Company Law - CAF PDF

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Company Law – CAF Notes
Dear All CAF Students
These notes have been made from Study Pack provided by ICAP. I have only
summarized it from Study pack by highlighting covering areas. I hope it will
help you for your final revision.
CAVEAT: These notes should not be taken as an Alternative to Study Pack.
Sanam Alam Khan
Prepared by: Sanam Alam Khan Page 1
mhkorai.blogspot.com
CHAPTER 19
1. Doctrine of corporate personality is a company which is separate from its owners and is a legal person
2. A Company Is An Artificial Person Because:

 A company can enter into contractual agreements with other persons
 An indebted company is liable itself, not its owners
 A company owns its own assets. Shareholders just own the shares
 A debtor owes money to the company, not its owners
 A company is personally liable to pay taxes
3. Effects Of Separate Legal Personality:

 Limited liability
 Separation of ownership from control
 Transfer of ownership
 Perpetual existence
4. Association Not For Profit:

 If secp is satisfied with an association which has been formed or is capable of being formed as a limited liability
company, it may grant licence to be registered as a limited company without the addition of the word limited
or pvt limited or guarantee limited as the case maybe
 Such association might be set up for purposes like sports religion culture art science commerce charity etc.
 Such association shall apply its profits or income in promoting its objects and shall not pay dividend to its
members
Its license maybe revoked at any time by the secp but the association will be given an opportunity to be heard. But if its
license gets revoked, registrar shall enter the word limited after its name and the association shall cease to enjoy the
exemptions and privileges granted by that license
5. Commission
Secp replaced corporate law authority and its HO is in Islamabad. Commission has got the powers to regulate the
affairs of all the companies and insurance, banking, non-banking finance companies and modaraba
6. Registrar
The power and duties of registrar are as follows:
 Registration of companies
 Receiving various documents
 Keeping records of mortgages and charges
 Keeping track of company’s routine documents
 Call the officers and directors of the company for info and explanations
 Inspect books and records of the company
7. Companies Have To Get The Approval Of Court When:

 A company wants rectification in its register of members and debenture holders
 For reduction of capital
Members can file petition against the company for winding up to the court
CHAPTER 20
1. Obligation To Register Certain Associations, Partnerships Etc., As Companies.-

No association partnership or company, consisting of more than twenty persons shall be formed for the purpose of
carrying on any business that has for its object the acquisition of gain by the association, partnership or company, or by
the individual members thereof, unless it is registered as a company under this Ordinance.
Exceptions:
(a) any society, body or association, other than a partnership, formed or incorporated under any other Pakistan law;
(b) a joint family carrying on joint family business;
(c) a partnership of two or more joint families where the total number of members of such families, excluding the
minor members, does not exceed twenty;
(d) a partnership formed to carry on practice as lawyers, accountants or any other profession where practice as a
limited liability company is not permitted under the relevant laws or regulations for such practice.
2. Steps Of Registration
 Getting availability of a suitable name
 Preparing MoA
 Preparing AoA
 Filing documents with the registrar for obtaining certificate of incorporation
 Filing documents with the registrar for obtaining certificate of commencement of business
3. Name Of The Company:

While Selecting Names, It Should Be Considered That:
 It is not inappropriate or deceptive
 It is not designed to exploit of offend religious sentiments
 It is not identical or doesn’t closely resemble a company which is registered under the ordinance except when
the company is in process of dissolution
Names Which Require Prior Approval of the Commission
 The patronage of any Pakistani or foreign head of state

 Any connection with the fed or provincial govt and their departments or authorities or their corporation
 Any patronage of, or any connection with, any foreign govt or any international organisation
Rectification of Names
If a company has chosen a name which is not permitted by the ordinance, it may change it on its own with the approval
of the registrar. The registrar may tell the company to change its name within 30 days of receipt of such instructions
however the registrar cannot do so if it has been 3 years since the date of registration of the company.
Publication of Name
 Put the name outside every business place (if the business is outside the city area, write it in local language)
 Name of the company shall be engraved in Urdu or English on the seal of the company
 Name of the company shall be mentioned in Urdu or English on all documents
4. Memorandum Of Association
a. It Is The Constitution Of The Company Which Defines In Brief:
 What the company is
 What is it for
 Where will it be
 What shall be the liability of the members

 Amount of share capital
 Who are the initial members of the company
b. Registration of the company is actually the registration of its constitution, the MOA, which binds the members of
the company irrespective of the fact that any member has subscribed to it or not. The person becoming a member
of the company is deemed to have read and understood the MOA and it shall be binding on him as if he has signed
the MOA himself.
c. Clauses Of Memorandum: (SALRON)

 Subscription clause
 Authorised capital clause (unlimited companies and guarantee limited companies don’t have this clause)
 Liability clause
 Registered office clause
 Objective clause
 Name clause
5. Alteration Of MOA
a. Name:
 Pass a special resolution
 Written permission of the registrar (not required if a public company becomes private and vice versa)
 Registrar will enter the new name on the register
 Certificate of incorporation of change of name shall be issued
 The former name of the company shall be mentioned for 1 year from the date of issue of the certificate outside
every office, business place, on every document and notice of the company
b. Liability And Authorized capital Clause: cannot be altered
c. Registered Office Clause:

 Obtain approval of the SECP within 60 days of the date of resolution
 Send the copy of the approval within 90 days of receiving the order
 Inform the registrar within 28 days of shifting

d. Objective Clause:
e. Reasons For Altering Objective & Registered Office Clause:

 To carry on its business more economically and efficiently
 To attain its main purpose by new and improved means
 To enlarge
 To change the local area of its operations
 To carry on some business not specified in the memorandum
 To restrict or abandon any of the objects
 To sell or dispose off whole or any part of the undertaking of the company
 To amalgamate with any other company or body of persons
f. Commission’s Approval For Alteration
For the approval, company shall file an application to the commission on the basis of special resolution. SECP
must be satisfied that:
 The circumstances exist

 Sufficient disclosure has been given to debenture holders and interested persons
 Consent of the creditors has been taken or their debts have been discharged. If not, SECP might ask the
company to discharge their debts
g. Effects of alteration will be that a member who has given his consent might have to purchase more shares or
undertake more guarantee
6. Registration Of MOA
Registrar shall register the MOA only if he is satisfied that:
 The company is being formed for lawful purposes

 None of its objectives are inappropriate or deceptive or insufficiently expressed
 All rules of Ordinance have been followed in respect of registration
If the registrar refuses the registration, company shall file an appeal before a registrar higher in rank or the SECP.
SECP’s decision shall be considered the final one.
7. Effect Of Registration
1. Certificate of registration will be received

2. It’s an evidence that requirements of the ordinance have been fulfilled
3. MOA will be duly registered under the ordinance
4. Subscribers and members will be a body corporate
5. A company can exercise all its functions
6. It will have perpetual succession
7. It will have a common seal
8. Members will be bound to contribute money in case a guarantee limited company winds up
8. Articles of Association (AoA)

The bye laws of the company subordinate to the constitution of the company and further subordinate to the
ordinance. They contain the guidelines on day to day issues faced by a company. It is the option for the company
limited by shares to get the articles registered or adopt table A of the first schedule.
However the registration of AoA is mandatory for guarantee limited company and unlimited company. If they have
share capital they shall state the amount. If they don’t, they shall state the number of members with which the
company proposes to be registered.
1. Printing And Signature

The articles shall be:
1. Printed
2. Divided into paragraphs and numbered
3. Signed by every subscriber
4. Dated
The subscriber shall add the following in the presence of a witness who shall also write his
particulars:
1. His full name

2. His occupation
3. Father’s name or husband’s name
4. His nationality
5. His residential address
2. Every company, upon the request and payment by its member, shall supply within 14 days copies of the
memorandum and articles of the company

3. AOA can be altered by passing a special resolution. In case the alteration is affecting a certain class, a special
meeting shall be held for that class and ¾ of the affected class shall vote for it to be altered.
9. Commencement of business
Pvt and guarantee limited company not having share capital can commence their business and exercise all powers
regarding borrowings but other companies need to obtain certificate of commencement of business to do that. A
company has to meet the following requirements in order to obtain it:
1. The company should have allotted shares against cash for the an amount which is at least equal to the amount
of minimum subscription
2. Directors of the company should have paid to the company full amount of each share taken by him for which
he is liable to pay in cash
3. Issue a prospectus and get the shares listed on the stock exchange. In case the prospectus has not been issued,
there has to be a filed with the registrar, a statement in lieu of prospectus.
4. There should’ve been filed with the registrar a duly verified declaration by CE or by one of the directors and
the secretary
10. Registered office
It is the place where the company receives all of its communications. A company as from the day it begins to carry on
its business or as from the 28th day after its date of incorporation, whichever earlier, shall have a registered office.
CHAPTER 21
1. Characteristics of shares
1. It’s a form of property, carrying rights and obligations and is transferable
2. It must be paid for full when allotted to the shareholder
3. It is a form of bargain between the shareholders who must all comply with the company’s MOA
2. Share certificates
1. It is an evidence of ownership of shares in the name of the member and is required to be issued within 90 days of
allotment of shares
2. Whenever a shareholder transfers his shares to someone else, he must surrender the certificate to the company for
it to add the particulars of transferee
3. Instead of share certificates, holders in listed company are allowed to deposit their shares at CDC
4. Share certificate denotes:
 Number of shares
 Signature of director or CE
 Certificate number
 Distinctive numbers of shares
3. Authorised capital is the maximum amount of shares that the company may issue. It is expressed in the nominal value
of shares and it can only be increased with the formal approval of the shareholders
4. Ordinary Shares:
1. Owners of these shares are the owners of the company and its profits
2. Ordinary shares are often called equity shares
3. They are only entitled to the dividend if the directors propose a dividend and in case of final dividend, shareholders
vote for the payment of a dividend
4. Dividend will not be paid to the shareholders until all preference dividends for the current year have been paid
5. In case of winding up of the company, the ordinary shareholders are not entitled to receive payment of any capital
from liquidation of assets till all creditors and preference shareholders are repaid
6. Ordinary shareholders are issued irredeemable capital. i.e. no member has the right to get his money back
5. Preference Shares:
A preference share normally carries prior right ahead of ordinary shares to:
1. Receive a dividend (fixed amount each year)
2. In case of winding up of the company, receive payment of any capital from liquidation of assets
3. They are issued redeemable capital
6. Issued And Paid Up Share Capital

1. It’s also called allotted share capital, is the nominal value of shares that have been issued to shareholders.
2. Ordinance allows only fully paid shares for issuance
3. A share represents maximum liability of a shareholder
4. Whenever a company mentions its authorized capital in any ad, notice or statement, it shall mention the amount of
paid up capital as well
7. Capital Clause Of Memorandum Of Association:

1. The company may alter the capital clause to:
 Increase the authorized capital
 Consolidate the share capital into shares of larger amount (rights attaching to the shares shall not be affected
and shall rank equally with the existing shares of the company)
 Divide or sub divide the share capital into shares of an amount smaller than the one fixed by MOA(rights
attaching to the shares shall not be affected and shall rank equally with the existing shares of the company)
 Cancel the part of its authorized capital which has not been paid up

To exercise the above powers, company is required to obtain approval of the members in the GM through a resolution
which shall be filed along with related documents to the registrar within 15 days of passing the same, failing which the
resolution shall not be effective and shall ultimately lapse.
2. A company, if it is required to issue shares to a scheduled bank or a financial institution against any of its
obligations, may issue and allot shares even if the company has no sufficient authorised capital to issue new shares.
The authorised capital shall be deemed to have been increased to the extent of the requirement of issuance of
shares
8. Restrictions
1. Company cannot buy its shares back from the members
2. It cannot buy shares of its holding company
3. A company is not allowed to grant financial assistance to any person buying its or holding company’s shares
Exceptions:
1. If the subsidiary carries on a business of brokerage. But even then the company shall not exercise voting rights
2. If the subsidiary provides service of trustee for shares, subsidiary can hold the holding company’s shares. But the
shares should not be in the name of the subsidiary company itself or the holding company
3. A listed company, if it complies with the rules made by SECP, buy back its shares from its shareholders
4. A company can provide financial assistance to its salaried employees if it a part of contract of service (it may be
given to CE who was not a director prior of his appointment but a director shall not be given any financial
assistance)
9. Variation In Rights
1. Variation in rights of the shareholders can be made only by the alteration of the AoA by passing a special
resolution. However if it affects the rights of a particular class of shareholders, it shall not be passed if 3/4th of
majority do not approve
2. If any member or members representing 10% shareholding of the affected class may apply to the court for an order
against the resolution and court has the power to declare the resolution void if it feels that:
 The company withheld some facts while getting the resolution passed, had the members been in
knowledge of those facts would’ve never passed that resolution
 It is injurious to the interest of members
Such application shall be made within 30 days of the date of resolution. The decision of the court shall be final. The
company is required to file a copy of the order of the court to the registrar within 14 days of the receipt of the order
CHAPTER 22
1. Prospectus is:
 A document issued for general public
 It invites offers for sales of company’s shares/debentures or invited deposits from general public
 Companies are not entitled to invite deposits from general public in the like manner as the banks or financial
institutions do
Exception:
Financial institutions are freely allowed to call for deposits from the public. Companies other than financial
institutions are required to issue a prospectus for such purposes, after obtaining approvals with strict
requirements.
2. Statement Of Lieu Of Prospectus

If a company doesn’t want to call subscriptions from general public and wants to carry on business as a public unlisted
company, it shall be required to file a statement in lieu of prospectus with the registrar at least 3 days before first
allotment of any shares or debentures. A private company is not required to do this.
3. Contents Of Prospectus
1. Full memorandum of association
2. Complete particulars of signatories of MOA
3. Particulars of directors, proposed directors, secretary and CE
4. Particulars of auditors and legal advisors
5. Number and value of shares
6. Existing members and extent of their interest in the company
7. Description of business
8. Reasonable future prospects of the business
9. Any provisions in AoA regarding authority of determination of remuneration of directors
10. The amount of minimum subscription. It includes:
 Purchase price of property to be purchased
 Preliminary expenses
 Repayment of any money borrowed for above matters
 Working capital
 Any other expenditure
 Source other than shares being used to meet the above needs
11. Date and time of opening and closing of subscription lists
12. Amount payable on each share
13. Amount payable on each application
14. Any personal interest of the director or promoter in promotion of the company
15. Voting rights on the shares and its restrictions
16. Length of time from the date of commencement of business
17. Purpose of the activity for which proceeds of issue of shares shall be used
18. Details if the shares are to be issued for a consideration otherwise than in cash
19. Earnings of the company for last 3 financial years
20. Pending litigations
21. A report on assets and liabilities
22. P/L of the company
23. Dividend paid during last 5 financial years
24. When divided was not paid
25. Accounts of the company which were not prepared for the last 5 financial years
26. P/L and statement of assets and liabilities of its subsidiaries
27. Difference would it have made on P/L if company hadn’t issued the shares

4. Timing Of Prospectus
Prospectus may be issued before commencement of business if the company wants to issue shares but if a company
wants to start without the involvement of general public then it must file a statement in lieu of prospectus with the
registrar before obtaining the certificate of commencement of business. In future when the company wants to issue
shares or debentures it shall be required to issue a prospectus
Once issued and securities allotted under a prospectus, its existence ends.
Prospectus must be dated and it shall be considered the date of publication of prospectus
5. Availability Of Prospectus
2. Stock exchange
3. Bankers
4. One Urdu and one English Newspaper
6. Registration Of Prospectus
1. Copy of the prospectus shall be filed to the registrar
2. It shall be signed by all directors
3. It shall be accompanied with:
 the consent of experts
 Copies of material contracts
 Reports required by the 2nd schedule
7. Face Of Prospectus
The following matters should be stated:
 The copy has been filed with the registrar
 A list of documents or a reference to any note was filed with the registrar
 Application for listing of shares or debentures has been or shall be filed with the stock exchange
8. Necessity Of Prospectus
Prospectus is not needed to be accompanied with form of application for shares or debentures if:
1. If it is sent to a person to enter into an underwriting agreement with respect to shares or debentures
2. It is sent in relation to shares or debentures not offered to the public
3. If the offer of shares and debentures is made to existing shareholders or debenture holders
4. If the offer is being made for such shares and debentures which are already in issue and listed on an exchange
9. Experts
1. Statement of experts increases credibility of information provided in the prospectus
2. He must be independent and shall have no connection with the formation or management of the company
3. Statement shall only be included when written consent is given and is not withdrawn till the time a copy is filed for
registration. If the consent was withdrawn and directors did not exclude his statement, such directors will be liable
for loss occurred to the expert
4. Things to mention in prospectus:
 The expert has given his consent
 The consent was not withdrawn till the time a copy of prospectus was filed with the registrar
CHAPTER 23: MORTGAGES AND CHARGES
1. Companies cannot exercise borrowing powers until the date they obtain a certificate of commencement of business
2. Directors can borrow the money once they have passed a resolution
3. AoA may have restrictions on borrowing which a director can pass through by taking prior approval of the members in
a GM. If the authority is exceeded, it’s called ultra vires borrowings.
4. Forms Of Borrowing:
1. Debentures: Companies may issue debentures with or without interest. Holder of debentures can’t cast votes in the
meetings of the company but they can in their own respective creditor’s meetings.
2. Credit institutions: they include: commercial banks, investment banks, non-banking finance companies and
modarabas
3. Other sources: includes sponsors and controlling shareholders
5. Types Of Securities
1. Pledge: goods and valuables given in possession of the lender till the debt is paid. This contract is not required to
be registered with the registrar
2. Mortgage: transfer the title of “immovable property” but the company doesn’t transfer physical possession of it
3. Charge: a contract of transferring the title and physical possession of the asset in the company’s failure to abide by
the terms of loan contract
a. Fixed charge: its created on a specific asset for a defined amount and cannot be replaced or sold without
prior approval of the beneficiary of charge
b. Floating charge: asset is not fixed and can be replaced by the company but overall value of charge cannot
change
6. Following Mortgage And Charges Must Be Registered With The Registrar:

1. For the purpose of securing any issue of debentures including redeemable capital and musharika agreements
2. On uncalled share capital of the company
3. On any immovable property
4. On any moveable property
5. Any receivables of the company
6. Goodwill, patent, licence under patent, trademark, copy right, license under copyright
7. Leasing agreement
8. Floating charge
7. Procedure For Registration

1. Duty of registration
 Get the particulars of the mortgage of charge registered within 21 days of creation
 Form 10 containing particulars of mortgage/charge
 Copy of instruments creating the mortgage/charge
 An affidavit
 Bank challan
2. Anyone can get it registered but the cost shall be borne by the company
3. Consequences of no registration
 Mortgage or charge shall become void
 Debt becomes unsecured
 Money to which was to be secured by the charge becomes payable immediately
4. Registration of mortgage or charge created outside Pakistan on a property situated outside Pakistan: procedure is
same but the period of 21 days shall start from the day docs reach Pakistan
5. Registration of mortgage or charge created in Pakistan on a property situated outside Pakistan: : procedure is same
but registration of charge with the authorities of that other country is required too
6. Every company buying any property of the company shall have a constructive notice that the asset is subject to
mortgage or charge.

7. The particulars of satisfaction of mortgage and charge shall be submitted to the registrar within 21 days of
satisfaction
8. The registrar shall register the satisfaction of the charge after verifying it from the lender and shall grant him 14
days to file any objection
9. The registrar is entitled, even if no information is received, to enter the satisfaction of the mortgage and charge if
he I aware that it has been repaid or the property is no longer a part of the undertaking of the company
10. the company is required to keep the copies of instruments creating charges and register regarding mortgages and
charges at its registered office which any creditor or member can inspect and other than creditor and member for
against payment of fee
Chapter 24
1. GM allows members to make decisions on matters of importance like:

 Remove directors
 Restrict their powers
 Approve and disapprove dividends
 Resolve any differences among the shareholders
 Propose resolutions
2. GM maybe: statutory meeting, annual general meeting or an extraordinary general meeting
3. Statutory Meeting:
 It happens in the beginning phase of the company and it provides an opportunity to get all the members know
each other and deliver statutory report
 Following Companies Are Required To Hold Statutory Meeting:
a. Every company limited by shares
b. Every company limited by guarantee having share capital
c. Every private company converting itself into a public company within 1 year of its incorporation
 Timing Of Statutory Meeting:
a. After 3 months and before 6 months from the date entitled for commencement of business
b. For a converted company, date of commencement of business shall be replaced with the date of its
conversion
c. Send the statutory report and notice 21 days before the statutory meeting
 Matters To Be Stated In The Statutory Report:
a. Total number of shares allotted by the company
b. Total cash received against allotted shares
c. Summary of receipts and payments
d. Particulars of commission paid on issue of shares
e. Particulars of any contract to be modified of which approval is required in the meeting
f. Extent of carrying out or not carrying out any underwriting contract with reasons
g. Brief review of the state of affairs of the company
 Auditors’ certificate to be accompanied with statutory report of a b c
 Certification And Filing Of Report
a. Report shall be certified by CE and 2 directors
b. 5 copies of the report shall be filed with registrar after sending it to the members
4. Annual General Meeting

1. Requirement And Purpose:
 For members to vote on certain resolutions
 To consider routine business
 To consider and discuss audited annual financial statements
 To obtain approval of shareholders on:
a. Election or re-election of directors
b. Approval of final dividend
c. Appointment or re-appointment of the auditors
2. Timing, Place And Notice Period
 First AGM: within 18 months from the date of its incorporation or once a year
 Subsequent: within 4 months of closure of its financial year or 15 months from last meeting, whichever is
earlier
 Secp (listed companies) or registrar (other companies) may extend time for holding only subsequent AGM
which cannot exceed 30 days. No extension of time is granted for the first AGM
 21 days notice. Listed companies shall publish it in Urdu and English newspapers having circulation in the
province in which the stock exchange, on which is the company is listed, is situated

 AGM of listed company shall be held in the same town as registered office but it can be relocated by the
prior approval of SECP
 It Is called on the orders of the directors and not members
Extraordinary General Meeting
1. Purpose/Calling Of EGM:
 Alteration of AoA and MoA
 Directors call and hold EGM whenever they feel the need to get approval of the shareholders
 Members holding more than 10% of the total voting power may call an EGM but they shall file a proper
written requisition for this purpose which shall include the objects of the meeting and shall be signed by
the requisitionist in this behalf. If the directors do not call the meeting within 21 days of the requisition,
the requisitionists themselves should call a meeting. Within 3 months of the requisition a meeting should
be held otherwise the requisition shall expire. Any expenses shall be repaid to the requisitionist by the
directors on the failure of holding a meeting and it shall be deducted from directors’ remuneration.
 Notice of the meeting shall be sent 21 days before the meeting but it can be held on a shorter notice if the
registrar authorises it.
2. SECP has the power to call AGM, SM and EGM (on the requisition of the members). But he may give incidental
directions as well, like a direction that even one member present shall be the quorum of the meeting and also
advise the cost and expenses of such meetings
3. All copies of special resolutions shall be authenticated by CE or secretary of the company and filed with the
registrar within 15 days of passing the same and shall be intact with AoA and provided to the person asking for a
copy of AoA. Special resolution passed to alter AoA is required to be filed with the altered copy of AoA
4. Notice of the meeting is a formal document sent to each member at his registered address and to the auditors. It
shall state place, date, time & draft of the resolution to be passed and material facts of special business to be
discussed. Notice shall be served to the members by hand or by post.
5. Special resolution is always passed for a special business but special business does not always require a special
resolution
6. Quorum Of The Meeting:

 Public listed: 10 members-representing 25% voting power-personally present or through proxies
 Any other company: 2 members-representing 25% voting power-personally present or through proxies
 Single member company: the single member present in person or proxy
 If fixed quorum is not present within half an hour from the appointed time for the meeting, the meeting
shall be dissolved and adjourned to the same day next week at the same place and time. If the quorum is
not present at the adjourned meeting, the members present in the meeting, not less than 2, shall be the
quorum.
7. Voting In Meetings:
 Company having share capital: a member shall have votes proportionate to the paid up value of shares
held by him
 Company not having share capital: each member shall have 1 vote
 Voting is done by show of hands unless a poll is ordered by the chairman or by any person competent to
demand the poll
 Chairman shall declare the results of show of hands and an entry in the minute books shall be evidence
unless contrary is proved
8. Polls
1. Demand for poll
Following Persons Can Demand The Poll:
 Chairman
 Public company: any 5 members having right to vote on the resolution

 Private company: 1 member (If not more than 7 are present), 2 members (more than 7 present) having
the right to vote on the resolution
 Any company: members having 1/10th of the total voting power or shares having 1/10th of the total sum
paid up on all such shares
2. Time Of Taking Poll

 Poll demanded on the election of chairman or adjournment of the meeting shall be taken forthwith
 In all other cases, time decided by the chairman not exceeding 14 days from the day on which it is
demanded
 The chairman or his nominee and a representative of the members demanding the poll shall scrutinize
the votes and chairman shall announce the result and the result shall be deemed to be the decision of
the meeting
9. Proxy
 Proxy is person appointed to vote and speak on the behalf of a member in a general meeting of the
company. He is entitled to on behalf of the original shareholder all the acts which the original shareholder
is entitled to do himself in the meeting. Proxy has the following rights:
a. Speak and vote
b. Demand for a poll
c. Abstain from voting
 Notice of the meeting must specifically mention the right of shareholder to appoint a proxy and attach a
blank proxy form.
 A member cannot appoint more than one proxy and the proxy shall be the member of the company unless
AoA permits otherwise
 Proxies shall be lodged 48 hours before the meeting
 Companies not having share capital do not allow members to appoint proxies
10. Minutes
 Fair and accurate summary of all proceedings and meetings of directors, members or committees of
directors along with names of participants in properly maintained books at registered office is called
minutes
 Copy of minutes of meetings of BoD shall be given to all directors within 14 days of the meeting
 Signature of chairman of the meeting or of chairman of next succeeding meeting shall be sufficient
evidence of the proceedings
 It shall be open to inspection for all members 2 hours daily and members can ask for the copy and it shall
be provided to him within 7 working days.
11. Representation At Meetings

 If a company is a member/creditor of another company, it may authorise any of its officials or any other
person to act as a representative who shall be entitled to exercise same powers which an individual
shareholder/creditor of that other company possesses in the meeting/creditor’s meeting
 Being a member of the company, the fed government or provincial govt may appoint a representative at
any meeting of the company or meeting of any class of members of the company and such person shall be
entitled to exercise same powers which a govt has as a member of the company
CHAPTER 25
1. Every director has one vote unless they are the members of the company as well. Then they have voting rights based on
the number of shares they hold
2. If creditors nominate a director, it won’t be counted in the minimum number of directors fixed by the ordinance but if
federal/provincial government and any company who holds shares in that company, elect a director, will be considered
in the calculation of minimum number of directors.
3. No person shall be elected or appointed as a director or CE if such person has not filed his consent to become one. The
company shall file such consent to the registrar within 14 days of the date of appointment or election.
4. Minimum Number Of Directors:

 SMC: 1
 Private: 2
 Public: 3
 Listed: 7
5. First directors are selected while rest are elected
6. The person’s whose names are entered in the AoA shall be the directors of the company. If not written, the names and
numbers of first directors shall be decided by the subscribers of memorandum. Until the names and numbers of
directors are determined, the subscribers of memorandum shall be considered the directors of the company.
7. A Company can be a subscriber of memorandum but cannot be treated like a director of a company
8. Elections Procedure:
 First directors will retire at AGM
 Elected directors will retire after 3 years
 Existing directors decide the number of directors for the next term at least 35 days before the date of meeting.
Such number shall not be changed even by the directors themselves, once chosen. It can only be altered by
taking prior approval of members in a general meeting
 A general meeting is called for elections. The notice of the GM, in addition to its routine contents, includes the
number of directors to be elected and names of the retiring directors.
 Interested members send a notice 14 days before the elections. Such member may withdraw the notice any
time before the elections. Company sends such notice to all the members. In case of listed company, it is
published in an English and Urdu newspaper having circulation in the province where the stock exchange is
situated on which the shares of the company are listed
 If Number of members standing for election is not more than the required number of directors then all
directors shall stand elected unopposed
 Every member is entitled to cast a vote with number of votes = number of shares held x number of directors to
be elected. A member can give all his votes to one applicant or distribute among the applicants
 Company not having share capital shall mention the procedure of elections in it AoA
9. Listed companies can re-elect before 3 years on the orders of the commission
10. A person who acquired 12.5% or more voting shares in a listed company in his own name may apply to the commission
for ordering the company to hold fresh elections. It may be approved if its beneficial for:
 The company
 Minority shareholders
 Capital markets
The person on whose request fresh elections were held shall not sell or dispose the shares acquired by him for at least 1
year from the date of elections
11. Members holding 20% voting power of the company may make an appeal to the court to declare the elections of one or
all directors in valid. Though the appeal shall be made within 30 days of elections. The court shall accept the appeal if it
is satisfied that there has been material irregularity in holding the elections. Although actions of directors taken within
their scope of being a director are considered valid in order to protect the third parties
12. Eligibility To Act As A Director:

Ordinance has not provided specific requirements for a person to eligible to be a director. A company can fix its
conditions to become a director in its AoA. But ordinance does say no person shall be appointed as a director if he:
 Is a minor
 Is of unsound mind
 His application of insolvency is pending
 Is an un-discharged insolvent
 Has been convicted by court of law
 Has been debarred from holding such office
 Has betrayed lack of fiduciary behaviour
 Is not a member however this eligibility shall not apply in the case of:
 A person representing the government or an institution which is a member
 A whole time director who is an employee of the company
 A CE
 A person representing a creditor
 For listed companies:
 A defaulter in repayment of loan
 A person engaged in business of brokerage
13. Casual Vacancy

When a director resigns earlier than his specified period, casual vacancy shall be filled by the remaining directors
which has no time limit but a company shall not function at any time without minimum number directors working for
the company but if the company has more directors from the required minimum number of directors then the casual
vacancy may not be filled and the directors may complete the term without filling it. However, the director appointed
under casual vacancy shall be appointed for the remainder of the term of the director and shall vacate the office once
the term ends.
14. Removal From Office: director may be removed from the office by the members of the company by passing a
resolution in a GM. Number of votes shall be calculated this way:
Number of Shares X Number of Directors = Number of Votes
The director shall not be considered to have been removed if the number of votes casted against the resolution equals
or exceeds the least number of votes which were enough to qualify a person as a director in the last elections of
directors
In order to remove a first or casual vacancy director, number of votes shall be calculated this way:
(Number of Directors for the Term X Number of Shares)/Number Of Directors for the Time
Being
Removal shall not be considered if number of votes cast against the resolution equals or exceeds the number of votes
calculated as per the formula above.
15. Other Ways To Get Vacated: A Director Shall Be Treated To Have Vacated From The Office If He:
 Becomes ineligible to become a director
 Absents himself from 3 consecutive meetings of board
 Absents himself from All meetings held in consecutive 3 months
 Accepts any loan or guarantee in violation of the provisions of the ordinance
 Accepts any office of profit without permission of the company in GM
 Other reasons company has provided in its AoA

16. Powers Of Directors
Directors shall exercise the following powers by passing a resolution in board meeting
 To call the uncalled and unpaid share capital of the company
 To issue shares and debentures
 To borrow money
 To invest funds in the company
 To make loans
 To approve annual and periodical accounts
 To approve bonus of employees
 To incur capital expenditure
 To undertake leasing obligations exceeding 1 m
 To sell/dispose assets having BV exceeding Rs 100 k
 To declare interim dividend
 To write of bad debts
 To write off inventories and other assets
 To compromise a law suit
 Sell, lease or dispose the undertaking or any sizeable part
 To remit
 To give relief or time extensions in loans
17. Loans To Directors

Company is not allowed to provide financial facilities to:
 A director of a company/holding company or to their relatives/partner
 A partnership firm in which the director or relative is a partner
 A private company in which such director is a director or a member
 A body corporate whose 25% or more voting power is held by the director or their relatives
 A body corporate whose management is accustomed to take advice from CE or directors of the company
Exceptions
 A private company which is not a subsidiary of a public company

 A banking company
 Any loan provided by holding to its subsidiary
Loans may be given to a whole time working director if approved by the commission for the following purposes:
 Purchase or construction of a dwelling house

 Purchase of a conveyance for personal use
 Purchase of household effects
 Payment of medical cost incurred by the director for himself or any relative
18. If Directors Enter Into A Contract In Which They Themselves Have An Interest, It Must Be Disclosed
Because:
 So that their integrity is not questioned
 So that they are not charged with allegations of secretly misusing or taking undue advantage of the company
Notice Of His Interest In Any Transaction Shall Be Given.
 If it requires director’s approval, it shall be given in the first meeting of directors in which discussion Is started
regarding the transaction
 If it does not require director’s approval, it shall be given in the first meeting held after the transaction
General notice is disclosure of multiple transactions which is given in director’s meeting or the concerned directors
takes reasonable steps to ensure that the notice is read by other directors. It shall expire at the end of the financial year.

Exceptions to Interested Directors Not To Vote:
 When a private company is neither a subsidiary nor a holding of a public company

 When the director has acted as the surety of the company
 When a director is the director on the board of any public company, on an appointment made by his present
company, he shall be considered as interested director on the board of his original company
19. Chief Executive:

 He controls and directs directors
 He is entrusted with all the powers of management
 He is a business manager
 First CE is appointed within 15 days of the date of incorporation or right on the day of commencement of
business, which ever earlier, max up to first AGM
 Subsequent CE shall be appointed within 14 days of elections of directors or office of CE falling vacant, max for
3 years
 Retiring CE shall continue to perform his services until his successor is appointed unless he was expressively
terminated or he is the cause of non-appointment of the new CE
 CE can be removed by passing special resolution in GM or passing resolution in BoD
 CE’s spouse and children cannot enter into a business which competes with the business of the company
20. Company Secretary

 Mandatory to have one in listed companies and SMC
 His responsibilities include making sure the company compiles with all relevant corporate
requirements
 Any of the following can be appointed as secretary of a listed company:
a. A member of a recognized body of professional accountants
b. A member of a recognized body of corporate/chartered secretaries
c. A person holding master’s degree in business administration or commerce or being a law graduate
CHAPTER 26:
1. Power to make investments and disinvestments rests with the directors who can make such decisions by passing a
resolution however they require to pass a special resolution in GM while making investments/disinvestments in an
associated company. The special resolution shall indicate the nature, period, amount, terms and conditions attached to
the investment. Company is not allowed to make variations in the terms and conditions without passing a special
resolution. If the investment has been made in the form of a loan, the return on investment in the form of loan shall
not be less than the borrowing cost of investing company. Private companies are not required to pass special
resolutions while investing. If any default is made, the directors shall jointly reimburse the loss caused to the company
2. Company Can Make Investments in Its Own Name and Not Someone Else’s Name. Exceptions Are:
 To become a director, there is requirement to own certain amount on shares. Therefore the company invests in
the name of that person in order for him to become a director of the investee company
 The company can hold shares of subsidiary in a name of a nominee to complete the requirement of minimum
members required by the subsidiary company
 An investment company having its principal business as making investments
3. Company Is Allowed To Deposit Its Investments In The Form Of Shares Or Debentures In The Name
Of Bank Or Financial Institution If It Is:
 A condition for receiving the dividend or interest etc. payable on those securities
 A condition for the company to register the transfer of shares or debentures
However if the transfer does not take place within 6 months of the date of deposit of securities In the name of financial
institution the company must get securities back in its own name
Company may also place its investments in securities in the name of CDC if it is allowed to do so
The investments being the assets of the company can be pledged as well to obtain loans
4. Company Is Required To Hold A Register For The Investments Not Held In Its Own Name. The
Register Shall Contain:
 Particulars as maybe necessary fully to identify such shares or securities
 The bank or person in whose name or custody such shares or securities are held
Members, creditors and holder of debentures of the company may inspect the register free of cost at least 2 hours daily.
The company may impose restrictions by its AoA on the inspection in a GM
5. Final dividend is proposed with the approval of financial statements by the directors and the final dividend is
approved, rejected or reduced (but not increased) by the members in the AGM of the company. Final divided is paid
within 30 days of the date of AGM
6. Directors may propose interim dividend and it’s usually announced with half yearly or quarterly accounts. Interim
dividend must be paid within 30 days of commencement of book closure, if the books are not closed then, within 30
days of directors meeting
7. Dividend Is NOT Declared Out Of The Profits Of Sale Of Immovable Property Or Item Of Capital
Nature Except:
 After such profits are adjusted against losses on sale of such property
 The business of the company is to sell such property
Any gain arising out of re measurement of investment property directly credited to the income statement shall also be
excluded for the purpose of declaration of dividends
8. Dividend is paid in form of dividend warrant which is a sort of crossed cheque. They are sent to shareholders at their
registered address. In case of default regarding period of payment, CE of the company may be fined along with
imprisonment and banned to become a director or CE of any company for the next 5 years.

9. In The Following Cases, The Company May Withhold Dividend After Obtaining Prior Approval Of The
Commission Within 45 Days Of Declaration Of Dividend:
 It cannot be paid due to operation of law
 If company withheld the payment against any sum recoverable from shareholder
 If the shareholder has given instructions regarding payment of dividend which cannot be followed
 If the non-payment was not due to any default on the part of the company
CHAPTER 27
1. Books Of Accounts With Respect To Should Be Kept By Every Company For At Least 10 Years:
 All sums of money received and expended
 All sales and purchases
 All assets
 All liabilities
 Special books required by the commission
2. Books must be kept at the registered office. If the directors of the company may opt to keep these books at some other
place, they shall be required to pass a resolution and it shall be given to registrar within 7 days of passing the same.
Summarized returns of the books of the branch shall be kept at registered office with maximum intervals of 3 months.
3. Members have to pass a resolution to inspect the books of accounts as only directors can inspect them and decide when
and in what circumstances the members can inspect the books
4. Presentation Of Annual Accounts:

 Normally present it once a year
 In GM, within 4 months of the closure of financial year
 First accounts, within 18 months of incorporation of the company
 Non-profit organisations have an income and expenditure account
 Copy of accounts, director’s and auditors report shall be sent to every member 21 days before the meeting
 Companies shall keep its copy at registered office which is allowed by members to inspect
 Listed company must dispatch at least 5 copies of accounts, director’s and auditor’s report to commission,
stock exchange and members
 Extension maybe granted to a company (registrar) and a listed company (SECP) for presentation of annual
accounts except for first accounts
 Company should not prepare the above accounts for a period of more than 12 months but it may be extended if
taken prior approval of the registrar
5. Power To Approve:
 Directors authenticate the accounts by passing a resolution
 As a token of approval, the CE and 1 director or 2 directors (in case CE is out of Pakistan) put their
signatures on the accounts
6. Filing Of Accounts:
 Send copies of accounts, auditors and director’s reports to the registrar within 30 days of AGM
 Listed shall send 3 copies of each and other companies shall send 2 copies
 If the accounts and reports are not approved in the AGM, it shall be mentioned to the registrar
 Auditor’s report shall be signed by the auditors and director’s report shall be signed by either:
i. chairman of the board,
ii. CE or
iii. at least one director and CE

 A private company shall send copies of accounts, auditors and director’s reports to the registrar if it has a paid
up capital of 7.5 million rupees
7. Directors are the agents of the shareholders so they should report the matter. The accounts of the company are also a
report from the directors to its members but its expected out of directors that they should add wordings to those
accounts as well which are known as director’s report. Its contents are as follows:
i. Statements regarding the state of the affairs of the company
ii. Particulars of any amount recommended as dividend
iii. Particulars of any amount transferred or proposed to be transferred to any reserve account
iv. Address any specific changes and commitments affecting the financial position of the company
v. It shall discuss any reservations, observations etc or any adverse remarks pointed out by the auditors
vi. Earnings per share
vii. Reasons for incurring loss
viii. Reasonable indication of future profit, if any
ix. Default in repayments of loans or interest on loans
x. Material changes which affect:
 The business of the company
 Its holding
 Its subsidiaries
 Any other company where it has made investments
8. Auditors:
The auditor’s duty is to express an opinion on the truthfulness/fairness or otherwise, on the accounts. Most companies
are required to hire a practicing CA as their auditor except a private company with a paid up capital less than Rs 3
million.
Appointment and Removal of First Auditors:

 First auditors shall be appointed by the directors of the company within 60 days after the date of incorporation
an fix their remuneration and remove them by passing a resolution
 If not appointed, members shall appoint within 120 days of incorporation and fix their remuneration and
remove them by passing a special resolution and shall not be entitled to appoint any person as an auditor. In
such a case, only the commission can appoint one
 If not appointed, SECP may appoint and fix their remuneration
Appointment of Subsequent Auditors:
 First auditors shall retire on first AGM

 New auditors shall be appointed by the members by passing a resolution and removed by passing a special
resolution
 Notice for appointment shall be sent by any member to the company 14 days before the date of meeting and
company shall circulate it 7 days before the AGM
Right of Retiring Auditor
If a notice is received by the company relating to the replacement of the existing auditor, it shall be sent to him and he
will gain the rights to make a representation which shall be sent to the members, unless it is received too late by the
company. If the company fails to do so, retiring auditor shall be allowed to read his representation at the AGM and he
may allow someone else to read it for him as well. Charges can be pressed against the auditor if it is felt by the
members that auditor has misused his right to gain publicity and registrar may require the auditor to compensate the
cost to the company.
Casual Vacancy
Casual vacancy of the auditor due to resignation or death shall be filed to the directors and until such vacancy is filled,
the surviving auditor, if any, may continue to act as an auditor. If auditors are not appointed in casual vacancy by the

directors within 30 days of the occurrence of vacancy, the commission shall appoint the auditors and fix their
remuneration and such auditor shall hold the office of the auditor till the conclusion of next AGM. Company is
required to inform the registrar within 14 days of appointment, removal or retirement of the auditor.
Qualification of Auditors
A firm of which all the partners of Pakistan are CAs may be appointed by its firm name as auditors of a company and
may act in its firm name. An auditor has to be a natural person or a firm of natural persons who have obtained a valid
certificate from ICAP
Disqualification of Auditors
 A person who is a director, officer or employee or held at such position at any time during the preceding 3
years
 A person who is a partner of a director, officer or employee
 The spouse of a director and a person who is indebted to the company
 A person or his spouse or minor children, or in case of a firm, all partners of such firm who holds any shares of
an audit client or any of its associated companies. However, if such a person holds such shares prior to his
appointment as auditor, the fact shall be disclosed on his appointment and such person shall disinvest within
90 days of such appointment
 If afterwards any such defects or disqualification occurs, the auditor shall vacate the office immediately
Auditor’s Rights
 he has right to access all books, all times

 he is entitled to require every information and explanation from the company
 he has rights to access books of the branch situated outside Pakistan
 he shall be entitled to attend any GM of the company and has the right be heard in them
 in case of a listed company, auditor shall be present in the GM in which balance sheet, profit or loss statement
and auditor’s report is to be considered
Duties of the Auditor
 to express opinion in a form of report to the members on the accounts and books of the company
 to make reports on balance sheet, profit or loss statement, notes to the accounts which is to be presented at the
AGM
 he shall state in auditor’s report that they have obtained the information and explanations which in their
knowledge and belief were necessary for the purpose of audit and it shall also state in the case if they weren’t
provided
 he shall state his opinions about the books of accounts and if they were in accordance with the requirements of
companies ordinance 1984 of the statement of company’s affairs, profit or loss and changes in financial
position
 he shall state his opinion on expenditure and investments of the company
 he shall also report as to the responsibility of the company regarding deduction and payment of zakat

DEFINITIONS:
CHAPTER 19
1. Company: "company" means a company formed and registered under this Ordinance or an existing company;
2. Body Corporate: "Body corporate" or "corporation" includes a company incorporated outside Pakistan, but does not
include—
(i) a corporation sole; or
(ii) a co-operative society registered under any law relating to the registration of co-
operative societies; or
(iii) any other body corporate, not being a company as defined in this Ordinance, which
the Federal Government may, specify in this behalf;
3. Private Company: "private company" means a company which, by its articles,
(i) restricts the right to transfer its shares, if any;

(ii) limits the number of its members to fifty not including persons who are in the
employment of the company; and
(iii) prohibits any invitation to the public to subscribe for the shares, if any, or debentures
of the company:
Provided that, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of
this definition, be treated as a single member;
4. Public Company: "public company" means a company which is not a private company;
5. Subsidiary And Holding: a company or body corporate shall be deemed to be a subsidiary of another if—
(a) that other company or body corporate directly or indirectly controls, beneficially owns or holds more than fifty per
cent of its voting securities or otherwise has power to elect and appoint more than fifty per cent of its directors; or
(b) the first mentioned company or body corporate is a subsidiary of any company or body corporate which is that
other's subsidiary;
[Provided that where a central depository holds more than fifty percent of the voting securities of a company, such
company shall not be deemed to be a subsidiary of the central depository save where such voting securities are held
beneficially by the central depository in its own behalf.]
6. Commission: “Commission” means the Securities and Exchange Commission of Pakistan established under section 3
of the Securities and Exchange Commission of Pakistan Act, 1997
7. Registrar: "registrar" means a registrar, an additional registrar, a joint registrar, a deputy registrar or an assistant
registrar, performing under this Ordinance the duty of registration of companies
CHAPTER 20
1. Special Resolution:
"Special resolution" means a resolution which has been passed
 by a majority of not less than three-fourths of such members entitled to vote as are present in person or by
proxy
 at a general meeting
 of which not less than twenty-one days’ notice specifying the intention to propose the resolution as a special
resolution has been duly given
Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be
proposed and passed as a special resolution at a meeting of which less then twenty-one days’ notice has been given;
CHAPTER 22
1. Prospectus: "prospectus" means any document described or issued as prospectus, and includes any notice, circular,
advertisement, or other communication, inviting offers from the public for the subscription or purchase of any shares
in, or debentures of, a body corporate, or inviting deposits from the public, other than deposits invited by a banking
company or a financial institution approved by the Federal Government, whether described as prospectus or
otherwise;
2. Financial Institutions: financial institution” includes:–

(a) a company or an institution whether established under any special enactment and operating within or outside
Pakistan which transacts the business of banking or any associated or ancillary business through its branches;
(b) a modaraba, leasing company, investment bank, venture capital company, financing company, housing finance
company, a nonbanking finance company; and
(c) such other institution or company authorised by law to undertake any similar business, as the Federal Government
may, by notification in the official Gazette, specify for the purpose;]
3. Expert: it includes engineer, a valuer, an accountant and any person whose profession gives authority to a statement
made by him
CHAPTER 23
1. Debenture: debenture includes debenture stock, bonds, term finance certificate and any other securities, other than a
share, of a company, whether constituting a charge of the assets of the company or not.
2. Pledge: bailment of goods as security for the repayment of a debt or a performance of a promise
3. Mortgage: it is the transfer of an interest in specific immovable property for the purpose of securing the payment of
money advanced or to be advanced by the way of loan, an existing or future debt of the performance of an engagement
which may give rise to a financial liability
4. Charge: it is a security for the payment of a debt or other obligation that does not pass title of the property or any right
to its possession to the person to whom the charge is given

CHAPTER 24
1. General Meetings: a GM is a meeting of the shareholders of the company who are entitled by the company’s articles
to attend and vote at such meetings
2. EGM: every GM of a company other than AGM and SM is called an EGM
3. Ordinary And Special Businesses:
apart from the following, all are special businesses:
 Consideration of accounts, balance sheets and the reports of the directors and auditors
 The declaration of dividend
 Appointment and fixation of remuneration of auditors
 Election and appointment of directors
4. Quorum: it means a certain minimum number of members of a company as is fixed as competent to transact business
in a GM of members in the absence of the other members. Any business transacted in a meeting without quorum shall
be void.
5. Minutes: Fair and accurate summary of all proceedings and meetings of directors, members or committees of
directors along with names of participants in properly maintained books at registered office is called minute
CHAPTER 25
1. Directors: agents of the company whom members have given right to make financial decisions on their behalf
2. 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;
CHAPTER 26:
1. "Associated Companies" And "Associated Undertakings" mean any two or more companies or undertakings,
or a company and an undertaking, interconnected with each other in the following manner, namely: —
a. if a person who is the owner or a partner or director of a company or undertaking, or who, directly or
indirectly, holds or controls shares carrying not less than twenty per cent of the voting power in such
company or undertaking, is also the owner or partner or director of another company or undertaking, or,
directly or indirectly, holds or controls shares carrying not less than twenty per cent of the voting power in
that company or undertaking; or
b. if the companies or undertakings are under common management or control or one is the subsidiary of
another; or
c. if the undertaking is a modaraba managed by the company
However following directorships or shared holdings shall not be considered while ascertaining the status of companies
to be associated:
(i) directorship of a person or persons by virtue of nomination by the Federal Government or a Provincial
Government or a financial institution directly or indirectly owned or controlled by such Government; or
(ii) shares owned by the National Investment Trust or the Investment Corporation of Pakistan or a financial
institution directly or indirectly owned or controlled by the Federal Government or a Provincial
Government
(iii) shares registered Inserted by Central Depositories where such shares are beneficially owned by the central
depository]; shall not be taken into account for determining the status of a company, undertaking or
person as an associated company, associated undertaking or associated person;
2. Investment: for the purpose of this section, the expression “investment” shall include loans, advances, equity, by
whatever name called, or any amount, which is not in the nature of normal trade credit
3. Dividends: dividends are payments made to shareholders by a company, out of its distributable profits
DAYS:
CHAPTER 20:
1. Rectification Of Names
If a company has chosen a name which is not permitted by the ordinance, it may change it on its own with the approval
of the registrar. The registrar may tell the company to change its name within 30 days of receipt of such instructions
however the registrar cannot do so if it has been 3 years since the date of registration of the company.
 The former name of the company shall be mentioned for 1 year from the date of issue of the certificate outside
every office, business place, on every document and notice of the company
2. Registered Office Clause:
 Inform the registrar within 28 days of shifting
3. Objective Clause:
4. Every company, upon the request and payment by its member, shall supply within 14 days copies of the
memorandum and articles of the company
It is the place where the company receives all of its communications. A company as from the day it begins to carry
on its business or as from the 28th day after its date of incorporation, whichever earlier, shall have a registered
office.
CHAPTER 21:
1. Share certificates
It is an evidence of ownership of shares in the name of the member and is required to be issued within 90 days of
allotment of shares
2. Capital Clause Of Memorandum Of Association:
To exercise the above powers, company is required to obtain approval of the members in the GM through a resolution
which shall be filed along with related documents to the registrar within 15 days of passing the same, failing which the
resolution shall not be effective and shall ultimately lapse.
3. Variation In Rights
Such application shall be made within 30 days of the date of resolution. The decision of the court shall be final. The
company is required to file a copy of the order of the court to the registrar within 14 days of the receipt of the order
CHAPTER 22:
1. Statement Of Lieu Of Prospectus

If a company doesn’t want to call subscriptions from general public and wants to carry on business as a public unlisted
company, it shall be required to file a statement in lieu of prospectus with the registrar at least 3 days before first
allotment of any shares or debentures. A private company is not required to do this.
CHAPTER 23:
1. Get the particulars of the mortgage of charge registered within 21 days of creation/satisfaction
2. the registrar shall register the satisfaction of the charge after verifying it from the lender and shall grant him 14 days to
file any objection
CHAPTER 24:
1. Every private company converting itself into a public company within 1 year of its incorporation shall hold a statutory
meeting
2. Timing Of Statutory Meeting:
d. After 3 months and before 6 months from the date entitled for commencement of business
e. For a converted company, date of commencement of business shall be replaced with the date of its
conversion
f. Send the statutory report and notice 21 days before the statutory meeting
3. Certification And Filing Of Statutory Report
c. Report shall be certified by CE and 2 directors
d. 5 copies of the report shall be filed with registrar after sending it to the members
4. Timing, Place And Notice Period
 First AGM: within 18 months from the date of its incorporation or once a year
 Subsequent: within 4 months of closure of its financial year or 15 months from last meeting, whichever is
earlier
 Secp (listed companies) or registrar (other companies) may extend time for holding only subsequent AGM
which cannot exceed 30 days. No extension of time is granted for the first AGM
 21 days’ notice. Listed companies shall publish it in Urdu and English newspapers having circulation in the
province in which the stock exchange, on which is the company is listed, is situated
5. EGM
 Members holding more than 10% of the total voting power call an EGM but they shall file a proper written
requisition for this purpose which shall include the objects of the meeting and shall be signed by the
requisitionist in this behalf. If the directors do not call the meeting within 21 days of the requisition, the
requisitionists themselves should call a meeting. Within 3 months of the requisition a meeting should be
held otherwise the requisition shall expire. Any expenses shall be repaid to the requisitionist by the
directors on the failure of holding a meeting and it shall be deducted from directors’ remuneration.
 Notice of the meeting shall be sent 21 days before the meeting but it can be held on a shorter notice if the
registrar authorises it.
6. All copies special resolutions shall be authenticated by CE or secretary of the company and filed with the registrar
within 15 days of passing the same
7. Quorum Of The Meeting:
 Public listed: 10 members-representing 25% voting power-personally present or through proxies
 Any other company: 2 members-representing 25% voting power-personally present or through proxies
 Single member company: the single member present in person or proxy
 If fixed quorum is not present within half an hour from the appointed time for the meeting, the meeting
shall be dissolved and adjourned to the same day next week at the same place and time. If the quorum is
not present at the adjourned meeting, the members present in the meeting, not less than 2, shall be the
quorum.
8. Polls
a. Demand For Poll
Following persons can demand the poll:
 Chairman
 Public company: any 5 members having right to vote on the resolution

 Private company: 1 member (If not more than 7 are present), 2 members (more than 7 present) having the
right to vote on the resolution
 Any company: members having 1/10th of the total voting power or shares having 1/10th of the total sum paid
up on all such shares
b. Time Of Taking Poll

 Poll demanded on the election of chairman or adjournment of the meeting shall be taken forthwith
 In all other cases, time decided by the chairman not exceeding 14 days from the day on which it is demanded
9. Proxies shall be lodged 48 hours before the meting

10. Minutes:
 Copy of minutes of meetings of BoD shall be given to all directors within 14 days of the meeting
 It shall be open to inspection for all members 2 hours daily and members can ask for the copy and it shall be
provided to him within 7 working days.
CHAPTER 25:
1. No person shall be elected or appointed as a director or CE if such person has not filed his consent to become one. The
company shall file such consent to the registrar within 14 days of the date of appointment or election.
2. Minimum Number Of Directors:
 SMC: 1
 Private: 2
 Public: 3
 Listed: 7
3. A person who acquired 12.5% or more voting shares in a listed company in his own name may apply to the commission
for ordering the company to hold fresh elections
4. Members holding 20% voting power of the company may make an appeal to the court to declare the elections of one or
all directors in valid. Though the appeal shall be made within 30 days of elections.
5. Chief Executive:
 First CE is appointed within 15 days of the date of incorporation or right on the day of commencement of
business, which ever earlier, max up to first AGM
 Subsequent CE shall be appointed within 14 days of elections of directors or office of CE falling vacant, max for
3 years
CHAPTER 26:
1. However if the transfer of shares and securities does not take place within 6 months of the date of deposit of
securities In the name of financial institution the company must get securities back in its own name
2. Final divided is paid within 30 days of the date of AGM
3. Interim dividend must be paid within 30 days of commencement of book closure, if the books are not closed then,
within 30 days of directors meeting
4. the company may withhold dividend after obtaining prior approval of the commission within 45 days of
declaration of dividend
CHAPTER 27:
1. Books must be kept at the registered office. If the directors of the company may opt to keep these books at some other
place, they shall be required to pass a resolution and it shall be given to registrar within 7 days of passing the same.
Summarized returns of the books of the branch shall be kept at registered office with maximum intervals of 3 months.
2. when and in what circumstances the members can inspect the books
3. Presentation Of Annual Accounts:

 Normally present it once a year
 In GM, within 4 months of the closure of financial year
 First accounts, within 18 months of incorporation of the company
 Copy of accounts, director’s and auditors shall be sent to every member 21 days before the meeting
 Listed company must dispatch at least 5 copies of accounts, director’s and auditor’s report to commission,
stock exchange and members
 Company should not prepare the above accounts for a period of more than 12 months but it may be extended if
taken prior approval of the registrar
4. Power To Approve:
 As a token of approval, the CE and 1 director or 2 directors (in case CE is out of Pakistan) put their
signatures on the accounts
5. Filing Of Accounts:
 Send copies of accounts, auditors and director’s reports to the registrar within 30 days of AGM
 Listed shall send 3 copies of each and other companies shall send 2 copies
 Auditor’s report shall be signed by the auditors and director’s report shall be signed by either:
i. chairman of the board,
ii. CE or
iii. at least one director and CE
 A private company shall send copies of accounts, auditors and director’s reports to the registrar if it has a paid
up capital of 7.5 million rupees
6. Auditors
The auditor’s duty is to express an opinion on the truthfulness/fairness or otherwise, on the accounts. Most companies
are required to hire a practicing CA as their auditor except a private company with a paid up capital less than Rs 3
million.
7. Appointment And Removal Of First Auditors:

 First auditors shall be appointed by the directors of the company within 60 days after the date of incorporation
an fix their remuneration and remove them by passing a resolution
 If not appointed, members shall appoint within 120 days of incorporation and fix their remuneration and
remove them by passing a special resolution and shall not be entitled to appoint any person as an auditor. In
such a case, only the commission can appoint one
8. Appointment Of Subsequent Auditors:

 Notice for appointment shall be sent by any member to the company 14 days before the date of meeting and
company shall circulate it 7 days before the AGM
9. Casual Vacancy
If auditors are not appointed in casual vacancy by the directors within 30 days of the occurrence of vacancy, the
commission shall appoint the auditors and fix their remuneration and such auditor shall hold the office of the auditor
till the conclusion of next AGM. Company is required to inform the registrar within 14 days of appointment, removal or
retirement of the auditor.

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Company Law – CAF Notes

Dear All CAF Students

Sanam Alam Khan

Prepared by: Sanam Alam Khan Page 1

Company Law – CAF Notes

2. A Company Is An Artificial Person Because:

3. Effects Of Separate Legal Personality:

4. Association Not For Profit:

7. Companies Have To Get The Approval Of Court When:

Prepared by: Sanam Alam Khan Page 2

Company Law – CAF Notes

1. Obligation To Register Certain Associations, Partnerships Etc., As Companies.-

3. Name Of The Company:

Names Which Require Prior Approval of the Commission

 The patronage of any Pakistani or foreign head of state

Prepared by: Sanam Alam Khan Page 3

Company Law – CAF Notes

c. Clauses Of Memorandum: (SALRON)

b. Liability And Authorized capital Clause: cannot be altered

c. Registered Office Clause:

e. Reasons For Altering Objective & Registered Office Clause:

f. Commission’s Approval For Alteration

 The circumstances exist

Prepared by: Sanam Alam Khan Page 4

Company Law – CAF Notes

Registrar shall register the MOA only if he is satisfied that:

 The company is being formed for lawful purposes

1. Certificate of registration will be received

8. Articles of Association (AoA)

1. Printing And Signature

1. His full name

Prepared by: Sanam Alam Khan Page 5

Company Law – CAF Notes

10. Registered office

Prepared by: Sanam Alam Khan Page 6

Company Law – CAF Notes

6. Issued And Paid Up Share Capital

7. Capital Clause Of Memorandum Of Association:

Prepared by: Sanam Alam Khan Page 7

Company Law – CAF Notes

Prepared by: Sanam Alam Khan Page 8

Company Law – CAF Notes

2. Statement Of Lieu Of Prospectus

Prepared by: Sanam Alam Khan Page 9

Company Law – CAF Notes

Prepared by: Sanam Alam Khan Page 10

Company Law – CAF Notes

CHAPTER 23: MORTGAGES AND CHARGES

6. Following Mortgage And Charges Must Be Registered With The Registrar:

7. Procedure For Registration

Prepared by: Sanam Alam Khan Page 11

Company Law – CAF Notes

Prepared by: Sanam Alam Khan Page 12

Company Law – CAF Notes

1. GM allows members to make decisions on matters of importance like:

2. GM maybe: statutory meeting, annual general meeting or an extraordinary general meeting

4. Annual General Meeting

Prepared by: Sanam Alam Khan Page 13

Company Law – CAF Notes

Extraordinary General Meeting

6. Quorum Of The Meeting:

Following Persons Can Demand The Poll: