Chapter 5-7 J.S.C

Question 1

Define Joint Stock Company

Answer 1

“I is an incorporated association enjoys the advantage of having a large number of members who contribute money to a common pool for running large undertakings. The interest or share of each member can be purchased, sold and transferred without the consent of other members”
(Companies Ordinance 1984)

Question 2

State any five properties of a joint stock company

Answer 2

(i) Separate legal entity

Common seal

Number of members

Large scale production

Determination of objects

Financial Resources

Distribution of profit

Change in business

Use of word limited

Maganement

Borrowing

Easy mode of investment

Purchase and sale of property

Payment of taxes

Low cost of production

Government control

(il) Democratic style

(ili) Long life/durable

iv) Limited liability

(v) Easy transfer of shares

Question 3

State any five advantages of a joint stock company.

Answer 3

(i) Larger capital

Expansion of business.

Growth of investment.

(i) Limited liability

ili) Experts services

Increase in govt’s income

iv) Long life/durable

Less chance of corruption

Low cost of production

Public confidence

Beneficial advice

Democratic set up

Sound credit ability

Easy to seperate

Better management

Long period projects

Variety In investment

Higher profits

Risky business

Employment opportunities

Question 4

Write down any five disadvantages of a joint stock company.

Answer 4

(i) Monopoly

Nepotism

il) Late decisions

Change in objectives

Labour dispute s

Lack of team spirit
Unnecessary expenditures

Complicated procedures

Speculations

Laxk of responsibility

Lack of freedom

Exploitation

Fraud in distribution of dividend

Centralization of powers

(i) Difficulty in formation

Difference of opinions

Minority rights

iv) Lack of secrecy

Personal satisfaction

(v) Double taxation

Question 5

What is meant by the separate legal entity of a company.

Answer 5

Joint stock company is an artificial person and has separate legal entity. In this capacity, the company can sue or enter into agreement with other parties.

Question 6

What is meant by the common seal of a joint stock company.

Answer 6

A joint stock company cannot sign itself. A common seal with the name of the company is used as the substitute of its signature.

Question 7

Explain the organizational structure of a joint stock company.

Answer 7

The management of the company is entrusted to the board of directors elected by the shareholders, Shareholders are not allowed to participate directly in the affairs of management.

Question 8

What is meant by democratic style or set up in a joint stock company.

Answer 8

The company has democratic set up because shareholders of the company elect the directors by using their voting rights to run the business. Moreover, all the business policies are implemented according to the
decision of majority.

Question 9

How does a joint stock company provide different investment opportunities.

Answer 9

The company issues ordinary and preferred shares to those investors who want to share the profit or loss of the business and issues debentures to those investors who want to receive interest at fixed rate.

Question 10

State the number of shareholders in a joint stock

Answer 10

In case of a multi-members private limited company minimum number of members should be two and maximum fifty whilst in a listed public limited company minimum members should be seven but there is no limit on maximum number of members.

Question 11

From where a joint stock company obtains capital for starting business.

Answer 11

A joint stock company mobilizes a large portion of its capital by issuing shares. For this purpose a public company can issue its prospectus to general public whilst private company cannot issue the shares to general public.

Question 12

What is meant
by limited liability of the
shareholders in a joint stock company.

Answer 12

In joint stock company, the liability of the shareholders is limited to the extent of shares purchased by them. It means the private property of shareholders cannot be used for the loss of company.

Question 13

State the definition of a listed public company.

Answer 13

In this company, minimum number of members may be seven but there is no restriction for maximum.

The word limited is used after the name.

Shares of the company can easily be sold and transferred

The liability of the shareholders is limited to the value of shares purchased.

It is essential for the company to issue prospectus.
The audit of company’s accounts is compulsory every year.

It is necessary for the company to call statutory meeting within three to six months of its commencement.

The minimum number of promoters is seven.
For example PTCL and SNGPL etc,

Question 14

Define a multi-members private Itd. company.

Answer 14

In this company, minimum number of members is two and maximum is fifty.

The company uses the word “Private” with its name.

Minimum number of directors is two.

The shares of the company are not transferable.

The liability of the shareholders is limited.

It is not essential for the company to issue prospectus.

The audit of the company is not compulsory.

This company can start its business after getting the certificate of incorporation.

There is no restriction on the company to call statutory meeting.

Minimum number of promoters is two.

For example, Tapal (Pvt.) Ltd. and HKB (Pvt.) Ltd.
etc.

Question 15

What are the stages involved in the formation of a joint stock company.

Answer 15

Formation of Joint Stock Company
Promotion
Incorporation
Capital Subscription
Stage
Stage
Stage
Certificate of Commencement

Question 16

Define the memorandum of association of a company.

Answer 16

It is a document, which determines the rights, powers and objects of company.

MOA is the most important legal document, which must be submitted to the registrar before the establishment of company. This document is a sort of contract between the company and other persons outside the company like bankers and creditors etc., which explains the legal position of company. No change can be made in memorandum without the prior permission of court.

Note: Normally Memorandum is prepared by specialists / experts or promoters.

If the company works on a line, which is not given in Memorandum then it will be considered as illegal. The memorandum should be printed and divided into different paragraphs. Each paragraph should be numbered and signed by its promoters.

Contents

Name clause
Head office
Capital clause
Object clause
Liability clause
Association clause
Alteration.

Question 17

Define articles of association of a company.

Answer 17

It is second important document of the company, which includes the rules and regulations necessary to run the company and to govern the internal organization. “Articles” are responsible for the good conduct of whole management.
This document never includes any such rule or regulation, which is against the memorandum. When a company does not dísclose its rules and regulations then a model called Table ‘A’ comprised of 85 clauses contained in Companies Ordinance 1984 is considered as articles of the company.
CONTENTS
1. Capital and its division into shares.
2. Different types of shares.
3. Value of shares and their transfer.
4. Method for the change in capital.
5. Rights of shareholders.
6. Conversion of shares into stock.
7. Name and number of directors.
8. Powers and duties of directors.
9. Methods to call the meetings.
10. Voting powers of shareholders.
11. Appointment of directors.
12. Accounts and their audit.
13. Appointment of auditors, their rights and duties.
14. Distribution of profit and reserve capital.
15. Directors’ meeting.
16. Method of selling shares.
17. Seal of company.
18. Right, duties and remuneration of managing agents.

Question 18

Define prospectus of a company.

Answer 18

This document is advertised for raising the capital. In this the general public is invited to purchase the shares.
An attested copy of prospectus should be submitted to registrar’s office. It also contains the date of issue.

1. All points of memorandum.
2. Name and address of company. Directors and auditors.
3. Conditions on which the shares to be issued.
4. Rights of shareholders attached to shares.
5. Estimated preliminary expenses.
6. Detail of property purchased by the company.
7. Balance sheet of company.
8. Amount payable on application.
9. Any restriction on the transfer of shares.
10. Minimum Subscription on which the directors may allot the shares.
11. Name of underwriters and their commission.
12. Duties and remuneration of Directors.
13. Business contracts.
14. Dividend ratio on different kinds of shares.
15. Kinds of shares.
16. Sale of shares (at par, discount or premium)

Question 19

State the kinds of company’s capital.

Answer 19

i) Authorized capital
ii) Issued capital
iii) Subscribed capital
iv) Called up capital
(v)Uncalled capital
(vi) Paid up capital (vii) Unpaid capital
(vili) Advance paid up capital (ix) Unissued capital
(x) Reserve capital

Question 20

Explain the preference shares of a joint stock company.

Answer 20

These are the shares whose holders have preferential rights in respect of the payment of dividend and repayment of capital in the event of winding up.

Preference Shares:
These are the shares whose holders have preferential rights in respect of the payment of dividend and repayment of capital in the event of winding up. The rate of dividend on these shares is fixed. There are further two types of preference shares.
(a) Cumulative Preference Shares:
If the profit of company is not enough to pay dividend on any kind of shares at the end of financial year then the right of dividend on these shares accumulates until all arrears of unpaid dividend have been paid.
(b) Non-Cumulative Preference Shares:
Non-cumulative preference shares are the shares on which if dividend is not paid out of current year’s profit in any year then it is never paid.

Kinds of Shares (Simple Explanation)

Companies issue shares to raise money, and shareholders get a part of the company’s profit as dividends. There are different types of shares based on how dividends are paid and rights given to shareholders.

1. Preference Shares
   • Shareholders with preference shares get dividends before ordinary shareholders.
   • If the company shuts down, they also get their investment back before others.
   • The dividend on these shares is fixed, meaning it does not change with company profit.

Types of Preference Shares:

(a) Cumulative Preference Shares
• If the company cannot pay a dividend in one year, the unpaid dividend is carried forward to future years.
• The company must pay all pending dividends when it has enough profit.

(b) Non-Cumulative Preference Shares
• If the company does not pay a dividend in one year, that dividend is lost forever.
• The company is not required to pay for past unpaid years.

2. Ordinary Shares (Common Shares)
   • These are regular shares bought by most investors.
   • The dividend is not fixed and depends on how much profit the company makes.
   • If the company does well, shareholders get higher dividends. If it does badly, they may get no dividend at all.
   • In case of company closure, these shareholders get paid last, after all debts and preference shares are settled.
3. Deferred Shares (Founder’s Shares)
   • These shares are given to company founders or promoters (the people who started the company).
   • They only receive dividends after preference and ordinary shareholders have been paid.
   • These shares usually hold more voting power, giving founders control over company decisions.

Easy Example to Understand:

Imagine a company makes a profit and decides to give dividends. Here’s how the payments will be made:
1. Preference shareholders get paid first, with their fixed amount (e.g., $5 per share).
2. Ordinary shareholders get paid next, but their amount depends on profits (e.g., if the profit is high, they may get $10 per share; if it’s low, they may get only $2 or nothing at all).
3. Deferred shareholders (company founders) get paid last, only if money is left after others.

Let me know if you need further clarification!

Question 21

Define cumulative preference shares.

Answer 21

If the profit of company is not enough to pay dividend on any kind of shares then the right of dividend on these shares accumulates until all arrears of unpaid dividend have been paid.

Cumulative Preference Shares
• If the company cannot pay a dividend in one year, the unpaid dividend is carried forward to future years.
• The company must pay all pending dividends when it has enough profit.

Question 22

Define non-cumulative preference shares.

Answer 22

The holders of these shares are entitled to a fixed rate of dividend out of current year’s profit, but if dividend is not paid on these shares in any year then it is never paid.

Question 23

Define the ordinary shares.

Answer 23

The shares on which the dividend is paid out of profit earned by the company after the payment of dividend on preference shares.

Kinds of Shares (Simple Explanation)

2. Ordinary Shares (Common Shares)
   • These are regular shares bought by most investors.
   • The dividend is not fixed and depends on how much profit the company makes.
   • If the company does well, shareholders get higher dividends. If it does badly, they may get no dividend at all.
   • In case of company closure, these shareholders get paid last, after all debts and preference shares are settled.
3. Deferred Shares (Founder’s Shares)
   • These shares are given to company founders or promoters (the people who started the company).
   • They only receive dividends after preference and ordinary shareholders have been paid.
   • These shares usually hold more voting power, giving founders control over company decisions.

Easy Example to Understand:

Imagine a company makes a profit and decides to give dividends. Here’s how the payments will be made:
1. Preference shareholders get paid first, with their fixed amount (e.g., $5 per share).
2. Ordinary shareholders get paid next, but their amount depends on profits (e.g., if the profit is high, they may get $10 per share; if it’s low, they may get only $2 or nothing at all).
3. Deferred shareholders (company founders) get paid last, only if money is left after others.

Let me know if you need further clarification!

Question 24

Define deferred shares.

Answer 24

The shares issued to promoters of the company are called “Deferred or Founders Shares”. The dividend on these shares is paid after the payment of dividend on all other kinds of shares.

Kinds of Shares (Simple Explanation)

Companies issue shares to raise money, and shareholders get a part of the company’s profit as dividends. There are different types of shares based on how dividends are paid and rights given to shareholders.

3. Deferred Shares (Founder’s Shares)
   • These shares are given to company founders or promoters (the people who started the company).
   • They only receive dividends after preference and ordinary shareholders have been paid.
   • These shares usually hold more voting power, giving founders control over company decisions.

Easy Example to Understand:

Imagine a company makes a profit and decides to give dividends. Here’s how the payments will be made:
1. Preference shareholders get paid first, with their fixed amount (e.g., $5 per share).
2. Ordinary shareholders get paid next, but their amount depends on profits (e.g., if the profit is high, they may get $10 per share; if it’s low, they may get only $2 or nothing at all).
3. Deferred shareholders (company founders) get paid last, only if money is left after others.

Let me know if you need further clarification!

Question 25

Explain the terms for the issuance of shares. (i) Atpar (ii) At premium (iii) At discount

Question 26

What is the meant by statement in lieu of prospectus.

Answer 26

If the company is not in a position to submit prospectus at the time of registration, then another statement containing all necessary information is sent to registrar's office. This statement is known as "Statement in Lieu of Prospectus".

Question 27

State the difference between the shareholder and debentureholder.

Answer 27

Shareholder: The people who provide finance to company by purchasing shares are called shareholders. Debentureholder: The people to whom company issues debentures as a security of loan are called debentureholders. 1. Shareholders: Individuals or entities that own shares (stocks) in a company. They are partial owners and receive dividends based on company profits. 2. Debenture Holders: Individuals or entities that lend money to a company by purchasing debentures. They are creditors of the company and receive fixed interest, regardless of profit. Debentures vs. Shareholders 1. Ownership: • Shareholders own a part of the company. • Debenture holders are lenders to the company. 2. Returns: • Shareholders get dividends (profit share). • Debenture holders get fixed interest. 3. Risk: • Shareholders take more risk because their returns depend on company profits. • Debenture holders have lower risk since they get fixed interest, even if the company makes no profit. 4. Control: • Shareholders have voting rights and can help make company decisions. • Debenture holders have no voting rights. 5. Repayment: • Shares are not repaid; shareholders stay with the company unless they sell their shares. • Debentures must be repaid after a certain period. In short, shareholders are owners, while debenture holders are creditors (people who lend money to the company).

Question 28

What is meant by authorised capital of the company.

Answer 28

It is the total amount of capital which a company is authorized to raise to general public.

Question 29

Define the reserve capital of company.

Answer 29

Reserve capital is that part of uncalled capital which the company has decided by special resolution shall not be called up unless there is particular event or the company being wound up.

Question 30

Define dividend.

Answer 30

Dividend is a distribution of earning made to shareholders by the company in proportion to the number of shares owned. KINDS OF DIVIDEND The most common kinds of dividend are as under. Kinds of Dividend - Proposed Dividend > Interim Dividend Final Dividend Proposed Dividend: The dividend announced by the company to the sharcholders at the end of year on the basis of current year's profit or earing of the company. Interim Dividend: A dividend paid by the company to the shareholders during the course of its financial year. Normal practice is for 3. soropany to pay one interim dividend about half way through the yeur, However ya company may pay several interm dividends Final Dividend: Ths diwidend paid by the company to the shureholder after the payment of interim dividend or dividends al the end of the year.

Question 31

Define interim dividend.

Answer 31

A dividend paid by the company to the shareholders during the course/before the end of its financial year if it expects to earn huge profit. What is a Dividend? A dividend is the portion of a company’s profit that is distributed to its shareholders. It is a reward for investing in the company and is usually paid in cash or additional shares. Companies pay dividends to keep investors interested and share their financial success. Kinds of Dividends 1. Proposed Dividend • A dividend that the company plans to pay at the end of the financial year. • It is based on the company’s annual profit and must be approved by shareholders before payment. 2. Interim Dividend • A dividend paid before the financial year ends. • Usually given in the middle of the year when the company has made good profits. • A company may pay multiple interim dividends. 3. Final Dividend • Declared after the financial year ends, once the company has calculated its full-year profit. • It is usually higher than the interim dividend. • Paid only after interim dividends, if any, have been distributed. Example: • A company makes a total profit of $1 million in a year. • In June, they pay an interim dividend of $100,000. • At the end of the year, they declare a final dividend of $300,000. • The remaining profit is reinvested in the company. This system helps companies manage profits while rewarding shareholders throughout the year.

Question 32

What is meant by debenture.

Answer 32

Capital source of company. The document, which a company issues as receipt of the borrowed amount to the lender, is known as Debenture. Debentures holders help company raise their capital without giving away owner ship. They are assured fixed rate of interest. Kinds. Simple Mortgage Registered Bearer Redeemable Irredeemable Convertible

Question 33

What is issuance of shares at premium.

Answer 33

Issuance of shares at premium means that the shares are being issued at a higher price than the face value of shares.

Question 34

What is meant by subscribed capital.

Answer 34

Subscribed capital is that portion of the issued capital, which has been subscribed or taken up by the public through shares.

Question 35

What do you mean by issued capital.

Answer 35

It is that part of authorized capital, which has been issued or offered to public for subscription.

Question 36

Q.25 What is meant by Registered Company.

Answer 36

According to incorporation. (i) Registered Company is formed under company's ordinance 1984. It also includes an existing company defined in Sec 2(15). (ii) These companies are allowed to do various industrial, agricultural and trading businesses. e.g., Subhan Textile Mill etc. The rules regarding company's formation, management and winding up are stated in Companies Ordinance. (e.g) Adam Ji Industries, Wazir Ali Industries and Subhan Textile Mill etc.

Question 37

Q.26 What is meant by Statutory Company.

Answer 37

According to incorporation. These companies are formed by the order of - president or by the special act of parliament. The main purpose of these companies is the welfare of public and profit is not so important. It is not essential for these companies to use word "limited" These companies have monopoly in their respective fields. 口 The liability of shareholders is limited to the value of shares purchased. (c.g) State Bank of Pakistan, Zarai Taragiati Bank Limited and WAPDA etc.

Question 38

Q.27 Define Share.

Answer 38

The total authorized capital of a company is divided into small units and each unit is individually called "Share". Kinds. KINDS OF SHARES (1) Preference Shares: These are the shares whose holders have preferential rights in respect of the payment of dividend and repayment of capital in the event of winding up. The rate of dividend on these shares is fixed. There are further two types of preference shares, (a) Cumulative Preference Shares: If the profit of company is not enough to pay dividend on any kind of shares at the end of financial year then the right of dividend on these shares accumulates until all arrears of unpaid dividend have been paid. (b) Non-Cumulative Preference Shares: Non-cumulative preference shares are the shares on which if dividend is not paid out of current year's profit in any year then it is never paid. (il) Ordinary Shares: Ordinary shares are the shares on which dividend is not paid at fixed rate. Ordinary shareholders receive the dividend proportionally out of profit eamed by the company after the payment of fixed dividend on preference shares. (lil) Deferred Shares: The shares issued to promoters of the company are called "Deferred or Founders Shares". The dividend on these shares is pard after the payment of dividend on all other kinds of shares Kinds of Shares (Simple Explanation) Companies issue shares to raise money, and shareholders get a part of the company’s profit as dividends. There are different types of shares based on how dividends are paid and rights given to shareholders. 1. Preference Shares • Shareholders with preference shares get dividends before ordinary shareholders. • If the company shuts down, they also get their investment back before others. • The dividend on these shares is fixed, meaning it does not change with company profit. Types of Preference Shares: (a) Cumulative Preference Shares • If the company cannot pay a dividend in one year, the unpaid dividend is carried forward to future years. • The company must pay all pending dividends when it has enough profit. (b) Non-Cumulative Preference Shares • If the company does not pay a dividend in one year, that dividend is lost forever. • The company is not required to pay for past unpaid years. 2. Ordinary Shares (Common Shares) • These are regular shares bought by most investors. • The dividend is not fixed and depends on how much profit the company makes. • If the company does well, shareholders get higher dividends. If it does badly, they may get no dividend at all. • In case of company closure, these shareholders get paid last, after all debts and preference shares are settled. 3. Deferred Shares (Founder’s Shares) • These shares are given to company founders or promoters (the people who started the company). • They only receive dividends after preference and ordinary shareholders have been paid. • These shares usually hold more voting power, giving founders control over company decisions. Easy Example to Understand: Imagine a company makes a profit and decides to give dividends. Here’s how the payments will be made: 1. Preference shareholders get paid first, with their fixed amount (e.g., $5 per share). 2. Ordinary shareholders get paid next, but their amount depends on profits (e.g., if the profit is high, they may get $10 per share; if it’s low, they may get only $2 or nothing at all). 3. Deferred shareholders (company founders) get paid last, only if money is left after others. Let me know if you need further clarification!

Question 39

What is meant by Modarba.

Answer 39

Modarba is formed under Modarba ordinance 1980. In Modarba one party contributes capital (known as Rab ul Mal) and other party participates with his skills (known as Modarib). e.g., NBP Modarba etc. This company is formed under Modaraba Companies Ordinance 1980 (Applicable w.e.f 26- 06-1980). In this company, one party contributes capital whereas other party participates with his skill and expenience. • The contributor of capital is called "Rab-ul-Mal" and the person who manages the business affairs is called "Modarib" • The certificates of Modaraba company are transferable. • A Modaraba company may be for definite ot indefinite period of time. • The Modaraba may be multipurpose or specific. For example, NBP Modarba and ABL Modaraba etc

Question 40

What is meant by Holding company.

Answer 40

(i) It is a company which holds more than 50% shares of another company. (ii). The company may have the powers to appoint more than 50% of directors of another company. e.g., Nishat Mills limited is the holding company of Nishat power limited etc.

Question 41

What is meant by Charter Company.

Answer 41

These companies are formed by the royal order or charter. The word "limited" is not used with the name of company. The management of company is run according to the provisions of charter. The members are not liable for the debts of company. (e.g) Chartered Bank of England, Royal Bank of Scotland and East India Company etc.

Question 42

31 What is meant by Single member Company.

Answer 42

The securities and exchange Commision of Pakistan (SECP) introduced the concept of Single Member Company (SMC) throught amended Ordinance 2002 (SMC Rules 2003) in Pakistan Companies Ordinance 1984. The objective of the concept of single member company is to provide an opportunity to single or sole owner to enjoy the benefits of limited liability. The main characteristics of SMC are as under. • There is only one member or shareholder in this сотралу. The company uses the words (S.M.C. Private Lid.] after its name. The sole or single member is responsible for the management of the company. • The shares of the company are non-transferable. The lability of the owner of company is limited, The issuance of prospectus is not necessary for the company. The company has a separate legal entity apart from its members. The business life of company is long or durable because the heirs of single or sole owner can continue the business in case of his death. The promoter of SMC is its single owner. For example, Pearl Consultancy (SMC Private Limited), Islamabad etc.

Question 43

Write down the name of important documents of company.

Answer 43

There are three important documents of a company: (i) Memorandum of association. (ii) Articles of association. (iti) Prospectus.

Question 44

LONG 1. Define JSC and discuss its characteristics

Answer 44

i) Separate legal entity Common seal Number of members Large scale production Determination of objects Financial Resources Distribution of profit Change in business Use of word limited Maganement Borrowing Easy mode of investment Purchase and sale of property Payment of taxes Low cost of production Government control (il) Democratic style (ili) Long life/durable iv) Limited liability (v) Easy transfer of shares

Question 45

Long. 1. Advantages and disadvantages of JSC

Answer 45

Larger capital Expansion of business. Growth of investment. (i) Limited liability ili) Experts services Increase in govt’s income iv) Long life/durable Less chance of corruption Low cost of production Public confidence Beneficial advice Democratic set up Sound credit ability Easy to seperate Better management Long period projects Variety In investment Higher profits Risky business Employment opportunities Disadvantages Monopoly Nepotism il) Late decisions Change in objectives Labour dispute s Lack of team spirit Unnecessary expenditures Complicated procedures Speculations Laxk of responsibility Lack of freedom Exploitation Fraud in distribution of dividend Centralization of powers (i) Difficulty in formation Difference of opinions Minority rights iv) Lack of secrecy Personal satisfaction (v) Double taxation

Question 46

Long 1. Comparison. Sole trader ship. Partnership. JSC

Answer 46

Definition Formation Reason to formation Formation expenses Registration Minimum members Maximum members Legal entity Management Capital volume Withdrawal of capital Change in capital Change in business Liability Durability Audit Agent Payment of debt Trade agreement List of stock exchange Dissolution.

Question 47

Long. 2. Discuss various kinds of company

Answer 47

1. According to incorporation Charter Statutory Registered 2. According to ownership Public Private Holding Govt Subsidiary 3. According to liability Limited by shares Limited by guarantee Unlimited company 4. Modarba company 5. According to nationality Pakistani company Foreign company

Question 48

Long. 2. Formation of company

Question 49

Long. 2. Sources of company’s capital

Question 50

Long 2. Kinds of company’s capital

Question 51

Long 2. Note on the following MOA AOA PROSPECTUS KINDS OF SHARES KINDS OF DEBENTURES

Question 52

Long 2. Distinguish btw: MOA AND AOA DEBENTURES AND SHAREHOLDERS PUBLIC AND PRIVATE COMPANY

Question 53

What is meant by a director of company. Who can select the directors of company.

Answer 53

The shareholders whe are the owners of the company do not participate in the affairs of management directly, but they elect their representatiyes to run the business. These elected representatives are called "Directors of the company" and elected directors are collectively known as "Board of Directors" i) By Promoters (ii) By Subscribers (ili) By Shareholders (iv) By Directors (v) By Creditors

Question 54

What are the duties of company's director. Ans.

Answer 54

(i) Directors make the arrangements to conduct the company's meetings. (ii)They should prevent the misuse of capital. ( iii) They keep check to stop the wrong payments. (iv) The directors should frame and implement the policies of business. (v) They submit the various reports to registrar.

Question 55

How many number of directors are in a company.

Answer 55

According to section 174 of Companies Ordinance 1984, a multi-members private company shall not have less than two directors and a listed public company shall not have less than seven directors.

Question 56

What is meant by the statutory meeting and explain its main objectives.

Answer 56

Statutory meeting is the first meeting of the company's shareholders. The object of the statutory meeting is to inform the shareholders about the affairs of the company. At least 21 days before, a notice is issued by the secretary of company to all shareholders. OBJECTS The detail about the formation of company. To provide exact information regarding the affairs of company. iii) To win the confidence of shareholders of the company.

Question 57

What is resolution and give its kinds. Ans.

Answer 57

The formal expression of opinion or desire of any meeting or assembly obtained by the majority votes of members is called "Resolution". There are two parts of resolution, first part explains the causes of resolution where as second part explains the decided matters of the meeting. KINDS OF RESOLUTION There are following three kinds of resolution. ( Ordinary resolution. (ii) Special resolution. (iii) Extraordinary resolution. Q.7

Question 58

What is meant by extra ordinary meeting and its objectives. What methods can be used to wind up a company.

Answer 58

According to section 159 of companies ordinance 1984, all general meetings other than the statutory meeting and annual general meeting are called extra-ordinary general meetings. These meetings are to be called in following circumstances. • To solve important issues. • To issue debenture. • To alter company's capital. i By court (ii) Voluntary winding up (im) Under the supervision of court.

Question 59

What are the contents of statutory report.

Answer 59

Statutory report provides the following information: (1) Total number of allotted shares. (ii) Cash received in respect of allotted shares. (iii) Names and addresses of directors, auditors, managers and secretaries etc.

Question 60

What is meant by company's meeting and gives its types.

Answer 60

When the members of the company, gather at certain time and place to discuss the business and managing affairs it is called meeting of the company. (TYPES) (i) Directors meeting. (il) Shareholders meeting. • Annual general meeting • Extra ordinary meeting • Statutory meeting

Question 61

Which people cannot become the directors of company.

Answer 61

(i) a minor; (ii) person of unsound mind; (i) a fence invonvicted by a court of law for an offence involving moral turpitude; (iv) a person who does not give written declaration of becoming director. (v) a person who is not a member of the company.

Question 62

Explain the steps involved in the winding up of company by the consent of creditors. Ans.

Answer 62

The method of creditor's voluntary winding up for joint stock company is given below. (a) Statutory declaration (b) General meeting c) Creditor's meeting (d) Statement of company's affairs (e) Intimation to registrar (t) Appointment of liquidator (g) Inspection committee (h) Duties of the liquidators (i) Final meeting

Question 63

Q.13 What is meant by special resolution.

Answer 63

The resolution which is passed by ¾ three fourth majority of the shareholders is called special resolution. A 21 days notice along with a copy of resolution must be sent to each member.

Question 64

Define statutory report of company.

Answer 64

Statutory report provides the following information: (i) Total number of Allotted shares. (ii) Total amount of cash received in respect of the allotted shares (iii) Detail of company's receipts and payments. iv) The names & addresses of the directors, chief executive, secretary, auditors etc. (v) Particulars of any business contract etc.

Question 65

What is an ordinary resolution.

Answer 65

A resolution which is passed by the simple majority of members in any kind of general meeting of the company. For this resolution a 21 days notice must be sent to each member.

Question 66

Long. Discuss the procedure regarding the appointment, qualification and disqualification of company's directors.

Question 67

Long. Write a note on the powers and duties of directors.

Question 68

Long. Define company's meeting and explain its kinds.

Question 69

Long. What do you know about the resolution and its kinds.

Question 70

Long. Discuss the various methods of winding up of the joint stock company.