CORPORATE LAW

Week 11 & 12

Company Law and Regulation: An Introduction

By Muhammad Naveed Chohan
Department of Management Sciences
Saturday, May 05, 2012

Outline
Introduction to Company Law Jurisdiction of Courts under Company Law S.E.C.P as a Regulator Kinds of Companies

Saturday, May 05, 2012

Introduction to Company Law

What is meant by Company/Joint Stock Company? Joint stock company is an artificial person, recognised by law, with a distinctive name, a common seal, a common capital, comprising transferable shares, carrying limited liability having a perpetual succession Company means a company formed and registered under this ordinance or an existing company
Section 2(1) (7) of Companies Ordinance, 1984

Existing company means a company formed and registered under any previous Companies Act
Section 2(1) (5) of Companies Ordinance, 1984
Saturday, May 05, 2012

Introduction to Company Law

What is meant by Company/Joint Stock Company? A company is an association of many persons who contribute money or money worth to a common stock and employ it for some common purpose
Lord Justice Lindley

Saturday, May 05, 2012

Introduction to Company Law

Distinctive Features of a Company/ Joint Stock Company:
Artificial Person Recognized by Law Distinctive Name Common Seal Transferable Shares Limited Liability Perpetual Succession

Saturday, May 05, 2012

Introduction to Company Law

An Overview of History:
Some forms of companies in Ancient Rome and Ancient Greece First recognizable commercial associations were Medieval Guides Commercial enterprise under the lex mercatoria were in fact partnerships UK Companies emerged at the end of 16th Century Regulation to companies were given charter Rise of Joint Stock Companies Various Acts: 1720, 1825, 1837,1844, 1855, 1856, 1862, 1867, 1890, 1900, 1907.. Pakistan Companies Act 1913 and Independence Companies Ordinance 1984 and amendments in 2002
Saturday, May 05, 2012

Introduction to Company Law

Object of Company Law in the Shape of Companies Ordinance 1984:
Consolidation and amendment of law Healthy growth of corporate entities Fix minimum standards of Integrity and promotion of management Prevent misconduct and malpractices Protections of shareholders Enforce proper duties Require discloser of information Adjustments of rights Empower government

Saturday, May 05, 2012

Jurisdiction of Courts under C/L

What is Company Court? Company court means a court having jurisdiction under Companies Ordinance, 1984
Section 2(11) of Companies Ordinance, 1984

Jurisdiction: (U/S 7 and 8)

High Court (H.C Benches will be constituted by Chief Justice of High Court) Federal government can authorize civil courts to deal with corporate matters Jurisdiction of civil court and registered office of the company Longest period of registered office and territorial jurisdiction of civil court

Saturday, May 05, 2012

Jurisdiction of Courts under C/L

Proceedings of Company Court: (U/S 9)
Judgment within 90 days Day to day hearing of case Reason of delay in proceedings No adjournment more than the 14 days and 30 days in proceedings Court follow summary proceedings Order of company court Paid up capital more than one (1) million Supreme Court Order of company court Paid up capital less than one (1) million if SC allow it than Order of company court No Paid up capital if SC allow it than Disposing of Appeal in 90 days
Saturday, May 05, 2012

Appeal: (U/S 10)

SECP as a Regulator
Law: Securities and Exchange Commission Of Pakistan (SECP) Act, 1997 Meaning of Commission: (U/S 2 (6 -A ) of Companies Ordinance, 1984)
(Section 2 (g) of SECP Act, 1997)

Corporate Law Commission constituted under Section 3 of SECP Act, 1997

Constitution of Commission: (Section 11 of Companies Ordinance, 1984)

(Section 3 of SECP Act, 1997)

Commission will be a body corporate Federal Government is empowered to constitute it Not being less than 3 members Appointed by Federal Government One of the member is chairman also appointed by Federal Government

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SECP as a Regulator

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SECP as a Regulator
Functions of Commission: (U/S 12 of Companies Ordinance, 1984)
Under Companies Ordinance 1984 Under Federal Government directions Appointed by Federal Government One of the member is chairman also appointed by Federal Government Federal Government can also appoint officers to assist SECP Officers will follow orders of SECP

Powers of Commission:
Order of production and examination of documents Ask to furnish information for proceedings or enqiury Issue order, instructions and directions to all officers Confirm alteration in Memorandum Adjourn Proceedings
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Kinds of Companies
On the Basis of Incorporation On he Basis of Number of Members

On the Basis of Liability

On the Basis of Ownership

Statutory Company Charted Company Registered Company Listed Company

Company Limited by Shares Company Limited by Guarantee Unlimited Company Association not for Profit

Public Company Private Company Single Member Company Holding Company Subsidiary Company Associated Company Foreign Company

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Kinds of Companies
On the Basis of Incorporation:
When the company is registered that process is called incorporation of the company

1. 2.

Chartered Company: Chartered granted by Crown For example East India Co. , Bank of England Business of the company is explained by Charter Statutory Company: Formed by Special Act or under Order of head of state For the utilities of public Purpose is to provide services and not to earn profit These companies do not have memorandum and articles For example SBP,ADBP, PR, PIA, WAPDA etc.
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Kinds of Companies
On the Basis of Incorporation:
When the company is registered that process is called incorporation of the company

3. 3.

Registered Company: Formed under Companies Ordinance ,1984 Formed under earlier previous Acts Most popular mode of incorporation Memorandum and Articles of Association Get powers from law Listed Companies: Securities are listed Allowed to trade in stock exchange Preparation of quarter accounts ONE MONTH BEFORE (U/S 245) Filing of copies of accounts to commission and to stock exchange (U/S 245)
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Kinds of Companies
On the Basis of Liability:
Defines the liability of members or company as a whole

1. 2.

Company Limited by Shares: (U/S 15) Members limited up to the nominal value of the share purchased by them Paid full nominal value of share hold by him his liability is nil Company Limited by Guarantee: (U/S 15) Limited liability of the members Each member undertake to pay in the event of winding up of the company Kinds: (a) Company Limited by Guarantee and having a share capital (b) Company Limited by Guarantee and not having share capital For example Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) ..

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Kinds of Companies
On the Basis of Liability:
Defines the liability of members or company as a whole

3.

Unlimited Company: (U/S 15) Liability of the members in the company is unlimited Show purpose of the registration No existence in present

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Kinds of Companies
Association not for profit:
o
o o

Purpose not to earn profit Under section 42 these companies are registerd Not add the words Ltd. or (Pvt.) Ltd. or Guarantee Ltd Condition of the Association not for Profit:
Promotion of useful object Profits applies their objects Not pay dividend Condition binding on association Condition includes in documents Licence is granted by Federal government Insert in MOA and AOA regulations of Federal government Advantages: Application for Licence:

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Kinds of Companies
On the Basis of Number of Members:
1. 2. Single Member Company: Single member is shareholder At least one director Also required to have one director Companies add SMC at the end of the name Private Company: At least 2 persons Not exceed 50 Articles of association restrict transfer of shares Shares are not offered to general public Companies add (Pvt.) Ltd at the end of the name Privileges of private company.............. Loss of Privileges..............
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Kinds of Companies
On the Basis of Number of Members:
3. Public Company: Public company means a company not a private company At least 3 persons Maximum unlimited shareholders Shares can be transferred from one person to other it means to general public Companies add the word Ltd. at the end of the name

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Kinds of Companies
On the Basis of Ownership:
1. 2. 3. 4. Holding Company: Hold 50% shares of other company Control over the board of directors Advantages of holding company.............. Subsidiary Company: Other company hold 50% of its shares Other Company has control over the board of directors Associated Company: Not a subsidiary company but works in close connection It is also called associated undertaking Foreign Company: Incorporated outside the Pakistan and carries business in Pakistan
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