Memorandum of Association, Articles of Association, Registration and Conversion

Ghulam Murtaza Korai Institute of Business Management Karachi

Memorandum of Association

Memorandum of Association is the constitution and fundamental law of a company on the basis of which company regulates its external affairs. It is most important document of a company. It defines the boundaries of a company and determines the powers, objects and limits of a company. A

Memorandum of Association
NAME CLAUSE: The memorandum shall state

the name of the company with the word Limited, (Private) Limited or (Guarantee) Limited as last word of the name of a public, private or guarantee limited company respectively. NOTE: Single Member Companies should have the same word as (SMC-Private) Limited as provided in the Single Member Companies rules,2003.

Memorandum of Association
REGISTERED OFFICE CLAUSE: Under this

clause the province or part of Pakistan not forming part of a province, in which the registered office of the company is to be situated, is mentioned. Object Clause: It is the most important portion of the memorandum of association. It contains not only the main object of the company but also the objects which a company is likely to undertake in future. A company cannot go beyond the objects mentioned in its memorandum. Objects should also be mention which the company will take in the

Memorandum of Association
LIABILITIES CLAUSE: This clause contains

the extent of the liability of the members of the company. It should state whether the liability of the member is limited, unlimited or limited to the guarantee given by each member. AUTHORISED CAPITAL CLAUSE: The amount of the authorized share capital which the company proposes to be registered, the number of shares and the nominal value of each share is mentioned under this clause. This clause is not applicable to a company which does not have a share capital.
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Printing, Signature ETC. of Memorandum

1. 2. 3.

THE MEMORANDUM SHALL BE: Printed Divided into paragraphs numbered consecutively, Signed by each subscriber who shall add his present his name and surname in full, his occupation fathers name, and in case of woman her husbands name, nationality and usual residence address and such other particulars may be prescribed, in the presence of at least one witness who shall attest the signature.

ALTERATION IN THE MEMORANDUM

The company may alter its memorandum of

association. Procedure of Amendment in Memorandum of Association. NAME CLAUSE: A company may change its name in the manner: a) pass a special resolution; b) get written approval of the Registrar of Joint Stock Companies; c)an altered certificate of incorporation is to be issued by the Registrar (Sec 40). The Certificate is called Certificate of Incorporation on change of name and d) the write the old

ALTERATION IN THE MEMORANDUM

THE CAPITAL CLAUSE: The company can

increase, decrease or sub-divide its share capital its share capital by passing an ordinary resolution. The company shall file the registrar notice of such alteration within 15 days. Registered Office Clause: a) pass a special resolution; b) obtain permission within 60 days of resolution from SECP by filing a petition; and c) give the certified copies of the Order of the Commission to the Registrar of the old and new provinces within 90 days of confirmation of the Commission.

ALTERATION IN THE MEMORANDUM

THE OBJECT CLAUSE:

a) pass a special resolution; b) obtain confirmation within 60 days from the SECP by filing a petition; and c) file the certified copy of the Commission with the Registrar within 90 days. ALTERATIN IN ARTICLES OF ASSOCIATION. As the articles are subordinate to the memorandum of association and the Companies Ordinance, 1984 thus any alteration can be made if the same is allowed by the Memorandum and The Ordinance.
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ARTICLES OF ASSOCIATION
These are the rules and regulations subordinate to the Memorandum of Association. It means that the articles cannot go beyond the objects mentioned in the memorandum. It deals with the internal matters relating to the business of the company. FOLLOWING ARE THE GENERAL CONTENTS OF ARTICLES OF ASSOCIATION 1. Definitions: This clause contains the definitions of the words and phrases used in the articles. 2. Business: The brief contents of the objects of the company are mentioned under this caption.

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ARTICLES OF ASSOCIATION
3. Shares: The section contains the matters relating to the classes of shares., offer to and subscription by the general public, the procedure to be adopted for the allotment, issuance of original or duplicate and transfer of the shares. 4.Alteration of Capital: The powers of the company to alter its share capital and the procedure to be followed while exercising this power is also mentioned in the articles of the company. 5. General Meetings and the Board Meetings: The types of meetings and of the directors and the rules and regulations in this connection are to be mentioned in the Articles of the company.

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ARTICLES OF ASSOCIATION
6. Votes of Members: This section contains the rules regarding the voting powers of the members of the company, and the procedure of the voting in the meetings of the company. 7.Directors: The articles should contain the number and the names of the first directors, the qualification of subsequent directors, the appointment of director, filling of the casual vacancy in the office of director, the rules for fixation of remuneration of the directors, their powers and duties and the way in which directors can be removed. 8. The Seal of The Company: The rules regarding

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ARTICLES OF ASSOCIATION
Safe custody of the common seal of the company and the procedure to be adopted while affixing it on the documents, be mentioned in the articles. The documents upon which the seal is to be mentioned in this regard is also mentioned in the articles. 9. Dividend and Reserve: The rules regarding the books of account to be maintained, their safe custody, the place where books are to be kept, the inspection of books by the members, preparation of financial statements, approval of the accounts by the company, the appointment of the auditor of the company and fixation of

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ARTICLES OF ASSOCIATION
10. Notices: The articles should state the rules regarding the notices to be issued to the members, directors and the creditors of the company. The contents of such notices and ways giving the notices should also be stated. 11. Indemnity: This clause contains the rules regarding the indemnity to or by the company for damages. 12. Arbitration: The procedure to be adopted in case there is a difference of opinion between the company and its members and the matters to be referred to arbitration are stated in the articles.

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ARTICLES OF ASSOCIATION
Circumstances and the ways in which a company can be wound up. The appointment of the liquidator, the procedure to be adopted in disposal of assets, settlement of liabilities, and distribution of remaining assets among the members of the company.

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INCORPORATION OF COMPANIES AND THEIR CONVERSION

OBLIGATION TO BE A REGISTERED COMPANY.: Section 14 of the Ordinance requires that if any association, partnership or company comprises of more than twenty persons and is formed for carrying on any business for profit for itself or for its members, it has an obligation to get itself registered as a company under the Companies Ordinance, 1984. EXCEPTIONS: However, this provision shall not apply in the following cases. Any society, body or association, other than partnership, formed under any other law; and A joint family business; or A partnership of two or more families where the total number does not exceed 20. A partnership to practice as lawyers, accountants or any other profession where practice as limited company in not permitted under the relevant laws or regulations of such practice.
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PENALITY
If the above provisions are not complied with, every member of the association, partnership or company shall be liable to a fine which may extend to Rs. 5,000 and also be personally liable for all the liabilities incurred in such business.

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Firstly the person who intend to incorporate a company shall apply to the registrar for availability and approval of the name of the company. In Order to register a Private Company the following documents are required to be submitted with the registrar. 1. Four copies of Memorandum and Articles of Association signed by each subscriber in the presence of at least one witness. 2. Form 1, which gives declaration of compliance with the requirements of the Companies Ordinance, 1984 signed by any of the persons a) An advocate of High Court or Supreme Court b) A person name in the Articles of Association as director

INCORPORATION

INCORPORATION
Of the company or c) A member of ICAP or ICAMP practicing in Pakistan. 3. Form 29, which contains particulars of Directors, Chief Executive etc. 4. A copy of treasury challan as evidence of filing of Registration fee. For Registration of Public Company following documents are required with the Registrar: 1. Four copies of Memorandum and Articles of Association signed by each subscriber in the presence of at least one witness
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INCORPORATION
2. Form 1,which gives declaration of compliance with the requirements of the Companies, 1984 signed by any of the following persons: a) An advocate of High Court or Supreme Court of Pakistan; or b) A person named in the Articles of Association as director of the company; or c) A member of ICAP or ICMAP practicing in Pakistan. 3. Form 29, which contains particulars of Directors, Chief Executive etc. 4. A copy of the treasury challan as evidence of filing of Registration fee. 5. Form 27, which contains list of persons consenting to act as directors. And 6. Form 28, which contains consent of persons to act as directors and Chief Executive.
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CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY AND VICE VERSA (SECTION 44)

No public company shall except with the prior

approval of commission in writing and subject to such conditions as may be imposed by the commission in this regard, convert itself into a private limited company. A private company can be converted into public company by the following procedure:

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CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY AND VICE VERSA (SECTION 44)
the Articles of Association shall be altered so that

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all the clauses applicable to private company under section 2(1)(28) will no longer be included; and Sec 2(1)(28) restricts the rights to transfer the shares, if any; b) limits the maximum number of its members to 50; and prohibits any invitation to the public to subscribe for the share or debentures of the company. Prospectus or a statement in lieu of prospectus, as the case may be, shall be filed with the registrar within 14 days after the date of conversion; Further , a private company on conversion into public company would be require to increase the number of its members and directors.

CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY AND VICE VERSA (SECTION 44)
This increase, in case of unlisted company to

listed company would be 3 to 7. A public company may also be converted into private company with the prior approval of the Commission in writing. In this case also the company shall have to alter its articles to incorporate all the conditions of Section 2(1)(28). Further the word (private) would start appearing in its name. It will also have to obtain a new certificate of incorporation.

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