company may make an amendment in its memorandum by following the prescribed legal procedure which is
briefly explained as under:
(i) Change of Name. A company may change its name by special resolution and with the approval of the
registrar, who shall issue a new certificate of incorporation in the changed name.
(ii) Change of Situation and Objects. A company may by special resolution alter its memorandum so as to
change the place of its registered office or the objects. The alteration must be confirmed by The Securities
and Exchange Commission of Pakistan and must be registered with the registrar.
(iii) Change in Liability. Ordinarily, liability clause in the memorandum cannot be altered.
(iv) Change in Capital. A company limited by shares, if so may alter the conditions of its share capital by
passing a special resolution. Within fifteen days after passing of the resolution, a notice of the alteration
must be sent to the registrar.
Rule 3 of Companies (General Provision and Form) Rules,1985
Application for confirmation of alteration be submitted to SECP by a responsible officer not later than 60 days
from date of special resolution. Application shall contain following information correct as on the day immediately
preceding date of special resolution and signed by a responsible officer
Name and address of company;
Number and date of incorporation;
Subscribed and paid-up capital;
Redeemable capital;
Business actually being carried on and the clause in the memorandum justifying it
 Reasons for the proposed alteration
Procedure on confirmation of the alteration
Certified copy of order of SECP + altered MOA filed with registrar for registration within 90 days of
passing of order by SECP.
The registrar shall register and shall certify the registration under his hand.
Certificate shall be conclusive evidence that all requirements complied
Extension (in 90 days) may be granted by SECP.
Confirmation by the SECP on petition required: No confirmation required if moving from Punjab to Islamabad
Capital Territory or vice versa. Before confirming SECP must be satisfied that sufficient notice given to every
holder of debentures & persons whose interest will be affected and consent of Every creditor, entitled to object
(and signifies his objection in manner directed by SECP) has been obtained or his debt or claim has been
discharged or secured
Effect of failure to register within days
Alteration become null & void if order of SECP not filed within 90 days (or extended time).
Application for revival order may be filed within further 90days.
Documents required
Following documents correct as on day immediately preceding date of special resolution and certified by
responsible officer shall be submitted with application
A copy of memorandum and the articles;
A copy of special resolution;
Minutes of meeting at which special resolution was adopted;
Particulars of dissenting shareholders or creditors together with their objections;
A copy of the latest audited balance sheet;
Statement in comparative form showing existing provisions of memorandum as are proposed to be altered
and the provisions as would appear after the proposed alterations have been made, indicating the reason
for change
Pattern of holding of its shares in Form 34;
Names and addresses of each of its creditors to whom an amount exceeding 50,000 rupees is due with the
amount mentioned against each along with their consent to alteration; and
Names and addresses of the persons likely to be affected along with their consent to the alteration
ARTICLES OF ASSOCIATION
Articles of association are the bylaws for shareholders and directors to follow while acting as members the corporate
body. These are the rules for management of entity of the artificial person. They regulate relation of members of the
company with each other.
A model set of 85 articles is given in Table A of the First Schedule of the Companies Ordinance 1984. A company
limited by shares may adopt the Table A as its articles; but a company limited by guarantee or an unlimited company
must frame its own articles.
Contents of Articles of Association
Articles of association contain rules and regulations regarding following matters:
1) Issue and allotment of shares and issue of share certificates to the allottees.
2) Transfer of shares from sellers to buyers.
3) Transmission of shares to legal heirs.
4) Alteration of share capital.
5) General meetings of shareholders.
6) Notice and proceedings of general meetings.
7) Voting rights of members.
8) Number of directors, their qualification, appointment and remuneration.
9) Powers and duties of directors.
10) Meetings of directors and their proceedings.
11) Custody and affixing the seal of the company.
12) Dividends and reserves.
13) Accounts and their audit.
14) Winding up of the company.
Signatories to the Articles
The Companies Ordinance 1984 provides that articles of association shall be signed by each subscriber to the
memorandum of association.
Printing, Signature etc. of the Articles
The articles shall be: (a) printed, (b) divided into paragraphs numbered consecutively, (c) signed by each subscriber to
the memorandum in the presence of at least one witness who shall attest the signature, and (d) dated.
Alteration in the Articles
A company may make alteration in its articles by passing a special resolution. Where a proposed amendment affects
the substantive rights or liabilities of members or of a class of members, it shall be carried out only if a majority of at
least three-fourths of the members or of the class of members affected by such alteration, as the case may be, vote for
such alteration.
REGISTRATION OF MEMORANDUM AND ARTICLES
MOA and AOA filed for registration to registrar, shall be properly stamped as required by Stamp Act, 1899, and shall
be accompanied by 3 copies duly subscribed and witnessed along with specified declaration which shall be made in
Form 1 by a person engaged in formation of the company who is
1. An advocate, entitled to appear before any High Court in Pakistan or the Supreme Court; or
2. A member of the ICAP or the ICMA practicing in Pakistan;
3. A person named in the articles as a director or other officer of the company.
Registrar may require any person making declaration or is a promoter or director of proposed Co or is a witness to
signatures of subscribers to memorandum to furnish such information, clarification or document as deem necessary.
Registrar if satisfied may register the MOA & AOA. If registrar refused to register; subscribers shall supply deficiency
or appeal within 30 days to Registrar if refusal passed by Additional/Joint/Deputy/Assistant Registrar or to SECP if
refusal passed by Registrar; SECP decision shall be final & not be challenged
Effect of alteration in memorandum or articles
Members are not bound by the alteration which increases their liability or require them to subscribe for more shares
unless he agrees in writing.
Copies of memorandum and articles to be given to members within 14 days of request on payment of prescribed
amount. Alteration of memorandum or articles be noted in every copy of memorandum and articles
DIFFERENCE BETWEEN THE MEMORANDUM AND THE ARTICLES
Difference between memorandum of association and articles of association is explained below:
1. Nature. The memorandum is the constitution of a company. The articles are the bylaws of a company.
2. Contents. As it is the constitution, the memorandum states objectives and scope of activity of the company. As
the articles are the bylaws, they contain rules to be followed by shareholders and directors of the company while
acting as members of the company for management of its entity.
3. Importance. Being constitution of company, the memorandum the most important document a company. Being
the bylaws of the company, the articles are next in importance to the memorandum.
4. Relationship: The memorandum relation of the company outside world. The articles define relation of
shareholders of the company with each other.
5. Necessity. It is obligatory for company to draw its memorandum of association. A company limited by share may
adopt Table A of the First Schedule of the Companies Ordinance 1984 as its articles, instead of preparing its own
articles.
6. Subordination. Memorandum of association is subordinate to the Companies Ordinance 1984. The articles are
subordinate to the memorandum as well as to the Companies Ordinance 1984.
7. Alteration. In order to make an alteration in the memorandum, it is necessary to pass a special resolution as well
as to obtain conformation from The Securities and Exchange Commission of Pakistan. Articles of association may
be altered only by passing a special resolution.
8. Ratification of Violation. If a company does an act that is beyond the scope of its memorandum, the act is void
and cannot be ratified subsequently by passing a resolution. If a company does an act contrary to its articles, the
act can be ratified subsequently by passing a resolution to that effect.
PROVISIONS WITH RESPECT TO NAMES OF COMPANIES
Prohibition of certain names
No company shall be registered by a name which is
Inappropriate or deceptive (in the opinion of the SECP)
Designed to exploit or offend the religious susceptibilities of the people.
Identical with name of a company already registered
Nearly resembling that name of a company already registered (except where Existing Co is in course of being
dissolved & signifies its consent)
Prior approval of SECP required if name suggests
The patronage of any, past or present, Pakistani or foreign, Head of State
Any connection with the Federal Government or a Provincial Government or any department or authority of
any such Government;
Any connection with any corporation set up by or under any Federal or Provincial law
The patronage or any connection with foreign Government/international organisation
Decision of the SECP regarding validity of name shall be final
Rule 5 of Companies (General Provision and Form) Rules, 1985
Promoters of Company desirous of having Co. registered, or a responsible officer of company intending to change its
name, may make an application to registrar concerned asking for information as to whether proposed name is or is not
available for adoption, and registrar shall, furnish information ordinarily within 2 days of receipt of application.
Requirements for change of Name
A company shall have to comply with the following requirements:
(a) Ascertain from the SECP/registrar, the availability of the name Reliance Foods Limited.
(b) Obtain members approval in the general meeting, by way of a Special Resolution.
(c) A copy of the resolution shall be filed with the Registrar within 15 days of passing thereof.
(d) An application for approval of change of name is filed with the Registrar.
(e) After approval, the registrar shall issue a certificate for change of name of the company and thereafter, the change
of name must be noted in the Memorandum and Articles of Association and in all documents, invoices, letter-heads,
bills, sign boards seal etc.
(f) For a period of one year from the date of issue of the certificate by the registrar, the company shall continue to
mention its former name along with its new name, outside every office or place in which its business is carried on and
in every document and notice issued by the company.
The change of name shall not affect any rights or obligations of the company, or render defective any legal
proceedings by or against the company, and any legal proceedings that might have been continued or commenced
against the company by its former name may be continued by or commenced against the company by its new name.
Rectification of name of a company
If wrong name selected by Co, it may change name with the approval of registrar & shall if registrar directs
within 30days of direction.
Registrar shall, before issuing direction for change of name, afford Co an opportunity to make representation
against proposed direction
Registrar cannot bound Co to change name after expiration of 3 years from registration
Change of name by a company: (Special Resolution + Approval of registrar). No approval required if addition or
deletion of word (Private)
Registration of change of name and effect thereof
Registrar shall issue a new certificate of incorporation altered to meet the circumstances
Continue to mention is former name along with its new name on the outside every business place and in all
the documents (for 1 year from date of issue of new certificate)
Change of name shall not affect the rights & obligations of Co.
Legal proceeding may be continued against the Co. in new name (Addition or deletion of word (Private) not
deemed as a change of name)
Alteration of names of commencement of ordinance and change of status of company
Every existing company deemed to include, before last word "Limited", "(Private)" for private company and
the "(Guarantee)" in the case of a company limited by guarantee
Conversion of a public company into private company registrar shall add "(Private)"
Conversion of a private company into public company registrar shall delete "(Private)"

PROSPECTUS
Prospectus the third most important document for the formation of a company is briefly discussed as follow:
What is Prospectus?
Prospectus is a document issued by a public company to invite the general public to subscribe for its shares or
debenture. It contains necessary information need by the prospective investors to make a decision about the
desirability or otherwise of the proposed investment.
When a Prospectus is Issued?
The Companies Ordinance 1984 requires that every company while issuing shares to the general public shall publish a
prospectus at least in one Urdu and one English daily newspaper, within seven to thirty days before the day the
subscription list is due to open. The company shall also make the prospectus, available at its registered office, with the
stock exchange and with the banker to the issue.
Approval for Issuing Prospectus
For a listed company, or for a company which proposes to make an application to a stock exchange for listing of its
securities, it is necessary to obtain approval for the issue of prospectus from The Securities and Exchange Commission
of Pakistan.
Registration of Prospectus
Before the issue of a prospectus it is necessary for every company to get its prospectus registered with the registrar of
companies. The registrar shall register a prospectus after he is satisfied that the company has complied with all legal
requirements for the issue of prospectus.
Matters to be specified in Prospectus
Every prospectus shall state the matters specified in section 1 of Part I of the Second Schedule of the Companies
Ordinance 1984. These matters are enumerated below:
1. The Memorandum. The contents of memorandum of association, signatories to the memorandum, and
number of shares subscribed by them.
2. Business Prospects. Description of business and its prospects
3. Remuneration of Directors. Provisions of the articles as to remuneration of the directors.
4. Particulars of Directors etc. Particulars of present or proposed directors,
chief executive, managing agent, and secretary of the company. Under the provisions of
5. Minimum Subscription. The amount of minimum subscription and the the Companies Ordinance
1984 value of shares
particulars as to how it is arrived at.
being applied is payable
6. Subscription Timing. The date and time of the Opening and closing of
in full at the time of
subscription list. application.
7. Application Money. The amount payable on application on each share
8. Preferential Rights, if any. The substance of any present or proposed contract
or arrangement whereby any preferential right is given or proposed to be given to any person to subscribe the
shares or debentures.
9. Shares Issued Otherwise than in Cash. The number, description and amount of share and debentures issued
or agreed to be issued for consideration other than cash and consideration for them.
10. Share Premium. The amount paid or payable as premium, if any, on each share.
11. Underwriters. Where the issue of share or debentures is underwritten, the name of underwriters will be
written.
12. Purchase of Property. Where a Property is proposed to be purchased which is to be paid for out of the
proceeds of the issue, the particulars of vendors, and particulars and value of the property.
13. Commission for Subscription. Where a commission is paid or payable to any person for subscribing or for
procure subscription for the issue.
14. Preliminary Expenses. Amount or estimated amount of preliminary expenses and the persons by whom any
of the expenses have been paid or are payable.
15. Payment to Promoters. Any amount or benefit paid or given within the two preceding years, or intended to
be paid or given, to any promoter or officer, and the consideration for the payment or the benefit given.
16. Contracts. Every contract appointing or fixing the remuneration of a chief executive, managing agent, if any,
or secretary; and every other material contract, not being a contract entered into in the ordinary course of the
business.
17. Auditors and Legal Advisors. The names and addresses of the auditors and legal advisers, if any, of the
company.
18. Interest of Directors. Full particulars of the nature and extent of the interest, if any, of every director or
promoter in the promotion of the company; or in any property acquired by the company within two years of
the date of the prospectus or proposed to be acquired by it.
19. Rights of Shareholders. The right of voting at meetings of the company conferred by, and the rights in
respect of capital and dividends attached to shares.
20. Restrictions on Rights. Any restrictions imposed by the articles upon the members in respect of right to
attend, speak or vote at meetings of the company or on the right to transfer shares; or upon the directors of
the company in respect of their powers of management.
21. Age of Business. If the company is already carrying on business, the length of time during which the business
of the company has been carried on.
22. Capitalization of Reserves. If any reserves or profits of the company or any of its subsidiaries have been
capitalized particulars of the capitalization.
23. Inspection of Financial Statements. A reasonable time and place at which copies of all balance sheets and
profit and loss accounts, if any, on which the report of the auditors is based, may be inspected.
24. Utilization of Proceeds of the Issue. The principal purposes for which the net proceeds of the issue are
intended to be used.
25. Purpose of Issuing Shares Otherwise than for Cash. If any shares are to be issued otherwise than for cash,
the genera purpose of the distribution and the basis upon which these shares are to be offered.
26. Summary of Earnings. A summary in columnar form of the earnings of the company and its subsidiaries, if
any, for each of the last three financial years.
27. Pending Legal Suits. Pending legal proceedings, other than ordinary routine litigation incidental to the
business, to which the company or any of its subsidiaries is a party.
REPORTS TO BE SET OUT IN PROSPECTUS
Following reports and certificates are also included in the prospectus:
 1. Auditors Report. A report by the auditors of the company with respect to: (a) Profits and losses and assets
and liabilities of the company; and (b) the rates of the dividends, if any, paid by the company for each of five
immediately preceding financial years.
2. Certificate by the Chief Executive. The Chief Executive and the Chief Financial Officer of the Company
shall certify that the prospectus constitutes a full, true and plain disclosure of all material facts relating to the
securities offered by the prospectus.
3. Certificate by the Underwriter. The underwriter of the issue, if any, shall certify that to the best of his
knowledge, information and belief, the prospectus constitutes full, true and plain disclosure of all material
facts relating to the securities offered by the prospectus.
STATEMENT IN LIEU OF PROSPECTUS
It is not mandatory for a public company to offer its shares to general public. Where the promoters of a public
company think it appropriate to raise the required capital from a limited group of people, usually comprising of their
relatives and friends, they need not to issue a prospectus. However, there must be a document that states terms of issue
of shares and other necessary information for the prospective subscribers. For this purpose, the promoters are required
to prepare a document termed as a statement in lieu of prospectus.
A statement in lieu of prospectus must be in the form and containing the particulars and reports as set out in section 1
and 2 respectively of Part II of the Second Schedule of the Companies Ordinance 1984. These particulars and reports
are almost the same as the particulars and reports contained in a prospectus. A statement in lieu of prospectus must be
signed by every person who is named therein as director or proposed director. It must be filed with the registrar at
least three days be before the first allotment of shares is made.
JOINT STOCK COMPANY, SHARES & SHARE CAPITAL
The share is a unit of ownership in a company. Owner of a share is called a shareholder. The money that shareholders
contribute for the business of the company is called share capital of the company.
Generally, the words share and stock are used intcrchangeably, with the explanation that the word share is popular
in British vocabulary whereas the word stock is popular in U.S. terminology. However, in our country the scholars and
practitioners sometimes make a differentiation between a share and a stock. They use the word stock to denote a group
of minimum number of shares that can be traded in the stock exchange. In our country, ten rupees is the most common
nominal value of a share; but ten rupees is a very small amount and if the companies allow their members to buy and
sell a single share, it will become unmanageable for the companies to maintain record of their shareholders and to
send notices and annual reports to each one of them. Therefore, the companies issue their shares in groups of one
thousand or five hundred shares; against which a single certificate, termed as stock certificate, is issued as evidence of
the ownership. These stocks and not the shares are traded in the stock exchange.
Shareholders are the owners of the company, but every shareholder is not entitled to participate in management of the
company. The shareholders at the annual general meeting elect directors of the company. Certain other important
decisions are also made by the shareholders at their general meetings by passing resolutions, but day to day
management of a company is responsibility of its directors.
This chapter contains a detailed discussion in the light of the Companies Ordinance 1984 on ownership and
management of joint stock companies.
SHARES OF JOINT STOCK COMPANIES
Companies raise their capital by a general appeal to the investing public for subscriptions. For this purpose, the
companies divide their capital into a large number of shares of same
nominal value; the most common denomination in our country being ten *Why Ten Rupees is Adopted as the
rupees. These shares are serially numbered. As evidence of shareholders Nominal Value of a Share? In the history of
title to the shares held by them, the companies issue stock certificates the subcontinent ten rupees was a significant
specifying therein the serial numbers of the shares. * amount and the companies used to issue
shares having ten rupees per share as the
Definition of Share nominal value. The companies adopted this
A share means interest of a shareholder in share capital of a company uniform nominal value per share so that
measured by a nominal value. The Companies Ordinance 1984 [Section market prices of shares of various companies
2(35)] defines a share in the following words: Share means share in may be easily compared. Gradually, inflation
share capital of a company . eroded value of rupee but the practice of
Nature of Shares adopting ten rupees as nominal value per
Following points depict nature of shares. share still prevails because adopting another
1. Shares Confer Rights. amount as the nominal value, e.g. hundred or
The shares represent equal portions into which capital of the thousand rupees, will make it difficult for the
company is divided, each shareholder being entitled to a portion investing public to compare the market price
of the share with the market prices of shares
of the companys profits corresponding to the number of shares
of other companies.
he holds; and in the event of winding up of the company to a
similar portion in surplus assets of the company. Shares also
confer on the shareholders voting and other rights as per provisions of the articles of the company.
 2. Shares Impose Liability
The shares impose liability on the shareholders to bear loss of the company upto the nominal value of shares
held by them.
3. Shares are Movable Property and Transferable
The Companies Ordinance 1984 declares that the shares are movable property and transferable in the manner
provided by the articles of the company.
4. Shares are Goods.
The Sale of Goods Act 1930 includes shares in the definition of goods; as such, trading of shares is also
subject to the provisions of the Sales of Goods Act 1930.
Measure of Value of Shares
Following are the three different measures of value of shares.
1. Nominal Value.
Nominal value means value assigned to a share out of total share capital of the company. For example, share
capital of Rs. 10,000,000,000 is divided into 1,000,000,000 shares of Rs. 10 each.* A company may issue its
share at their nominal value or it may issue its share at a premium, i.e. a price higher than the nominal value,
or at a discount, i.e. a price less than the nominal value. Nominal value of shares is also termed as the par
value or the face value.
2. Book Value
Book value per share means equity per share in the company. It is calculated by dividing shareholders equity
into number of shares outstanding. Book value is usually calculated only for ordinary shares. It is widely used
as a factor in estimating reasonable market value of a share.
Calculation of Book Value per Share an illustration.
Share capital 1,000,000 ordinary shares of Rs.10 each Rs. 10,000,000
Add retained earnings Rs. 5,000,000
Shareholders equity
Book value per share Rs.15,000,000 1,000,000 ordinary shares Rs. 15,000,000
= Rs.15 per share
3. Market Value
It is the price at which a share is being currently traded at stock exchange. Such factors as earnings per share,
dividends per share, and prospects for future earnings are usually more important factors affecting market
price of the shares than is the book value.
CLASSIFICATION OF SHARES
When a company issues only one type of shares conferring on all of the shareholders same rights and liabilities, the
shares are termed as ordinary shares. But where a company issues shares carrying different rights and obligations, the
terms preference shares and deferred shares are used to describe the other types of shares. Following is a detailed
discussion of different types of shares issued by joint stock companies.
1. Preference Shares
Preference shares are those which have a preferential claim on profits of the company. Preference shares carry a fixed
rate of dividend, which must be paid before any dividend is payable on ordinary shares. Preference shares generally do
not carry any voting right. Rights of preference shareholders may be further modified in the following manner, each
modification constituting a further classification of preference shares:
i. Cumulative and Non-cumulative. Ordinarily preferential claim of preference shares as to dividend is carried
forward if in any one year dividend is not paid due to inadequate profits. Dividend on ordinary shares can be
paid only after paying all accumulated arrears of dividend to preference shareholders. Such preference shares
are termed as cumulative preference shares. Where the preferential claim is not so carried forward the shares
are termed as non- cumulative preference shares.
ii. Participating and Non-participating. If in addition to the fixed dividend, preference shares carry a right to
further participate in the profits after ordinary shareholders have received a specified return, such preference
shares are called participating preference shares. Ordinarily preference shares are non-participating i.e. after
receiving their stipulated dividend they are not entitled to participate in the residual profits, unless an express
provision is made in the articles of the company to the contrary.
iii. Redeemable and Irredeemable. Where by the terms of issue, the amount contributed by the preference
shareholders is refundable on or after a certain date, such preference shares are termed as redeemable
preference shares. Where the preference shares are not so redeemable they are termed as irredeemable
preference shares.
iv. Convertible and Non-convertible. Where by the terms of issue preference shareholders are granted the
privilege to get their preference shares converted into ordinary share within a specified period of time, if they
think it advantageous for them, the shares are termed as convertible preference shares. Preference shares
carrying no such privilege are termed as non-convertible preference shares.
2. Ordinary Shares.
Ordinary shares are those which have right to receive the dividend after dividend on preference shares has been paid at
fixed rate. Similarly, in case of winding up ordinary shareholders participate in surplus assets only after the capital
contributed by the preference been refunded. Ordinary shareholders have right to vote at the general meetings of the
company.
3. Deferred Shares.
The shares that rank for dividend after payment of dividend on preference shares and ordinary shares are termed as
deferred shares. Similarly, in the event of winding up of the company, deferred shareholders participate in surplus
assets of the company after refund of capital to preference shareholders and ordinary shareholders. However, voting
rights of deferred shareholders are generally substantial as compared to ordinary shareholders. Deferred shares are
frequently taken by the promoters; thats why, deferred shares are also termed as promoters or founders shares.
SHARE CAPITAL AND ITS CLASSIFICATION
Capital is the amount that is contributed by the owner or Owners of a business for the purpose of the business. Capital
of a joint stock company is contributed by the shareholders who subscribe for the shares; therefore, capital of the
companies is termed as share capital. Share capital of the companies is classified into following groups:
1. Authorized Capital.
Authorized capital is the maximum amount that a company can raise/issue its shares. It is also termed as
registered capital or nominal capital of a company. Authorized capital of a company is stated in memorandum
of association of the company. A company can increase the amount of its authorized capital by following
prescribed legal procedure.
2. Issued Capital.
Issued capital is the nominal value of shares offered to general public for subscription. It also includes shares
offered to promoters and vendors for consideration other than cash. Generally, companies do not offer all of
their authorized capital for subscription. Portion of authorized capital that is not offered for subscription is
termed as an unissued capital.
3. Subscribed Capital.
Subscribed capital is the nominal value of shares for which the public applies for subscription. It also includes
the shares which the promoter and vendors agree to take up. Subscribed capital may be equal to or less than
issued capital but it cannot be more than issued capital. If the applications for subscription of shares received
by the company are more than the shares offered for subscription, the company returns the oversubscribed
amount to the applicants.
4. Called up Capital.
The companies registered under the Companies Act 1913 were allowed to ask the shareholders to pay the
amount due on the shares in installments. For example, a share of Rs.10 may be made payable as: Rs.3 at the
time when the share is applied for subscription, Rs.2 when the share is allotted, Rs.2 on first call and Rs.2 on
second call and Rs.1 on final call. In that case called up capital represented that portion of subscribed capital
that was called up by the company on the shares subscribed by the public, and the portion of subscribed
capital that was not demanded by the company from the shareholders was termed as uncalled capital.
However, the Companies Ordinance 1984 provides that no company shall issue partly paid shares and the
amount payable on application on each share shall be the full nominal amount of the share. It means that
called up capital of a company registered under the Companies Ordinance 1984 is always equal to its
subscribed capital, and there is no uncalled capital.
5. Paid up Capital.
When the companies were allowed to collect the amount of subscribed capital in installments, paid up capital
represented that portion of called, up capital which was actually paid by the shareholders; and that part of
called Up capital which was not paid, if any, by the shareholders was termed as calls in arrear. It is pertinent
to quote here again that under the Companies Ordinance 1984 the total nominal value of each share is payable
in full at the time the shares are applied for, therefore, paid up capital of a company registered under the
Companies Ordinance 1984 is equal to its called up capital and subscribed capital.
6. Reserve Capital.
This classification of capital also relates to companies registered under the Companies Act 1913. Reserve
capital is that portion of uncalled capital about which the company by means of a special resolution has
decided that it shall not be called up except in case of winding up of the company.
ISSUE AND ALLOTEMENT OF SHARES
The whole process of issue and allotment of shares is regulated by the provisions of the Companies Ordinance 1984.
In the light of legal provisions the process of issue and allotment of shares is explained below:
1. Issue of Prospectus: The company by issuing prospectus invites the public to subscribe for the shares. Within
seven to thirty days before the date the subscription list is due to open* the company is required to make
available sufficient number of copies of the prospectus at the registered office of the company, with the stock
exchange at which the company is listed and with the bankers to the issue*and to publish the prospectus at
 least in one Urdu and one English daily newspaper. The prospectus also contains the dates during which the
subscription list shall remain open.
2. Application Form: The public applies for allotment of shares on the prescribed forms. Every prospectus,
including the prospectus published in the newspapers, contains the application form. The application forms
are also made available at the designated branches of the bankers to the issue.
3. Minimum Number of Shares to Apply: The Securities and Exchange Commission of Pakistan, from time to
time, specifies the minimum nominal value of shares for which a person can apply for allotment. No
application for allotment of shares shall be made for less than such nominal amount.
4. Application Money: The Companies Ordinance 1984 provides that the amount payable on each share shall be
the full nominal amount of the share. Where the shares are issued at premium, the Companies Ordinance 1984
does not specify any thing as to whether the company can receive the amount of premium in installments.
However, it is common practice that the companies call full amount including the premium with the
application for allotment.
5. Separate Bank Account for Application Money: The company is required to keep all moneys received from
applicants for shares in a separate bank account in a scheduled bank until the company obtains the certificate
to commence business.
6. Restriction on Allotment:
The company is not allowed to make *The date on which the company starts receiving
allotment of shares unless the company applications for allotment of shares is technically termed
has received applications for the as the date on which subscription list opens.
allotment up to the applications upto the *Commercial banks which receive application for
amount of minimum subscription. In allotment of shares on behalf of the company are termed
such a case, the amount of minimum as bankers to the issue.
subscription received on the applications
shall be returned to the applicants within
fifty days after the first issue of prospectus.
7. Allotment of Shares: The Company shall take a decision within ten days of the closure of the subscription
list as to what applications have been accepted or are successful for allotment of shares.
8. Criteria of Allotment: First of all the allotments are made to those applicants who have applied for minimum
number of shares for which an application can be made then applications for more than minimum number of
shares are considered.

Assume that a company issues shares in multiples of 1,000 each. The company shall make
allotments against all applications of 1,000 shares and then applications for 2000 shares shall
be considered; and after making allotment against all applications for 2000 shares the
applications for 3,000 shares shall be considered, and so on. If applications for 1,000 shares
are more than the shares issued, the decision shall be made my means of a draw. If
applications for 1,000 shares are less than the issued shares, the allotment shall be made
against all application of 1,000 shares and then applications for 2,000 shares shall be
considered. If applications for 2,000 shares are less than the shares left after making
allotments against applications for 1,000 shares, allotments shall be made against all
applications for 2,000 shares and then applications for 3,000 shares shall be considered. But if
the applications for 2,000 shares are more than the shares left after making allotments against
applications of 1,000 shares, the successful application shall be selected by means of a draw.

9. Refund of Money to Unsuccessful Applicants. Within ten days after the decision of allotment of shares the
company shall refund the money of the unaccepted or unsuccessful applications.
10. Return of Allotments. Within thirty days after the allotment of shares, the company shall file with the
registrar a return of the allotment, stating therein the number and nominal amount of shares allotted, and
names and prescribed particulars of each of the allottees.
11. Issue of Share Certificates. Within ninety days after the allotment of its shares the company shall issue share
certificates to the allottees. The last date for the receipt of applications for allotment of shares is termed as the
date of closure of Subscription list.
 PROCEDURE FOR REDUCTION IN SAHRE CAPITAL
If allowed under the Articles of Association of the company, a company may reduce its share capital as follows:
a. Pass a resolution for reduction in share capital in the meeting of the directors.
b. Send notice with statement of material facts under provision of the Companies Ordinance 1984 and copy of
the proposed special resolution for reduction in capital to the shareholders convening the extra ordinary
general meeting at least 21 days before the date of general meeting and pass the special resolution in the
meeting.
c. File copy of the Special Resolution with the Registrar within 15 days from the date of passing of special
resolution.
d. Obtain NOC from creditors, if any.
e. File Petition before the Court for confirmation of the reduction in share capital.
f. Submit a copy of courts confirmation order for reduction of the capital, with the Registrar.
g. Comply with the Court order for publication of reason for reduction of share capital in the newspapers.
PROCEDURE OF ISSUANCE OF SHARES AT DISCOUNT
a. A company can issue shares at discount after one year of commencement of business.
b. The directors should pass a resolution to issue shares at discount, specifically mentioning the discount rate and
price, reason for the discount and possible effects of the discount on the company and its existing
shareholders.
c. Notice should be issued to members with statement of material facts along with copy of the proposed
resolution at least 21 days before the date of the general meeting.
d. The shareholders should pass a special resolution to that effect with atleast 3/4th majority.
e. A copy of the special resolution should be filed with the Registrar concerned within 15 days of the date of the
resolution.
f. An application should be furnished to the SECP for sanctioning the issue with a copy to the Registrar.
g. The shares should be issued within 60 days of the approval from Commission.
h. Return of allotment of shares should be filed with the Registrar within 30 days of the date of allotment.
i. Every prospectus and Balance Sheet issued thereafter should contain particulars of discount allowed and
amount not amortized, if any, at the balance sheet date.

DEBENTURES AND CLASSIFICATION OF DEBENTURES

The term debenture is derived from the Latin word debere which means to owe a debt and debenture means an
acknowledgement of a debt given to a creditor. Technically the term debenture is used to denote an acknowledgement
of a debt issued by a company against the funds borrowed from public by the issue of prospectus. The debentures are
similar to the shares in as much as the debentures are offered to public by issuing prospectus and that the debentures
are freely transferable, but the debentures are different from the shares because the debenture holders are creditors of
the company and not the owners and the debentures carry a fixed rate of return.
The Companies Ordinance 1984 [section 2(12)] defines debenture in the following words: Debenture includes
debenture stock, bonds, term finance certificates and any other securities, other than share, of a company, whether
constituting a charge on the assets f the company or not. Creditors financing is considered as a cheaper source of
finance as compared to equity financing on account of two obvious reasons: Firstly, interest paid to creditors is
deducted from revenues of the company before arriving at the taxable income, whereas, dividend paid to shareholders
is not so deductible; and secondly, shareholders expect a higher rate of return because the shares also carry the risk of
loss. Thats why; established companies instead of issuing shares prefer to issue debentures to obtain additional funds
to finance expansion.
Moreover, by the terms of issue, the debentures may be made redeemable after a certain number of years, whereas, the
shares are not so redeemable. Therefore, in order to fulfill their long-term, but not permanent, financial needs the
companies issue debentures to the public.
CLASSIFICATION OF DEBENTURES
The debentures may be classified as follow:
From Security Point of View
With respect to security offered to the debenture holders the debentures are grouped as:
i. Naked Debentures: Naked debentures do not carry any charge on the assets of the company. For the payment
of interest and for the repayment of the amount they rank as unsecured creditors of the company mortgage
debentures carry fixed or floating charge on assets of the company. Redeemable debentures are refundable after
a specified period. Irredeemable debentures are refundable only if the company thinks it appropriate.
If the company keeps record of debenture holders, the debentures are termed as registered debentures. If the
company keeps no records of particulars of debenture holders, the debentures are termed as bearer debentures
ii. Mortgage debentures: Mortgage debentures carry a charge on the assets of the company. If the mortgage
debentures are secured by a charge on specified assets of the company, they are termed as fixed charge
 mortgage debentures; and if the debentures carry a charge on whole of the assets of the company, they are
termed as floating charge mortgage debentures.
From Redemption Point of View
With respect to the conditions as to refund of the amount the debentures are classified as follow:
i. Redeemable Debentures: If the amount contributed by the debenture holders is, by the terms of issue,
repayable to them after a specified period, the debentures are termed as redeemable debentures.
ii. Irredeemable Debentures: If the company, at the time of issue of debentures, does not specify any time period
after which the principal amount shall be refunded, the debentures are called irredeemable debentures. The
debenture holders cannot demand return of their amount from the company unless the company makes a default
in the payment of interest thereon or the company goes into liquidation. However, the company may refund the
amount when it thinks appropriate. But where, by the terms of issue, the amount is not refundable during life
time of the company, such debentures are termed as perpetual debentures.
From Records Point of View
From the point of view of records of names of debenture holder the debentures are categorized as:
i. Registered Debentures: If the record of particulars of the debentures holders is kept by the company, the
debentures are called registered debentures. These debentures are transferable like shares by executing a transfer
deed.
ii. Bearer Debenture. If the company keeps no record of the particulars of the debenture holders, the debentures
are called bearer debentures. These debentures are transferable only by delivery. Payment of interest is made on
the production of coupons attached to the debentures.
From Conversion Point of View
From the point of view of right of being converted into shares the debentures are classified as follows:
i. Convertible Debentures. The debentures which are, as per terms of their issue, convertible into shares after a
specified time are called convertible debentures.
ii. Non-convertible Debentures. The debentures not so convertible into shares are called non-convertible
debentures.
DIFFERENCE BETWEEN A SHARE AND A DEBENTURE
Difference between a share and a debenture is explained in detail as follows:
i. Significance. The shares represent owners equity. A shareholder is one of the owners of the company. The
debentures represent creditors equity. A debenture holder is a creditor of the company.
ii. Voting Right. The shares carry voting rights. The shareholders cast their votes at the general meetings when a
resolution is being considered. The debentures do not carry voting rights. The debenture holders cannot cast
their votes in general meetings of the company.
iii. Return. Dividend is the return on shares. Dividend is paid only if the company earns profit. Interest is the
return on debentures. Interest is paid to debenture holders whether or not the company earns profit.
iv. Rate of Return. Rate of dividend on shares varies on profits of the company and the decision of directors.
Rate of interest on debentures is fixed.
v. Bonus. Bonus may be paid to the shareholders in the form of bonus shares. No bonus is paid to debenture
holders.
vi. Redemption. Amount of the shares is not redeemable except in case of winding up of the company. Amount
of debentures IS generally redeemable to after a specified number of years.
vii. Priority of Claim. In case of winding up of the company, claim of shareholders as refund of the subordinate
to the debenture holders. In case of the winding up, claim of debenture holders as to refund of the amount
enjoys of priority over the claim of shareholders.
viii. Charge on Assets. Shares do not have any charge on assets of the company. Debentures may have fixed or
floating charge on assets of the company.

UNDERWRITING
It is necessary for the promoters to ensure that the issue of shares is subscribed up to the amount of minimum
subscription, otherwise the company cannot get certificate of commencement of business. The underwriters in
consideration of a commission undertake to subscribe for that part of the issue which is not subscribed by the public.
This function of underwriting is performed by investment banks, insurance companies and stock brokers. The
underwriters get commission on total amount of the issue they underwrite even if whole of the issue is subscribed by
the public and the underwriters are not required to take up any shares.
TRANSFER AND TRANSMISSION OF SHARES AND DEBENTURES
Shares and debentures of joint stock companies are freely transferable unless articles of the company place any
restriction on the transfer. Transfer of shares means voluntary transfer of shares. The term transmission is used when
shares or debentures are transferred by operation of law e.g. in case of death or insolvency or lunacy of a shareholder.
Important provisions of the Companies Ordinance 1984 with respect to transfer and transmission of shares and
debentures are as follow:
i. Application for the Transfer
An application for registration of the transfer of shares and debentures in a company may be made either by
the transferor or by the transferee, and the company shall enter in its register of members the name of the
transferee. The application of transfer of shares is also referred to as the instrument of transfer or the transfer
deed.
ii. Requirements of the Application
The company shall not register a transfer of shares or debentures unless proper instrument of transfer duly
stamped and executed by the transferor and the transferee has been delivered to the company along with the
scrip.
iii. Intimation of Refusal
The Directors of a company shall not refuse to transfer any fully paid shares or debentures unless the transfer-
deed is, for any reason, defective or invalid. In such a case, the company shall within thirty days from the date
on which the instrument of transfer was lodged with it notice the defect or invalidity to the transferee.
iv. Submission of Revised Application.
The transferee to whom the defect or invalidity has been notified shall, after the removal of such defect or
invalidity, be entitled to relodge the transfer-deed with he company.
v. Transfer to Successor.
Transfer of shares or debentures from a deceased member or holder to his lawful nominee or successor shall
be made on application by such nominee or successor duly supported by a document evidencing nomination
or lawful award of the relevant property to such nominee or successor and thereupon the nominee or successor
shall be entered as a member.
vi. Nomination of Nominee.
A person may, on acquiring interest in a company as shareholder or at any time after acquisition of such
interest, deposit with the company a nomination conferring on one or more persons the right to acquire the
interest in the shares therein specified in the event of his death. The person to be nominated as aforesaid shall
not be a person other than the following relatives of the member, namely, a spouse, father, mother, brother,
sister and son or daughter, including a step or adopted child.
JOINT STOCK COMPANY, MANAGEMENT & WINDING UP
Management of affairs of a joint stock company is the responsibility of its board of directors. The board of directors
appoints a chief executive. The chief executive may be a director or any other person. The shareholders participate in
management of the company by holding general meetings. By passing resolutions they make decisions in the general
meetings.
BOARD OF DIRECTORS
The board of directors is the top management of the company and it represents the interest of the shareholders. It sets
the general policy and appoints the officers of company. The company is an artificial person so it can act through its
directors. The members of the board are individually known as directors. These directors can be elected by the
shareholders from within the company or may be appointed from outside it, by the creditors. The directors are
responsible for day to day management of the company. The directors are collectively termed as board of directors.
The Companies Ordinance 1984 [Section 2(13)] defines the director as:
Director includes any person occupying the position of a director, by whatever name called
1n the light of provisions of the Companies Ordinance 1984, directors of a company are discussed as follows: The
provisions of the Companies Ordinance, regarding the number, terms, election, retirement, powers of the directors are
given below:
Number of Members: According to section 174 of the companies ordinance, the minimum number of directors are
two in case of private limited company and seven in case of public limited company, who must be appointed and
elected in the manner as prescribed in this ordinance. The number of first directors shall be determined in writing by a
majority of the subscribers to the memorandum. The first directors of a company shall fix the number of elected
directors at least thirty five days before the first annual general meeting. The number so fixed shall not be changed
except with the prior approval of a general meeting of the company.
Terms of Office of Directors: A director elected by the shareholders can hold the office of director for a period of
three years unless he resigns, becomes disqualified as being director or ceases to hold the office of director before the
completion of his term.
Appointment of Directors: The director can be appointed by the following ways:
i. Selection by the Promoters: The first directors of the company are determined by the majority of the promoters
who work until the 1st annual general meeting when new directors are elected by the shareholders. These first
directors make sign on the memorandum and articles of association and their names are given in the prospectus
as directors. If due to any reason the directors are not selected by the promoter, then all the subscribers of the
memorandum who are natural persons shall be deemed to be the directors of the company.
 ii. Election by Shareholders: The shareholders of the company elect the directors in the1st annual general meeting
of the company. The 1st directors who are appointed by the promoters are retired at the date of this meeting and
they can again be elected directors of the company. Any person who contests election to the office of the
director must give his willingness to work as directors not less than fourteen days before the date of meeting at
which elections are to be held.
iii. Selection By the Board of Directors: According to section 180 of the companies Ordinance, the board of
directors can fill the casual vacancy of the directors and the term of directors so appointed is equal to the
remainder period of directors in whose place he is appointed.
iv. Appointment by the Creditors: According to the section 182 of the ordinance, the creditors in their special
interests may nominate persons as directors under the contractual agreements with the company in addition to
the directors appointed by the shareholders
Qualification Of Directors
A person may be appointed as director if he fulfills the following requirements:
i. He must be a natural person.
ii. He must be the shareholder of the company and has purchased maximum number of shares which are necessary
to become a director.
iii. He must have attained the age of majority which is of eighteen years.
iv. He must have given his willingness to work a director atleast fourteen days before the annual general meeting at
which directors are selected.
v. He must be of sound mind.
vi. He has not applied to be adjudicated as an insolvent and if already declared insolvent then he has been
discharged from his liabilities.
vii. He has not been convicted by a court of law for an offence involving moral turpitude.
The above mentioned qualifications are not necessary if the director is a representative of the creditor,
government, an institution or authority or whole time employee of the company or chief executive of the
company.
Vacation of the Office of Director
A director is ceased to hold his office under the following circumstances:
The first directors appointed by the promoters have to leave the office at the time of holding of first annual general
meeting at which new directors are elected.
i. When he refuses to purchase his qualification shares.
ii. If he becomes unsound mind.
iii. If he is declared Insolvent.
iv. If the articles of association allows the shareholders they can separate him from his designation by passing an
extra ordinary resolution.
v. A director himself can resign according to the provisions of articles of association.
vi. If a director is not working according to articles of association
vii. When a director remains absent from three consecutive meetings.
PROCEDURE FOR ELECTION OF DIRECTORS
The Companies Ordinance 1984 prescribes the following procedure for the election of directors:
Notice by Intending Contestants: Any person who seeks to contest an election to the office of director shall file with
the company, not later than fourteen days before the date of the meeting at which the elections are to be held, a notice
of his intention to offer himself for the election.
Communication of the Notice to the Members: All notices received by the company from the intending contestants
for election of directors shall be transmitted to the members not later than seven days before the date of the meeting,
or in case of a listed company by publication at least in one issue each of a daily newspaper in English language and a
daily newspaper in Urdu language having circulation in the Province in which the stock exchange on which its
securities are listed is situated.
Manner of Election: The directors of a company shall be elected by the members of the company in general meeting
in the following manner:
(a) A member shall have such number of votes as is equal to the product of the number of voting shares held by him
and the number of directors to be elected.
(b) A member may give all his votes to a single candidate or may divide them between more than one of the
candidates in such manner as he may choose.
(c) The candidate who gets highest number of votes shall be declared elected as director and then the candidate who
gets the next highest number of votes shall be so declared and so on until the total number of directors to be elected
has been so elected.
 WHEN ELECTION OF DIRECTORS MAY BE DECLARED INVALID
The Court may, on the application of members holding not less than twenty per cent of the voting power in the
company, made within thirty days of the date of election, declare election of all directors or any one or more of them
invalid if it is satisfied that there has been material irregularity in the holding of the elections.
REMOVAL OF DIRECTORS
The company may by resolution in a general meeting remove a director, provided that a resolution for removing a
director shall not be deemed to have been passed unless the number of votes cast in favour of such a resolution is not
less than:
the minimum number of votes that were cast for the election of a director at the immediately preceding
election of directors, if the resolution relates to removal of an elected director.
the total number of votes divided by the number of directors, if the resolution relates to removal of a first
director or a director appointed by the directors to fill a casual vacancy.
REMUNERATION OF DIRECTORS
There shall be a formal and transparent procedure for fixing the remuneration packages of individual directors. No
director shall be involved in deciding his/her own remuneration.
Directors remuneration packages shall encourage value creation within the company. These shall be subject to prior
approval of shareholders/board as required by companys Articles of Association. Levels of remuneration shall be
appropriate to attract and retain the directors needed to govern the company successfully.
Subject to the provisions of the Ordinance and the companys Articles of Association, the shareholders/board shall
determine the remuneration for non-executive directors. However, it shall not be at a level that could be perceived to
compromise their independence.
The company's Annual Report shall contain details of the aggregate remuneration separately of executive and non-
executive directors, including salary/fee, benefits and performance-linked incentives etc.
POWERS OF DIRECTORS
According to section 196 of the Companies Ordinance V 1984, the directors have the following powers:
1. They can make calls on shares in respect of the moneys unpaid on their shares.
2. They can issue shares.
3. They can issue debentures (participation term certificates).
4. They can borrow money otherwise on debentures.
5. They can invest the funds of the company.
6. The can make loans from the funds of the company.
7. They can authorise any director to enter into a contract for the sale, purchase, supply of goods or rendering
services with. the company.
8. They can approve annual or half yearly or other periodical accounts as are required to be circulated to the
members.
9. The directors may elect the chairman in their meeting and can determine the period for which he can hold his
office with regard to the provision of ordinance.
10. The directors can appoint the chief executive of the company in accordance with the provisions of the
Companies Ordinance.
11. They also approve the bonus of the employees.
12. They can pay the annual dues to the government
13. They also approve the periodical accounts of the company.
14. They can fill the vacancies of the company.
15. They can also fill the casual vacancies of the directors.
16. They propose the dividend in the annual general meeting of the company.
17. They can sell the business of the company if it is approved in the annual general meeting by the shareholders.
18. They can remit, give any relief or give extension of time for the repayment of any debt outstanding against
any person specified in sec. 195(i) after getting the approval in the general meeting of the members.
DUTIES OF THE DIRECTORS
The duties of the directors are determined in the articles of association of the company keeping in view the nature and
scope of the business of the company. However the duties of the directors may be as follows:
1. The directors must comply the provisions of Companies Ordinance, Articles of association, memorandum of
association and any statutory modification thereof for the time being in force.
2. The 1st directors of the company are bound to fulfill all the formalities required for the registration of the
company.
3. They must set out policies for the smooth running of the companys activities.
4. To arrange the annual meetings of the company in accordance with the provisions of Companies Ordinance
and Articles of association of the company.
5. They are bound to present the annual report of company in annual general meeting.
6. The directors must take active part in the management of the company with reasonable skill and diligence.
 7. They must make arrangement for the utilization of companys capital.
8. They must check and inspect the accounts of the company.
9. It is the duty of the directors to submit the Copies of accounts, notices and other documents if so required, to
the registrar of the company.
10. It is the duty of the directors to make arrangements for the payment of dividend to the shareholders when it
has been declared.
11. To enter into contracts with others On behalf of the company
12. The directors are bound to submit statement of affairs at the time of winding up of company
LIABILITIES OF DIRECTORS
According to Companies Ordinance 1984, the liabilities of the Directors may be as follows:
1. General Liability: The general liability of the directors of the company is limited by shares upto the amount
of their holdings.
2. Civil liability for Misstatement in Prospectus: (sec. 59) Any director and promoter of the company is liable
for any loss or damage Sustained by reason of any untrue statement included, into the prospectus.
3. Criminal Liability for Misstatement in Prospectus : Section 60: When a prospectus includes untrue
statement every person who signed or authorized the issuance of prospectus (directors or Promoters) is
punishable with imprisonment upto two years and with fine upto rupees ten thousand or both unless he proves
that statement was immaterial or he had reasonable ground to believe that statement was true.
4. Unlimited Liability (Section 111) : In a limited company, the liability of the directors or of any director may
be, if so provided in the memorandum, unlimited.
5. Liability for Contradiction of Ordinance (section 186) : Anyone who knowingly and willfully contravenes
the provisions of Companies Ordinance 1984, regarding the election and other matters about the directors, is
liable to a fine upto ten thousand rupees.
6. Liability for Unqualification: (section 189). A person who is not qualified to be a director or chief executive
of the company or has vacated his office as director or chief executive but represents himself or acts as
director or chief executive, he is liable to fine upto rupees two thousand daily.
7. Liability for Irregularity in Meetings: (section 193). If the meeting of the directors is held in the absence of
a quorum (one third or four whichever is greater) or not held at least twice in a year, the directors are liable to
fine upto ten thousand rupees and additional rupees one hundred for every day if the default continues, in
case of listed companies and upto rupees two thousand and additional rupees fifty daily if the default
continues, in case of non-listed company.
8. Liability for Negligence: (section 194). Any director, chief executive or any officer of the company is liable
for any negligence, default, break of trust of which he may be guilty in relation to the company.
9. Liability for Political Payment: (section 197). Any company which pays any amount for any political
Purpose to any political party or an individual, every director or officer of the company who is knowingly and
willfully in default is punishable with imprisonment upto two years and also be liable to fine.
CHIEF EXECUTIVE, SECRETARY AND MANAGING AGENT
The Chief Executive
The Company has separate legal entity. It is separate from its members. So the management work is done by a group
of persons known as board of directors. The board of directors appoints a full time executive amongst the directors or
employees of the company, who is empowered and is responsible for the management of routine business matters and
is known as chief executive or managing director of the company. The provisions of the Companies Ordinance,
regarding the definition, appointment and other matters of the chief executive has been given below:
Definition : Chief executive in relation to a company means an individual who, subject to the control and directions
of the directors, is entrusted with the whole, or substantially the whole of the powers of management of the affairs of
the company and includes a director or any other person occupying the position of a chief executive, by whatever
name called, and whether under a contract of service or otherwise;
Procedure of Appointment: The directors of the company appoint first chief executive of the company from the date
of commencement of the business or within fifteen days after the date of its incorporation whichever is earlier. The 1st
chief executive holds the office upto the first annual general meeting of the company when regular directors are
elected by the shareholders.
The subsequent chief executive is appointed within fifteen days from the date of election of directors or the office of
the chief executive falling vacant. The directors may appoint any person including elected directors as chief executive
and such appointment shall not be for a period exceeding three years. A chief executive may be reappointed on the
expiry of his 1st term. A retiring chief executive shall continue to perform his functions until his successor is
appointed unless such appointment is due to his default. (section 198, 199)
Terms of Appointment: The terms and conditions of the appointment of a chief executive shall be determined by the
directors of the company in annual general meeting in accordance with the provisions in articles of association.
(section 200). The chief executive shall, if he is not already a director of the company, be deemed to be its director and
be entitled to all the rights and privileges, and subject to all the liabilities, of a director.
Eligibility: Every person is eligible to become Chief Executive who is eligible to become a director of the company.
(section 201).
Restriction on the Appointment.
No person who is ineligible to become a director of a company shall be appointed or continue as the chief executive of
any company.
Rights, Duties and Liabilities : According to section 200(2) of the Companies Ordinance 1984, the chief executive
shall, if he is not already a director of the company, be deemed to be its director and be entitled to all the rights and
privileges and subject to all the liabilities of that office.
Removal of Chief Executive: Removal of Chief Executive.
The directors of a company by resolution passed by not less than three-fourths of the total number of directors, or the
company by a special resolution, may remove a chief executive before the expiration of his term of office. (section
202).
Restriction on Competing Business : The chief executive of the public company shall not directly or indirectly
engage in any business which is of the same nature as and directly competes with the business carried on by the
company of which he is the chief executive or by a subsidiary of such company. (section 203).
Special Penalty : Whoever contravenes or fails to comply with any of the provisions of section 198 to 203 or is a
party to the contravention of the said provisions shall be liable to a fine which may extend to ten thousand rupees and
may also by debarred by the authority which imposes the fine from becoming a director or chief executive of a
company for a period not exceeding three years. (Section 204)
THE COMPANY SECRETARY
The company secretary is responsible to ensure compliance of corporate laws by the company. He is recognized as
one of the principal officers of the company.
The Companies Ordinance 1984 neither makes it mandatory for the companies to employ the services of a company
secretary nor prescribes any qualification for the company secretary nor does it is explains his functions.
In March 2002 the Securities and Exchange Commission of Pakistan issued a directive titled as the Code of Corporate
Governance of Pakistan. The Code contains such provisions regarding the company secretaries. The Code is made part
of listing requirements of joint stock companies.
In the following lines position of a company secretary is explained in the Light of provisions of the Code of Corporate
Governance of Pakistan.
Appointment, Remuneration, Removal etc.
The appointment, remuneration and terms and conditions of employment of the Company Secretary of a listed
company shall be determined by the chief executive officer with the approval of the board of directors.
The company secretary of listed companies shall not be removed except by the chief executive officer with the
approval of the board of directors.
Qualification of Company Secretary.
No person shall be appointed as the Company Secretary of a listed company unless he is:
(a) a member of a recognized body of professional accountants; or
(b) a member of a recognized V body of corporate/chartered secretaries; or
(c) a lawyer; or
d) a graduate from a recognized university or equivalent, having at least five years experience of handling corporate
affairs of a listed public company or corporation.
Functions of a Company Secretary.
The exact duties of a company secretary depend a good deal on the nature of company and terms and conditions of his
appointment. However, the general duties of a company secretary may be enumerated as follow
1. To Issue Notices: The company secretary prepares schedule of meetings of directors and shareholders and
issues all notices of meetings to directors and shareholders.
2. To Attend Meetings. The company secretary is required to attend all meetings of directors and shareholders.
In the meetings he reads out the notice convening the meeting, minutes of previous meeting, the proposed
resolutions and he records the minutes of the meetings.
3. To Ensure Maintenance of Statutory Books. The company secretary is responsible to ensure maintenance
of all books and registers that a company is required by law to maintain.
4. To Conduct Correspondence. The company secretary conducts correspondence with shareholders and others
on behalf of the company.
5. To Submit Returns and Statements. The company secretary submits to the registrar, the Commission and to
other government agencies various returns and statements required to be submitted by the company.
6. To Keep and Affix Common Seal. Common seal of the company is kept by the company secretary. He
affixes where it is needed.
 THE MANAGING AGENT
Managing agent means a person, firm or company entitled to the affairs of a company, by virtue of an agreement
company. The Companies Ordinance 1984 places a ban on appointment of managing agents and provides that no
company whether incorporated in Pakistan or outside Pakistan shall appoint any managing agent by whatever name
called. However, a company wholly owned or controlled by the Federal Government or a Provincial Government may
employ a managing agent to manage its affairs.

SHAREHOLDERS IN COMPANY
The shareholders are the real owners of the company and base of the Company structure. Their capital enables the
company to function. They also have a right to vote on certain extraordinary transactions like purchase and sale of
fixed assets, winding up of a company etc.
RIGHTS OF SHAREHOLDERS
The shareholders as the real owners of the company have the following two types of the rights:
(i) Individual Rights. (ii) Group Rights.
INDIVIDUAL RIGHTS:
The individual rights of the shareholders are as under:
1. He has a right to attend the general meeting of the company.
2. He has a right to vote in person or by proxy in the general meeting of the company.
3. He can criticize the policies and can suggest in the general meeting of the company.
4. He can transfer his share freely to anybody.
5. He can get dividend when it is declared by the Company.
6. He has a right to get bonus shares when these are declared by the company.
7. He has a right to accept further shares in case of right, issue.
8. He can inspect record and books of accounts, as per the provisions of articles of association.
9. He can get the copies of memorandum and articles of association on the payment of prescribed fee.
10. He has a right to get the annual reports of directors and audited accounts of the company.
11. He has a right to collect the copy of minutes of annual meeting on the payment of prescribe fee.
12. He has a right to receive the copy of statutory report at least 21 days before the statutory meeting.
13. He has a right to share in the assets of the company on its liquidation.
GROUP RIGHTS:
The following are the group rights shareholders as owners of the company:
1. They have a right to elect and appoint the directors of the company.
2. They can fix the remuneration of the directors.
3. They approve the dividend as recommended by the directors in the annual general meeting.
4. They can appoint, remove and determine the remuneration of the auditor of the company.
5. They can apply and approve the appointment of the investigator for investigating the business matters of the
company.
6. They can approve the issuance of shares at discount.
7. They can approve the capitalization of profit and issuance of bonus shares.
8. They can approve the conversion of shares into the stock and stock into shares.
9. They can approve the, alteration memorandum and articles of association.
10. They can allow the directors for the sale and purchase of fixed assets of the company.
11. They can pass the resolution for the winding up of a company.
12. They can appoint the liquidator and can determine his remuneration.
13. They can 1low the liquidators to compromise with creditors in case of winding up of the company.
14. They can approve or reject the polices of the directors in the annual general meeting of the company.

LIABILITIES OF SHAREHOLDERS
The main liabilities of the shareholders are as under:
1. In case of a company limited by shares, the shareholders are liable upto the amount of their holdings.
2. In case of a Company limited by guarantee the holders are liable up to the amount they guarantee
3. In case of a Company with unlimited liability, a shareholder is liable to contribute to the assets of the
company to an amount Sufficient for the payment of its debits and liabilities and the cost, charges and expanse
of Winding up and for the adjustment of the rights of the contributors among themselves.
4. The shareholder are bound to pay money due on shares when the company make call, if these shares were
issued before the Companies Ordinance 1984.
5. They are bound to follow the decisions and resolution passed by majority of the shareholders at the meetings
of the company.
6. They are liable to pay the reserve capital at the time of winding up of the company.
 MEETINGS OF SHAREHOLDERS OF A COMPANY
The Companies Ordinance 1984 classifies general meetings of shareholders of a company as:
(a) Statutory meeting,
(b) Annual general meeting and
(c) Extraordinary general meeting. These meetings are discussed in detail as follows:

STATUTORY MEETING
It is the first meeting of shareholders of a company. The basic purpose of the meeting is to acquaint the shareholders
with the matters connected with the formation of the company.
What Companies To Call the Meeting?
Directors of every company limited by shares and every company limited by guarantee and having a share capital are
required to hold the statutory meeting of its members. But it is not necessary for private companies to call statutory
meeting of its members.
When the Meeting is Called? The statutory meeting shall be held within three to six months from the date at which
the company is entitled to commence business.
Notice of the Meeting. The directors shall, at least twenty-one days before the date of meeting, send to every member
of the company a notice of the meeting along with the statutory report.
The Statutory Report. The report sent by the directors to the shareholders along with the notice of the statutory
meeting is termed as the statutory report. This report is required to be certified by not less than three directors, one of
whom should be the chief executive of the company.
The statutory report states the following:
Total number of shares allotted.
(b) Total cash received in respect of all shares allotted.
(c) An abstract of receipts and payments of the company made up to a date within seven days of the date of statutory
report.
(d) Preliminary expenses of the company.
(e) The names, addresses and occupation of the directors, chief executive, secretary, auditors of the company.
(f) Particulars of any contract the modification of which is to be submitted to the meeting for its approval.
(g) The extent to which underwriting contracts have been carried out.
(h) Particulars of any commission or brokerage paid or payable in connection with the issue or sale of shares to any
director, chief executive, secretary or officer of the company.
(i) A brief account of the state of companys affairs since its incorporation, the business plan, and business prospects
of the company.
Business at the Meeting.
The members of the company present at the statutory meeting shall be at liberty to discuss any matter relating to the
format of the company or arising out of the statutory report.
Default in Holding the Statutory Meeting.
If the directors fail to hold the statutory meeting, the court may order winding up of the company.
Proceedings of Statutory Meeting
- Directors shall cause list of members (& their particulars) to be produced at commencement of meeting & shall be
open for inspection by any member during meeting.
- Members may discuss anything at meeting regarding incorporation and its operations
- No resolutions can be passed without notice being given to members in specified manner.
- Meeting may be adjourned from time to time and any resolution passed in the adjourned meeting will be as effective
as the original one.(provided notice given in specified manner)
- If petition is filed for winding up of the Co for not holding the statutory meeting, Court may give directions to hold a
meeting or file a report or make such orders as it think fit.

(b) ANNUAL GENERAL MEETING.

The Companies Ordinance 1984 requires that every company shall hold a general meeting of its shareholders every
year. This meeting is termed as annual general meeting.
1. When the Meeting is Held?
Every company is required to hold its annual general meeting within eighteen months from the date of its
incorporation and thereafter once at least in every calendar year within a period of six months following the close of
its financial year and not more than fifteen months after the holding of its last preceding annual general
meeting. Extension of 30 days can be granted by SECP for listed Co & registrar for any other case. No extension can
be granted in 1st AGM.
2. Where the Meeting is Held.
An annual general meeting shall, in the case of a listed company, be held in the town in which the registered office of
the company is situated unless allowed otherwise by SECP.
3. Notice of the Meeting.
The notice of an annual general meeting shall be sent to the shareholders at least twenty-one days before the date of
the meeting and, in the case of a listed company, such notice shall also be published at least in one daily newspaper in
English language and a daily newspaper in Urdu language.
4. Business at the Meeting.
Annual general meeting is held to transact the ordinary business i.e. (i) consideration of the accounts, balance sheet
and the reports of the directors and auditors, (ii) declaration of a dividend, (iii) appointment, and fixation of
remuneration of auditors, and (iv) the election or appointment of directors. Any business other than the above to be
transacted at the general meeting is called special business. A special business may also be conducted at an annual
general meeting provided a statement setting out all material facts concerning such business is annexed to the notice.
5. Default in holding the annual general Meeting.
If a company makes a default in holding two consecutive annual general meetings, the court may order winding up of
the company.
<<< Rule 14 of Companies (General Provision and Form) Rules, 1985>>>
Application for extension in time for holding any AGM (not being first AGM) or laying before AGM a BS and P&L
a/c or I &E a/c shall be submitted to SECP/Registrar not less than 30 days before last date on which such general
meeting was required to be held (For special reasons to be recorded, an application submitted less than 30 days before
last date on which AGM is required to be held can also be entertained)
The application of extension (accompanied by last audited balance-sheet and profit and loss account) shall state -
- The registration number, name and address of the company;
- Date on which the last general meeting was held and the financial year for which the financial statements and
reports relating to accounts were laid at such meeting;
- Date up to which AGM is required to be held and financial statements & reports laid therein
- Reasons for not being able to hold AGM or laying financial statements & reports at the general meeting by the
required date and justification for extension in period to the extent applied
- When delay is attributed to non-completion of books of accounts / non-finalization of audit, the exact state of
books of accounts with reasons for such with certificate of Cos auditor as to state of its accounts, reasons for
delay and minimum time required for it.
(c) Extraordinary General Meeting.
All general - meetings of a company other than the statutory meeting and the annual general meetings are termed as
extraordinary .general meetings.
1. Purpose of the Meeting.
An extraordinary general meeting is called to consider any matter which requires the approval of the company in a
general meeting and - the matter is so urgent that it cannot be postponed till the next annual general meeting.
2. Who Calls the Meeting?
The directors may at any time call an extraordinary gentra1 meeting of the company. The directors or the members
representing not less than one-tenth of the voting power may call an extraordinary general meeting. Notice of an
extraordinary general meeting shall be sent to the members at least twenty-one days before the date of the meeting.
The members representing not less than one tenth of the voting power may file a requisition with the directors to call
an extraordinary general meeting, and the directors shall forthwith proceed to call an extraordinary general meeting. If
the directors do not proceed within twenty-one days from the date of requisition, the requisitionsists/members may
themselves call the meeting within three months from the date of the requisition. Meeting shall be caused in same
manner as would have been called by directors. All expense incurred by members for such meeting shall be
reimbursed by Co and same amount shall be retained from amounts payable to directors who defaulted calling
meeting.
3. Notice of the Meeting. -
Notice of an extraordinary general meeting shall be sent to the members at least twenty-one days before the date of the
meeting, and in the case of a listed company shall also be published at least daily newspaper in English language and a
daily newspaper in Urdu language having circulation in province of stock exchange. However, in the case of an
emergency affecting the business of the company, the registrar may authorize such meeting to be held at such shorter
notice as he may specify.
 PROCEDURE AND CONDUCT OF THE GENERAL MEETINGS
Provisions of the Companies Ordinance 1984 regarding general meetings of the company, and votes and resolutions at
the meetings areas follows:
1. Notice of the Meeting.
Notice of the meeting specifying the place, the day and hour of the meeting alongwith a statement of the
business to be transacted at the meeting shall be given: (i) to every member of the company; and (ii) to the
auditor or auditors of the company.
2. Quorum of a General Meeting.
Unless larger number fixed by AOA, quorum shall be:
Listed Co: 10 members personally present > 25% voting powers present in person/proxy
Others : 2 members personally present > 25% voting powers present in person/proxy
SMC : 1 person either present in person or through proxy.
If Quorum not complete within half hour of meeting, it shall be dissolved (if called by requisitionists) and
shall be adjourned to same day, time and place in next week if called by directors.
If quorum not present within half hour at adjourned meeting, quorum shall be not less than two members
(unless the articles provide otherwise)
3. Chairman of the Meeting.
Every general meeting of the company shall be presided over by a chairman of the meeting. The chairman
shall be: (a) the chairman of the board of directors; or (b) if at any meeting, he is not present within fifteen
minutes after the time appointed for holding the meeting, or he is unwilling to act as the chairman, any one of
the directors present may be elected to be the chairman; or (c) if none of the directors is present or is
unwilling to act as the chairman, the members present shall chose one of their number to be the chairman.
4. Voting and Poll.
- Every member shall have voting rights proportional to paid up value of securities held.
- Fractional votes shall not be accounted for.
- No member can be debarred from using his voting rights.
- All members may participate in the meeting either personally or through proxy
- On show of hands every person shall have 1 vote
- In case of Co Ltd by guarantee and having no Share Capital every member shall have one vote
- On poll, votes may be given either personally or through proxy
5. Proxy.
On a poll votes may be given either personally or by proxy. A proxy must be a member unless the articles of
the company permit appointment of a non-member as proxy. Every member entitled to attend the meeting is
entitled to appoint a proxy. Members of Co not having Share Capital cannot appoint proxies. No member shall
be entitled to appoint more than 1 proxies. Every notice of the Co shall set out the member's right to appoint
proxy + proxy form. Proxy instrument shall be filed in writing and signed by appointer (if appointer is a body
corporate then also need to be under its seal. Proxy instrument shall be filed not later than 48 hours before the
meeting (Anything contained in AOA providing lesser period shall be void). Proxy shall have all the rights as
the original appointer. Members / proxies can do anything in meeting like demanding a poll on some matter or
abstaining from voting on some matter [Anything contrary to it in AOA shall be void]. Provisions of this
section apply to all general meetings & meetings of any class of members.
6. Resolutions.
Resolution means a proposal, a proposition, a suggestions etc. that is put in the general meeting for
consideration and voting for its approval. Company resolutions are classified into following two categories:
(i) Ordinary Resolution. An ordinary resolution is passed by simple majority of votes. The ordinary
resolutions are passed to conduct ordinary/routine business at a general meeting of the company.
(ii) Special Resolution. Where the proposition put to the vote pertains to a matter other than the
ordinary/routine business of the general meeting, it generally requires a special resolution for its
approval. A special resolution is passed by three-fourth majority of votes. A printed or typed copy of
every special resolution shall, within fifteen days from the passing thereof, be filed with the registrar
duly authenticated by the chief executive or secretary of the company.
7. Minutes of the General Meetings.
Every company shall maintain a fair and accurate summary of the minutes of all proceedings of general
meetings alongwith the names of those who participated in the meetings.
Circumstances in which proceedings of a general meeting may be declared invalid
Where material defects or omission in the notice or irregular proceedings of the meeting.
- On a petition filed by members having 10% or more voting rights to court
- Within 30 days of the meeting
- Court may declare such proceedings/part invalid & direct holding of fresh general meeting
Representations of corporations and creditors
A Company being a member of other Company by resolution of its directors authorizes any of its officials or any
person to act as companys representative. A creditor may authorize any of its officials to represent it at the creditors
meeting
Representation of government
Where Federal or Provincial Government as a member appoints a proxy, he shall be a deemed member and shall also
have the same rights and powers including right to appoint proxy.

WINDING UP OF A JOINT STOCK COMPANY

The process of dissolution of a company is termed as winding up of the company. In the course of winding up assets
of the company are realized, its liabilities are paid of the surplus, if any, is distributed among the shareholders; and
finally the artificial personality of the company ceases to exist. Following are the various modes of winding up of a
joint stock company.
(a) Compulsory Winding Up by Court.
On a petition submitted either by the shareholders or the creditors or the Registrar or the Authority, the Court may
order winding up of a company.
Grounds for Compulsory Winding Up
The Court may pass an order for compulsory winding up of a company on the following grounds:
Special Resolution: The company has, by special resolution, resolved that the company be wound up by
the Court.
Default in Holding Meetings: The company makes a default in delivering the statutory report to the
registrar or in holding the statutory meeting or any two consecutive annual general meetings.
Failure to Commence Business: The company does not commence its business within a year from its
incorporation, or suspends its business for a whole year.
Reduction in Membership: The number of members is reduced, in the case of private company, below
two or, in the case of any other company, below seven.
Inability to Pay Debts: It proves
to the satisfaction of the court that Minority share holders means shareholders together holding at least 20
the company is unable to pay its % of the share holding
debts. Company when deemed unable to pay its debts.
Unlawful Business: The company 1. If a creditor of lesser of 50,000 or 1% of Paid Up Capital serves
is formed to carry on unlawful or a notice at registered office of company for payment of sum,
fraudulent activities, or the himself or through agent or legal advisor and within 30 days
company is carrying on a business - Company neither pays the same
- Nor secures
not authorized by the - Nor satisfies creditor by compounding it
memorandum. 2. If court order in favor of creditor and still he remains
Ceases to be a Listed Company: unsatisfied
A listed company ceases to be a 3. It is proved to court that company is unable to pay debt
listed company. - Court shall take into account Contingent and Prospective
Any Other Equitable Cause: On liabilities
any other ground the court is of
the opinion that it is just and equitable that the company should be wound up.
Procedure of Compulsory Winding Up
Procedure of compulsory winding up of a company is briefly described as follows:
(i) Appointment of Liquidator: In order to wind up affairs of a company ordered to be wound up by the
court, the court shall appoint an official liquidator. The winding up proceedings shall be completed by the
official liquidator within a period of one year.
(ii) Committee of Inspection: When a winding up order has been made by the Court, the liquidator shall
within thirty days summon separate meetings of the creditors and the contributories to determine whether
or not an application is to be made to the Court for the appointment of a Committee of Inspection to act
with the liquidator, and who are to be the members of the committee if appointed. The Court may, on the
application by the official liquidator, appoint the Committee of Inspection.
(iii) Liquidators Account. The official liquidator shall at least twice in a year present to the Court an account
of his receipts and payments. The Court shall cause the account to be audited. After the audit the official
liquidator shall send a copy of the account to every creditor and contributory.
(iv) Dissolution of Company. When affairs of the company have been completely wound up, the Court shall
make an order of dissolution and that the company shall cease to exist from that date.
(b) Voluntary Winding Up
Members of a company may voluntarily wind up a company by passing a resolution to that effect.
Grounds for Voluntary Winding Up
A company may be wound up voluntarily in the following circumstances:
 (i) Expiry of Period. When the period, if any, fixed by the articles for the duration of the company expires
and the company in a general meeting passes a resolution to wind up the company voluntarily.
(ii) Occurrence of an Event. An event occurs, on the occurrence of which the articles provide that the
company is to be dissolved and the company in a general meeting passes a resolution to wind up the
company voluntarily.
(iii) Special Resolution. The company passes a special resolution that the company be wound up voluntarily.
Types of Voluntary Winding Up
Voluntary winding up of a company may be any one of the following two types:
(a) Members Voluntary Winding Up. If the company being wound up voluntarily is capable of paying its
debts, the winding up is termed as members voluntary winding up.
(b) Creditors Voluntary Winding Up. If the company being wound up voluntarily is incapable of paying
its debts, the winding up is termed as creditors voluntary winding up.
Procedure of Members Voluntary Winding Up
Procedure of members voluntary winding up is briefly discussed as follows:
(i) Declaration of Solvency. The directors shall make a declaration that after full inquiry into the affairs of
the company they have formed the opinion that the company has no debts, or that it will be able to pay all
its debts in full within a period not exceeding twelve months from the commencement of the winding up.
(ii) Appointment of Liquidator. The company in general meeting shall appoint one or more liquidators.
(iii) Final Meeting and Dissolution. As soon as the affairs of the company are fully wound up, the liquidator
shall call a general meeting of the company and lay before the meeting a report and audited account of
winding up showing how property of the company has been disposed of. The liquidator shall send a copy
thereof to the registrar within one week after the meeting. The registrar shall after necessary scrutiny
register the report and the account of winding up. On the expiration of three months from such
registration, the company shall be deemed to be dissolved.
Procedure of Creditors Voluntary Winding Up
Procedure of creditors voluntary winding up is briefly discussed as follows:
(i) Meeting of Creditors. The company shall call a meeting of its creditors either on the same day or on the
next day of general meeting of members at which the resolution for voluntary winding up is to be
proposed. In the meeting of creditors the directors shall present full statement of companys assets and
liabilities together with a list of the creditors and the estimated amount of their claims.
(ii) Appointment of Liquidator. The creditors and the company at their respective meetings may nominate
a person to act as the liquidator. If the creditors and the company nominate different persons, the person
nominated by the creditors shall be the liquidator.
(iii) Committee of Inspection. The creditors at their meeting may appoint a committee of inspection
consisting of not more than five persons to act with the liquidator.
(iv) Final Meeting and Dissolution. As soon as the affairs of the company are fully wound up, the liquidator
shall call a general meeting of the company and a meeting of the creditors and shall place before the
meetings a report and audited account of winding up showing how property of the company has been
disposed of. The liquidator shall send a copy thereof to the registrar within one week after the meeting.
The registrar shall after necessary scrutiny register the report and the account of winding up. On the
expiration of three months from such registration, the company shall be deemed to be dissolved.
Main Difference between members & creditors voluntary winding up
The winding up for which declaration of solvency has been made and delivered to registrar is termed as Members
Voluntary winding up, otherwise it would be Creditors voluntary winding up
Provisions same in members/creditors Subject to following Exception
voluntary winding up
Remuneration of auditor Same
Filing vacancy of liquidator Same
Powers of liquidator to accept shares etc as Powers not exercised unless court/COI sanction it
consideration
Creditors meeting in insolvency Liquidator bound to call meeting of both creditors
and members
Final meeting and dissolution Liquidator bound to call meeting of both, and
Person obtaining order shall file same with registrar
within 10 days (not 14 days)
 (c) Winding Up under the Supervision of Court.
When a company has passed a resolution for voluntary winding up, the Court may of its own motion or on the
application of any person entitled to apply to the Court for winding up a company, make an order that the
voluntary winding up shall continue, but subject to such supervision of the Court and on such terms and
conditions as the Court thinks just.
An order made by the Court for a winding up subject to the supervision of the Court shall confer full authority on
the court to exercise all powers which it might have exercised if an order had been made for winding up of the
company altogether by the court.
EFFECTS OF WINDING UP AS REGARDS TO DIFFERENT PERSONS
Company: Company continues to be a corporate entity with all rights. Only Management & Administration
passes to Liquidator.
Shareholders: A new statutory liability comes into existence. No transfer or change in shareholdings except with
approval of Liquidator.
Creditors: They have to lodge claims with Liquidator and Prove debt (except secured creditor). They cannot file
or continue suit against company except with leave of court.
Employees: Winding up by court appears to be a notice of termination. They can prove claims/damages in respect
of wrongful termination. Voluntary winding up does not necessary operates as notice of discharge.
Directors: Directors/ CE and officers cease to hold office except for the purposes of winding up. Committee of
inspection or creditors in general meeting may sanction continuance.
Properties of company: No disposition of properties without leave of court.
Contributories:
Contributory means every person liable to contribute to the assets of a company in the event of its being wound
up, and include the holder of any shares which are fully paid up; and persons who are deemed to be contributories
or alleged to be a contributory Liability of contributory accrues on commencement of liability but payable at time
specified in calls made on him for enforcing the liability.
Liability of contributories as past and present members
- Past and Present members will contribute money to pay all debts, liabilities, expenses of winding up and
adjustment of rights of contributories among themselves with following qualification:
- No contribution from past member if member ceases to be a member one year before winding up or debt
was contracted after he ceased to be a member.
- Past member will contribute only if court deems it necessary that present members are unable to pay debt.
- For company limited by shares, maximum liability shall be upto amount unpaid on shares.
- For company limited by guarantee, maximum liability shall be upto amount undertaken by member.
- For company limited by guarantee having share capital, maximum liability shall be amount unpaid on
shares as well as amount undertaken by member.
- A sum due to any member in respect of dividend, profit etc. shall not be a debt. Ordinance not applied
where liability of individual is restricted and funds of company liable (e.g. policy of insurance)
Winding up of unregistered Companies (SEC 443 to 449)
Unregistered Company includes any Partnership, Association or Company consisting of more than 7 members.
It does not includes
- A Railway company incorporated by UK or Pakistani Law
- A company registered under any previous Companies Act or under Co.Ord1984.
Provisions of winding up
No unregistered company shall be wound up voluntary or subject to supervision of court [Only By
Court.]
For determining Court having jurisdiction
- Company shall be deemed to be registered in Province where its Principal Place of Business is
situated.
- Principal place of business where proceedings are started, deemed to be registered office of company.
Circumstances of winding up are:
- If the company is dissolved, or ceased to carry on business or is carrying on business to wind up
affairs.
- If company is unable to pay debt.
- If Court thinks it just and equitable.
Miscellaneous Provisions
Companies established outside Pakistan would be wound up as an unregistered company.
Provisions of this ordinance with respect to staying and restraining suits and legal proceedings between
petition for winding up and order for winding up shall extend to suits & proceedings against any
contributory
No suit/proceedings can be continued/started against unregistered company being wound up against
 any contributory of company except by leave of court
Court & Official liquidator may exercise any powers on unregistered company being wound up as it is a
company registered under Companys Ordinance 1984
If unregistered company has no power to suit/to be sued in a common name
- Court may order all properties, interests, rights & obligations to be vest in Official liquidator
- Official liquidator may, after giving indemnity as directed by court, bring or defend in his official
name any suit/proceedings

Official liquidator
Official Liquidator occupies dual position on winding up
He represents company & creditors
He is bound to be impartial, not to make secret profits
He is paid agent of company: bound to carry out duties with due care and skills
Appointment of Official Liquidator (OL)
Court shall maintain a panel of persons form amongst persons specified by SECP
From this panel 1or more OL or Provisional Manager (PM) shall be appointed
Such person with 3 days of communication of order shall inform court of his inability to act so
A person other than panel can be appointed if
1. Court considers it. or
2. On application of creditor whom 60% of issued share capital or more is due
3. Notice of fact sent to Registrar.
OL shall forthwith start his duties till conclusion of winding up
Where more than 1 person are appointed, court shall declare whether any act shall be done by all or some or
anyone
Court shall decide whether any security needed to be given by OL
Resignation, removal & Filling Vacancy:
OL Cant resign before conclusion of winding up except on personal disability to the satisfaction of court
Can be removed by court any time.
Any vacancy in office of OL to be filled by Court, however, the outgoing OL shall continue to act until
successor takes his place.
Remuneration of OL
OL is paid remuneration for his services as follows
- %age of amount realized on disposal of assets
- There may be different %age for different class of assets Or Fixed by the Court having regard to amount
and nature of work done
In addition to remuneration Court may permit payment of monthly allowance for meeting expenses of
winding up for period of 12 months from date of commencement
Subsequently, remuneration cannot be enhanced but may be reduced by court anytime
If OL resigns, removed or otherwise ceases to hold office before conclusion
- He shall not be entitled to any remuneration
- Remuneration already paid shall be refunded to company
General provisions as to Official Liquidator
Past acts of OL having defects on appointment or qualification are valid till discovery.
Winding up procedure shall be completed within 1 year. Extension may be granted by court
- For one month at a time, maximum for six months
- On ground that any proceedings by or against company are pending in a Superior Court.
If OL is convicted of misfeasance, breach or default, he shall cease to hold office and shall be disqualified
for 5 years to hold any other office including that of Director in any company.
OL shall maintain proper books to make entries or minutes of proceedings, any other prescribed matters
Creditors and contributories can inspect it
OL shall take property of company in custody from any directors etc. He may contact dist. Magistrate
having jurisdiction over that area
Report by Official Liquidator
- On winding up order as soon as possible, after receipt of Statement of Affairs, not later than 30 days or
further 30 days extendable by court shall submit a preliminary report To Court
- Such statement shall contain following particulars
1. Capital issued, subscribed and paid up
2. Estimated amount of assets and liabilities giving separately
a. Cash, Bank and negotiable securities
 b. Debts due from Contributories
c. Debts due to company and securities(if any) available against them
d. Movable and Immovable properties of company
e. Unpaid calls
3. Cause of failure if company has failed
4. Whether in his opinion, further inquiry is desirable to any matter relating to formation, promotion, or
conduct of business
- If OL thinks fit, he may make a further report stating
o Manner in which company was formed or promoted
o Whether in his opinion any fraud has been committed by any person (director or other officer) in its
formation or promotion since its formation.
- Certified copy of report shall also be sent to registrar simultaneously.
Liquidators Account
- OL shall present to court an account of his receipts and payments and dealing as liquidator at
- prescribed times but not less than twice in a year
- Account shall be in prescribed form, made in duplicate & verified by declaration
- Court may have such accounts get audited.
- 1 copy held with court and other delivered to Registrar along with auditors report
- Each copy shall be open for inspection by any person on payment of prescribed fees
- OL shall send it to every creditor and contributory along with auditors report.
Powers of Official Liquidator
OL shall with sanction of court or committee of inspection have following general powers
- To institute or defend any suit, action, prosecution or other legal proceedings (civil/criminal) in the name
and on behalf of the company
- To carry on business necessary for beneficial winding up.
- To sell movable and immovable property of company by Public auction or private contract.
- To pay any classes of creditors in full
- To compromise or make arrangements with creditors having any type of claim against company
- To compromise all calls, debts, liabilities or claim/damages between company and contributories, debtors
or other persons apprehending liabilities and all questions affecting assets or winding up of company

OL shall have following powers subject to any general/special directions of court or committee of inspection

- To execute all deeds and use company seal

- To prove, rank and claim in bankruptcy/insolvency of any contributory for any balance against his estate
and receive dividends in bankruptcy/insolvency in respect of that balance
- To accept, make, or endorse bills of exchange
- To raise on security of assets of company any money requisite
- To take out in his official name letter of administration to any deceased contributory, do any other act for
payment due from contributory
- To appoint an agent to do business which he himself cannot do
- To do acts to recover payments due from a contributory
- To do other acts as are necessary for winding up and distribution of assets
Certain obligations of Official Liquidator
- OL shall maintain proper books to make entries, or minutes of proceedings, any other prescribed matters.
Creditors and contributories can inspect it.
- OL shall take property f company in custody from any directors etc, for which he may contract Dist.
Magistrate having jurisdiction over that area
Provisional Manager:
- At any time after presentation of petition and before Winding up orders, court may appoint a person eligible
for appointment as official liquidator.
- Court shall give notice to company and provide opportunity to make representation
o Court may dispense such notice for reasons to be recorded.
o PM shall have same powers as official liquidator
- Court may limit and restrict his powers in appointment or subsequent order.
PM shall cease to hold office when order of winding up being made.
Committee of Inspection
- Official liquidator shall within 30 days of orders, summon separate meeting of creditors and contributories
of company for determining
o Whether COI inspection should be appointed to act with official liquidator
 o Who should be its members

- Where Winding up order made on ground that company is unable to pay its debts, it is not necessary for
official liquidator to conduct such meeting
- If there is a difference between creditors and contributories, court shall decide it
Distribution by official liquidator
- Official liquidator shall, subject to directions of court, distribute surplus funds among creditors /
contributories within 30 days of receipt.
- Surplus funds means funds that come in hands of official liquidator after providing
o Expenses of Winding up
o Preferential payments
o Claims against company which are subject matter of adjudication/assessment.
Amount retained for this purpose shall be invested in Khas deposit certificates that shall be
deposited with court and distributions shall be made when claims are settled.
Dissolution of Company
- Under following circumstances court shall make an order that the Company be dissolved from date of order
and the company shall be dissolved accordingly
o When affairs of company have been completely wound up
o When court is of the opinion that official liquidator cannot proceed for winding up for want of funds
and assets.
o For any other reason just and reasonable of the case
- Dissolution shall not extinguish any right of debt due to company against or from any person.
- Copy of order shall be forward to registrar within 15 days of making. Registrar shall make a minute of
dissolution of company.
Powers of the Court
- Court may fix a time within which creditors are to prove their debts/claims or to be excluded from any
distribution made before these debts proved.
- Adjust rights of contributories amongst themselves, so distribute any surplus to entitled persons.
- When assets are insufficient to satisfy the liability, court may make an order of payment out of assets for
costs, charges and Winding up expenses in such order/priority as court may think fit.
- At any time after Winding up order require any of ;
o Contributory, trustee, receiver, banker, agent, officer, employee or auditor of company to convey,
surrender, deliver or transfer to OL any
o Money, property, books, papers or documents of company in his hands.
- Court may at any time after Winding up order, order any contributory to pay any money due from him/estate
of person whom he represents to company.
- In following cases a contributory can setoff any amount, due to him from company, otherwise than as a
member of company
o In case of unlimited companies
o Limited company, where directors liability is unlimited
o Cases where creditors are paid in full, as regards call made after.
Settlement of List of Contributories
- As soon as may be possible after making a winding up order, court shall settle a list of contributories with
powers of rectify register of members where necessary and shall cause the assets of the company to be
collected and applied in discharge of its liabilities.
- In settling list of contributories, court shall distinguish between
o Person who are contributories in their own rights
o Person who are contributories as being representative of or liable for debts of others.
- Court may dispense with settling list of court where it is not necessary to make calls and to adjust right of
contributories.
Enforcement of Orders
- All orders made by court under companies ordinance may be enforced in same manner in which decree of
such court in any suit be enforced.
- Such orders for winding up shall be enforceable in any place of Pakistan in the same manner as at place of
jurisdiction.
- Where any order of court is to be enforced by any other court
o A certified copy of order to be produced to proper officer of court required to enforce the same.
o Production of such copy shall be evidence of that order.
o Such 2nd court shall enforce matters in the same manner.
 THE SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission of Pakistan (S.E.C.P.) was set up in pursuance of The Securities and
Exchange Commission of Pakistan Act, 1997. The Commission is a body corporate with perpetual succession and a
common seal. Head office of the Commission is in Islamabad.
S.E.C.P. became operational in January 1999. It was initially concerned with the regulation of corporate sector and
capital market. Over time, its mandate has expanded to include Supervision and regulation of non-banking finance
companies, insurance companies and private pensions. S.E.C.P. has also been entrusted with oversight of various
external service providers to the corporate and financial sectors, including chartered accountants, credit rating
agencies, corporate secretaries, brokers, surveyors etc.
Organizational Structure of SPE.C.P
The Securities and Exchange Commission Policy Board is the highest body to look after the affairs of S.E.C.P. and to
make policy decisions. The Securities and Exchange Commission consists of a Chairman and Commissioners. The
Chairman is the chief executive officer of the commission. The Chairman directly supervises some of the departments
of S.E.C.P. and he is assisted by the Commissioners for the management of Operational Divisions of S.E.C.P. A brief
description of various units in the organizational structure of S.E.C.P. is given below:
The Securities and Exchange Commission Policy Board
The Securities and Exchange Policy Board oversees the performance of S.E.C.P. Main objective of the Policy Board is
to provide guidance to the Commission in all matters relating to its functions and to formulate policies in consultation
with the Commission. The Policy Board consists of a maximum of nine members appointed by the Federal
Government, including five ex-officio members and four from the private sector. The ex-officio members are: (i)
Secretary, Finance Division; (ii). Secretary, Law and Justice Division; (iii) Secretary, Commerce Division; (iv)
Chairman of the Commission; and (v) a Deputy Governor of the State Bank of Pakistan.
The Securities and Exchange Commission
The Commission Consists of a Chairman and such number of Commissioners as may be determined by the federal
government. The Chairman and the Commissioners are appointed by the federal government. The Chairman is the
chief executive officer of the Commission and directly supervises the working of Commissions Secretariat, Legal
Department and Information System and Technology Department. The Chairman is assisted by the Commissioners to
manage the Operational Divisions of the Commission. The Operational Divisions include: Company Law Division,
Securities Market Division, Specialized Company Division, Insurance Division,, Finance and Administration
Division, and Human Resources and Training Division A brief description of above noted departments and divisions
is given below:
(i) The Commissions Secretariat: The Commissions Secretariat is headed by a Secretary. It operates under the
direct control of the Chairman. It coordinates the overall functioning of S,E.C.P. and liaises with external
entities, including government agencies and multilateral and international organizations.
(ii) The Legal Department: The Legal Department is headed by an Executive Director. It operates under the
direct guidance of the Chairman and is responsible to manage legal affairs of S.E.C.P. and to provide impartial
legal advice to each Operational Division and Department of S.E.C.P.
(iii) The Information System and Technology Department. The Information System and Technology
Department is headed by an Executive Director. The department is responsible to provide Information
Technology to S.E.C.P. and to build the organizational information infrastructure that will assist the whole
organization to achieve its goals.
(iv) The Company Law Division: The Company Law Division is entrusted with wide range of responsibilities
that encompass regulation, monitoring and enforcement of laws pertinent to the corporate sector. The
Company Law Division is headed by an Executive Director and a Commissioner oversees its working.
(v) The Company Law Division operates with following departments: (i) The Registration Department is
responsible for registration of new companies and ensuring compliance with legal and regulatory requirements
through examination of statutory returns filed by companies. (ii) The Enforcement Department is responsible
for monitoring listed companies. It examines their published accounts, monitors compliance with applicable
laws, rules and regulations and takes necessary actions against erring companies, their directors, management
and auditors.
(vi) The Securities Market Division: The Securities Market Division regulates the primary and secondary
Security markets as well as the market intermediaries through registration, Surveillance, investigations
enforcement and rule making. It also grants approvals to prospectuses for public offering. The Securities
Market Division is headed by an Executive Director with oversight by a Commissioner. The Securities Market
Division is divided into the following Wings: (i) Stock Exchanges, Depository and Clearing, Policy and
Regulation (ii) Monitoring and Surveillance and Beneficial Ownership, (iii) Capital Issues, (iv) Brokers
Registration, inspection and Investor Complaints, (v) Commodity Exchange.
(vii) The Specialized Companies Division: The Specialized Companies Division is responsible for regulating and
monitoring non financing banking finance companies, modarba and private pensions. A commissioner
oversees The Specialized Companies Division. The Specialized Companies Division is organized into the
 following Departments and Wing. The Non-Banking Finance Companies Department, headed by an
Executive Director, is responsible for licensing and regulation of entities tinder its purview. These include
non-banking finance companies, mutual funds, and modaraba companies. Pensions Wing headed by a director
is responsible for regulation of contractual savings in the country. It is involved in implementing and
administrating the voluntary Pension System.
(viii)The Insurance Division: The Insurance Division regulates and monitors the insurance sector and administers
the relevant insurance laws. An Executive Director heads the Insurance division, which consists of the
following Wings: (i) Life Insurance, and (ii) Non-life Insurance.
The Finance and Administration Division: The Finance and Administration Division is responsible for
directing and controlling the areas of accounting facilitating overall operations of SE.C.P. and ensuring its
smooth functioning. It is headed by an executive director. This division is organized into the following
departments: Finance & Accounts Department, Administration Department. The Human Resource and
Training Division: this department is responsible for manpower planning, recruitment, selection and capacity
building of employees of S.E.C.P. It is headed by an executive director. This Division is categorized into
Human Resource Department and Training Department.
FUNCTIONS AND POWERS OF S.E.C.P.
Following are the important functions and powers of The Securities and Exchange Commission of Pakistan:
1. Monitoring and compliance
SE.C.P monitors compliance of applicable laws by organizations that come under its purview. This is done
through off site monitoring of companies on the basis of reports and returns furnished by them as well as
through on-site inspections of companies.
2. Review of Laws
Modern business environment are subject to continuous change which makes it necessary to continuously
review the laws applicable to business entities. S.E.C.P. is assigned the responsibility to continuously review
and suggest reforms of the law relating to entities that come within its purview.
3. Identification of the Policy Matters
The Commission may. from time to time. identify the matters requiring The Securities and Exchange Policy
Board to make policy decisions and may also make recommendations regarding the policy to the Hoard for its
consideration.
4. Registration
SE.C.P is responsible to effect registration of following organizations: (l Joint Stock Company. (2) Stock
Exchange. (3) Central Depository Company. (4) Clearing House. (5) Stock Broker. (6) Stock Brokers Agent. (7)
Insurance Company. (8) Insurance Broker. (9) Authorized Surveying Officer. (10) Modarba Companies. (11)
Credit Rating Companies.
5. Licensing.
A person who is entitled to be registered as insurance surveyor, an association not-for-profit which is to be
registered as a company and any persons desirous of forming a non-banking finance company are required to
obtain license from S.E.C.P. for that purpose. S.E.C.P. grants the license after insuring that the applicant fulfills
the necessary conditions and meets the requisite criteria.
6. Approval for Issue of Securities.
S.E.C.P. grants approval to: (a) All public companies incorporated in Pakistan which intend to issue or offer for
sale securities in markets outside Pakistan, or to list such securities on a stock exchange outside Pakistan.
(b) All bodies corporate incorporated outside Pakistan which intend to issue or offer for sale securities to the
public in Pakistan or to list such securities on a stock exchange in Pakistan.
7. Promotion and Development
S.E.C.P is responsible for: (a) Organized development of the capital market and the Corporate sector in
Pakistan (b) Promoting and regulating stock exchanges associations of mutual funds, leasing companies and
other N.B.F.I.s (c) Promoting investors education and training of intermediaries of securities markets (d)
Encouraging the organizational development of the insurance market in Pakistan (e) Promoting the
establishment and development of professional and educational organizations connected with insurance
business.
8. Investigation and Audit.
S.E.C.P is responsible for: (a) Conducting investigations in respect of matters related to The Securities and
Exchange of Pakistan Act 1997 and The Companies Ordinance 1984. (b) calling for information from and
undertaking inspections, conducting inquiries and audits of the stock exchanges and intermediaries in the
securities market.
9. Ensuring Public Access to the Documents.
S.E.C.P. receives, processes and stores the documents and information given to it under The Securities and
Exchange of Pakistan Act 1997 and The Companies Ordinance 1984. S.E.C.P. is responsible to ensure that these
documents and information are available, as soon as possible, for access by the public.
 10. Research.
S.E.C.P. is also assigned the responsibility of conducting research in respect of any of the matters connected
with its functions.

A listed company may place its quarterly accounts on its website, subject to fulfillment of the following conditions:
a. Seek the consent of its shareholders in a General Meeting.
b. Consult the respective stock exchanges.
c. Seek prior permission of the Commission.
d. The application for this purpose shall indicate the companys website address.
e. The Enforcement department would grant permission after visiting the website and finding it in order.
f. The website address shall not be changed except with the approval of the Commission.
g. The company, after obtaining the requisite permission, shall inform its shareholders through an advertisement in
the Press that the subsequent quarterly accounts would be transmitted to them through the company website.
h. The respective Stock Exchanges and the Commission shall be informed in writing by post.
i. Transmit periodical accounts electronically to the concerned stock exchange(s) so as to place the same on their
website.