Introduction to Company & Incorporation Flashcards
(42 cards)
Sole trader
▪ An individual who owns and runs his or her own business.
▪ The law does not recognize the business as a separate person
▪ The person is personally liable for the debts of the business
Partnership
▪ Group of individuals who own and run their own business.
▪ A partnership business is not recognized as a ‘person’ by the law.
▪ Partners are personally liable jointly with other partners for debts
Companies
▪ Capital of a company is represented by shares
▪ Ordinary shareholders are its owners.
▪ Created by a process established by Companies Act 2017
▪ Company is a legal person, separate from its owners.
(doctrine of corporate personality)
▪ Companies are managed by their directors
Separate legal personality
▪ Company can enter into contracts with other persons
▪ A company owns its own assets
▪ A company is personally liable to pay tax on its income (profits).
Limited liability
▪ The liability of the owners of a company for the debts of the company is limited to the
amount of their investment in the company.
Transfer of ownership and perpetual succession
▪ Any legal person can own shares in a company (even another company can own shares)
▪ Shareholders can transfer their share in the ownership of the company to someone else,
▪ It does not affect the legal status or legal existence of company.
▪ Company continues to exist (unaffected by change in ownership)
What is relevant law for Companies?
Companies are created by a process established by
Companies Act, 2017
Memorandum of association
(MOA)
Constitutional document that focuses on external
stakeholders is called memorandum of association
Articles of association (AOA)
Bye-laws which focuses on internal procedures of company
Company and Company Law
A Company formed and registered under this AcThe repealed Companies Act, Companies Ordinance, 1984, Companies Ordinance, 2016 and
also includes this Act unless the context provides otherwiset or the company law.
Body corporate “or” Corporation
Body corporate or corporation includes
- a company incorporated under this Act or company law;
- a company incorporated outside Pakistan, or
- a body corporate declared as body corporate in the relevant statute
but does not include
- A co-operative society registered under any law relating to the registration of co-
operative societies; or - Any other entity, not being a company as defined in this Act or any other law for the time
being which the concerned Minister of the Federal Government may, by notification,
specify in this behalf.
Foreign company
Means any company or body corporate incorporated outside Pakistan, which:
- has a place of business or liaison office in Pakistan whether by itself or through an agent,
physically or through electronic mode; or
- conducts any business activity in Pakistan in any other manner as may be specified.
Companies limited by shares
Liability of its members is limited by the memorandum to the extent of amount, if any,
remaining unpaid on the shares respectively held by them.
Companies limited by guarantee
Liability of owners is limited to the amount member guarantees to contribute in the event that
the company goes into liquidation
▪ The company may or may not have share capital
▪ If Company has share capital; Liability shall also include amount unpaid on shares (if any)
Unlimited companies
This has all advantages of a normal company except that, liability of its members is not limited
Public Company
A company which is not a private company
Private Company
Single Member Company
Which consists of a single member who is director of the company.
[In these companies (SMC-PVT) Limited is added to the name]
Other Private Company
Company can be registered by at least two members and it restricts
▪ Maximum number of members to 50
(members jointly holding shares shall be counted as 1 member)
▪ Right to transfer the shares by its members (save as otherwise provided in act),
▪ Invitation of subscriptions from general public for its shares debentures or
Redeemable capital.
Define listed and unlisted Company
Listed Company.
Whose securities are listed on stock exchange and are traded on it
Unlisted Company
Whose securities are not listed on stock exchange
Public sector company
A company, whether public or private, which is directly or indirectly controlled, beneficially
owned or not less than 51% of the voting securities or voting power of which are held by the
Government or any agency of the Government or a statutory body, or in respect of which the
Government or any agency of the Government or a statutory body, has otherwise power to
elect, nominate or appoint majority of its directors and includes a public sector association not
for profit, licenced by the SECP:
Will the opointment of Director by SECP will give company a status of Public Sector?
Nomination of directors by the Commission on the board of the securities exchange
or any other entity or operation of any other law shall not make it a public sector company.
Holding Company
Means a company which is another company‘s holding company if, but only if, that other
company is its subsidiary.
Subsidiary company
In relation to any other (holding) company, it means company in which the holding company:
▪ Holds the Composition of the Board; or
▪ Exercise or controls more than one-half of its voting securities either by itself or together
with one or more of its subsidiary companies
▪ However, such class or classes of holding companies shall not have layers of subsidiaries
beyond such numbers, as may be notified.
NOTES
- Subsidiary of a subsidiary company would also be considered subsidiary company of
the main holding company
- Composition of board is normally controlled by another company if it can appoint or
remove all or a majority of directors (by exercise of power available to it)
- the expression “company” includes any body corporate and “layer” in relation to a
holding company means its subsidiary or subsidiaries.
What is wholly owned subsidiary?
A company shall be deemed to be a wholly owned subsidiary of another company or the
statutory body if all its shares are owned by that other company or the statutory body.
SECP (Securities & Exchange Commission of Pakistan)
▪ SECP was operationalized on 1st January 1999.
▪ SECP replaced Corporate Law Authority
▪ SECP’s head office is at Federal Capital, Islamabad
▪ SECP has 8 regional offices
- 1 at Federal Capital
- 4at provincial capitals
- 3 in other major cities i.e. Multan, Faisalabad and Sukkur.
▪ SECP has been given lot of powers under Companies Act
▪ SECP regulate the affairs of Companies, Insurance Companies, Banking Companies,
Modarbas & Non-Banking Finance Companies
▪ Law has vested various powers to SECP
▪ In addition to Companies Act 2017, SECP is also empowered by SECP Act, 1997 to exercise
many powers and functions.
Registrar
Means a registrar, an additional registrar, an additional joint registrar, a joint registrar, a
deputy registrar, an assistant registrar or such other officer as may be designated by SECP,
performing duties and functions under this Act.
