Company Law Notes ICMA 92-98 PDF

COMPANIES ACT, 2017
Summarized and Compiled By

Xohaib Yakoob Surmawala
FOR ICMA
G4-Corporate Laws &
Secretarial Practices
Facilitator - Xohaib Yakoob Surmawala Page 1

Standard Scale of Penalty 479
Level Limit of penalty Per day penalty during which the

default continues
1 Upto Rs.25,000 Upto Rs.500

2 Upto Rs.500,000 Upto Rs.1,000
3 Upto Rs.100 million Upto Rs.500,000
Incorporation of a Company
Obligation to register 14-9
• No association partnership or company, consisting of more than twenty persons shall be formed for the
purpose of carrying on any business unless it is registered as a company under this Act.
• This section is not applicable to:
o any society, body or association, other than a partnership, formed or incorporated under any
other Pakistan law; or
o a joint family carrying on joint family business; or
o 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; or
o 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.
How and who can form a Public Company 15-14
• Any 3 or more persons

• for any lawful purpose
• by subscribing their names to MOA.
How and who can a Private Company15-14
• Any 2 or more persons

• by subscribing their names to MOA
How and who can a Single Company15-14.
• Any 1 persons
• by subscribing to MOA
• nominate a person who in the event of death of the sole member responsible for:
o transfer the shares to the legal heirs as per Islamic Laws

o manage the affairs of the company as a trustee, until shares are transferred.
o Provided that if shares are transferred to more the one legal heirs, the status of the company as
single member company shall seize and procedure for conversion on single member company in
to private company shall be initiated as per the requirement of this Act.
Nature of the Liability Company formed 15-14.
• Company limited by share

• Company Limited by guarantee
• Unlimited Company
Stages of Formation
1. Promotion Stage
• Discovery of business opportunity
• subsequent organization of funds, property and managerial ability into business concern
• for the purpose of making profit.
• The persons who initiate are called Promoters.
• Promoters may be an individual, firm or a company.
• Person acting in professional capacity is not promoter. Eg legal advisor
2. Company Name (First step of incorporation) 37-10
• Check the availability of name with the Registrar and approval of name.
o Inquire registrar of the availability of name, and Registrar will respond in two days.
Name can be searched on SECP website also. Prescribed application form & fee for
name availability certificate. After application for the available name is approved, the
name will be reserved for 60.
o If application for the name is refused than aggrieved person may file an appeal to the
Commission with 30 days of the order. The order of the Commission shall be final and
cannot be challenged.
• Name should not be / should not contain 37-10
o Inappropriate, deceptive, designed to exploit or offend in religion;
o Identical, close resemblance (except the comp is in the course of dissolution with the
permission of registrar).
o Distinguishable from the names of existing comp. Inclusion or deletion of ‘The’, ‘Al’,
‘New’, ‘Modern’ is not considered distinguished
o Already reserved by the registrar.
o Plural form singular or singular from plural.
o Having close phonic resemblance with the existing names.
o Prohibitions of words in names:
✓ Association/Foundation
✓ Authority, Co-operative, Bureau, UNO, World Bank, IMF, Red Cross

✓ Bahria, Askari, Fouji, Fazaiya, Cadet
✓ Banks, Banking Company
✓ Charter, Chartered
✓ Exchange
✓ Famous Personalities
✓ Federation
✓ Holding
✓ Investment, fund
✓ Name containing country name other than Pakistan
o Except with prior approval of the Commission, names shall not resemble or
contain:
✓ the patronage of any past or present Pakistani or foreign head of state;
✓ any connection with the Federal Government or a Provincial Government
or any connected authority
✓ any connection with any corporation set up by or under any Federal or
Provincial law;
✓ the patronage of, or any connection with, any foreign Government or any
international organisation;
✓ establishing a modaraba management company or to float a modaraba; or
✓ any other business requiring licence from the Commission.
• Rectification of the name of the Company 38-11
o May with the approval of registrar, change its name; and
o If directed by Registrar, within 30 days of receipt of direction. Company shall be given
an opportunity of being heard before such directions by the registrar.
o If the company fails to report compliance with the within the specified period, the
registrar may enter on the register a new name for the company selected by him, being
a name under which the company may be registered under this Act and issue a
certificate of incorporation on change of name.
3. Memorandum of Association and Articles of Association
In accordance with the requirements of Companies Ordinance.
4. Documents to filed for Registration of MOA and AOA 30-16
Application in the prescribed form shall be filed along with the following information and documents:
• Copy of NICs or passports (in case of foreigner) of each subscriber of MOA and AOA.
• Four copies of MOA & AOA signed by each subscriber. One affixed with special adhesive stamp.
• Statutory declaration that all the requirements have been complied with.
• Registration and filling fee challan.
• Document authorizing the person by the sponsors to make good any deficiencies and to collect
the certificate of incorporation.
• an address for correspondence till its registered office is established and notified
• Form 21- within 30 days of incorporation notifying the registered office.

5. Registration of MOA and AOA 30,33-16
• If the registrar is satisfied that:
o Legal formalities have been complied with;
o Comp is being formed for lawful purpose; &
o None of its object in the memorandum is inappropriate, deceptive or insufficiently
expressive.
• Issue Certificate of Incorporation,
• Which is a conclusive evidence that all the requirements have been complied with
• Any irregularity subsequently disclosed will not affect the registration.
• Any illegal activity erroneously included in object will not be valid.
• Allow the company to operate within the ambit of Memorandum.
6. If registration is refused 30-16

• File appeal within 30 days to
o The Commission. This decision is final. No more appeal!
7. Effect of memorandum and articles 31-17
• Bind the Company and the members for the terms contained in the MOA and AOA as MOA and
AOA has been signed by each member.
• Money payable by subscriber shall be:
o debt due from him
o payable in cash
o within 30 days of the date of incorporation of the company
• The receipt of subscription money shall be
o reported to the registrar within 45 days of incorporation
o along with the verification certificate from a chartered accountant or cost and
management accountant.
• If the subscription not deposited within the prescribed time
o Shares shall be deemed cancel
o Name of the subscriber will be removed from the register
o Registrar may give such direction for the compliance of this section.
• Penalty Level.
8. Effect of registration 32-18
1. The subscribers to the memorandum and members are a body corporate by the name stated in
the certificate of incorporation;
2. the body corporate is capable of exercising all the functions of an
incorporated company
3. the status and registered office of the company are as stated in the application for registration
4. in case of a company having share capital, the subscribers to the memorandum become holders
of the initial shares; and

5. the persons named in the articles of association as proposed directors, are deemed to have
been appointed to that office.
9. Less than Minimum Number of Members 47-15

• At any time number of members of the comp is reduced
o Below 2 in case of private company or
o Below 3 in case of others and
• carries on business for more than 6 months with reduced members,
• every person who is a member of the Company and having knowledge thereof during that time
• shall be liable for
o the payment of whole debts of the comp contracted during that time and
o member may be sued alone or with other members.
10. Business and Objects of the Company 0-26
• A company may
o carry on any lawful business
o enter into any transaction
o which is necessary in attaining its business activities.
o Principal line of business is mentioned in MOA and
o Corresponds to the name of the Company.
• A change in principal line of business:
o report to registrar within 30 days of change.
o Registrar may give direction for the change in name if in violation of this section.
“Principal line of business” means the business in which substantial assets are held or likely to be held or
substantial revenue is earned or likely to be earned by a company, whichever is higher.
11. Documents for incorporation by Single Member Company

• At the time of incorporation, prescribed form indicating at least two individuals to act as
nominee director and alternate nominee director in case of death of anyone.
• All requirements of a private limited comp for incorporation shall apply.

Restrictions on Commencement of Business by a Public Company 146-19,20
1) A public company shall not commence any business or exercise any borrowing powers unless
a) shares held subject to the payment of the whole amount thereof in cash have been allotted to an
amount not less in the whole than the minimum subscription;
b) every director of the company has paid to the company full amount on each of the shares taken
or contracted to be taken by him and for which he is liable to pay in cash;
c) no money is or may become liable to be repaid to applicants for any shares or which have been
offered for public subscription
d) there has been filed with the registrar a duly verified declaration by the chief executive or one of
the directors and the secretary that all the conditions have been complied with and
e) in the case of a company which has not issued a prospectus inviting the public to subscribe for its
shares, there has been filed with the registrar a statement in lieu of prospectus.
2) The registrar shall, after making such enquiries as he may deem fit to satisfy himself that all the
requirements have been complied with in respect of the commencement of business, register all the
relevant documents. The registration of documents shall be conclusive evidence that the company is so
entitled.
3) Any contract made by a company before the date at which it is entitled to commence business shall be
provisional only, and shall not be binding on the company until that date, and on that date it shall become
binding.
4) If any company starts its business operations or exercises borrowing powers in

contravention of section, every officer or other person who is responsible for
contravention shall without prejudice to other liabilities be liable to a penalty not
exceeding level 2 on the standard scale.
5) This section is not applicable to a private company, or to a company limited by guarantee and not having a
share capital or a private company converted into public company

Memorandum Of Association
• It is the company’s
o Constitution and
o Fundamental law
o On the basis of which company operates
o which signifies its powers and limitations.
• Provides information of company’s
o Purpose
o Capital
o Location
o Member’s liability &
o Acquisition of shares by its subscribers.
 Contents of Memorandum 16,17,18-27,28,29

1. Name of the Company
• Private company limited by shares-------(Private) Limited
• Single member private comp LBS---------(SMC-Private) Limited
• Public Company LBS--------------------------Limited
• Comp Ltd by guarantee with or without share cap------(Guarantee) Limited
2. Unlimited Liability company-----------------------------------“Unlimited”
3. Province of the registered office or part of Pakistan not forming the part of a province.
4. Principal Line of Business.
• For company already in existence at the time of commencement of this Act:
o Existing company can carry on with their existing Moa and object stated there in shall be
considered as their principal line of business.
o If object clause is not the principal line of business
✓ Intimate to the registrar along with
✓ revised copy of MOA indicating principal line of business
5. An undertaking as to correctness of information.
6. State that the liability of the members is limited other than in case of unlimited liability comp.
• Whether Limited by shares or
• Limited by guarantee.
7. Share Capital and division thereof into shares of fixed amount.
8. No subscriber shall take less than one share and write opposite to his name number of shares he agreed
to take.
9. In case of limited by guarantee, state
• The amount that each member undertakes to be liable to pay the debts of the company incase of
winding up,
• while he is a member and within one year after cessation of his membership for the liabilities
contracted by the company when he was a member.

• Member shall also be liable for the winding up charges if the company is wound up while he is a
member or within one year after he ceases to be a member.
✓ In case of comp limited by shares, every subscriber of the Memorandum shall take at least one share
and shall write apposite to his name the number of shares he takes.
B Printing, signature etc. of Memorandum 19-4,30,31
• Printed
• Divided into paragraphs
• Signed by each subscriber, present name in full, occupation and father’s/husband’s name in full,
nationality, residential address in the presence of a witness who will sign and will add his
particulars.
• In case of a person other than natural person, the address of its registered office and authorized
representative signing the documents and add his particulars.
• Dated.
• The memorandum and Articles shall be deemed to include the power to enter in to any
agreement for obtaining loans, advances or credit and to issue non-interest bearing securities for
raising finance from banking company or a financial institution.
Any restriction in this respect in the Articles shall be void and illegal.
• All the provisions of the Ordinance shall prevail despite of anything contained in any
agreement, contract, memorandum or articles or any other document. Means that if anything
is contained in any document contrary to the provisions of the Ordinance shall be void.
C Name of the Company 39,40,143,144-12,13,22,23
• Publication of name by a Company

o display its name and incorporation number in visible position in easily legible English or
Urdu characters.
o display the certified copy of the incorporation certificate at every business place
o shall have its name engraved on its common seal in legible English or Urdu characters.
Penalty Level 1.
o shall mention its name in English or Urdu characters in certain documents including bills,
letter heads, cheques, purchase orders, sales orders, letter of credits etc.
o Penalty for non-publication of name- Level 1.
• Change of Name
o Special resolution (Passed by not less than 3/4th of the members entitled to vote in
person or by proxy at a GM. Notice of a GM shall be given at least 21 days before the
meeting specifying the intention to propose the resolution as a special resolution).If all
the members entitled to vote agree, the resolution may be proposed and passed as a
special resolution by giving a notice of less than 21 days.

o Clearance of new name from the registrar
o Registrar shall
✓ enter the new name in place of the former name and
✓ issue an altered certificate of incorporation
✓ then change of name shall be complete.
o Former name is required to be mentioned along with the new name for a period of 90
days from the date of altered certificate of incorporation.
o Addition or Deletion of
✓ (Private) or vice versa and
✓ (SMC- Private) Limited to (Private) Limited or vice versa
✓ Shall not be considered a change of name.
✓ However altered certificate of incorporation is required.
o Change of name shall not affect anything in favor of or against the company.
D Alteration of Memorandum 21,22,23,24,25,34-32,33,34,35
• A company may alter its principal line of business or registered office by

o Special resolution,
▪ No effect of alteration of registered office unless confirmed by Commission. For change
in principal line of business confirmation is not required.
o Any application sent to SECP or Fed Gov must be sent to registrar as per rules.
• Confirmation from SECP required or not?
o Change in Principal Line of Business------------------------------------------------- No
o Change in registered office
✓ From one province to another province or Islamabad--------------------Yes
✓ One city to another city within one province--------------------No
✓ From a part of Pakistan not forming part of a province to a province or
Islamabad and vice versa---------------------------------------------------------Yes
• Certified copy of the confirmation of alteration shall be sent to the company and registrar with 7
days from the date of the order.
• Reasons for change: examples
o To carry on business more efficiently and economically
o To attain its main purpose by new and improved means
o To enlarge or change the local area of its operation
o To carry on some business not being a business mentioned in Memorandum, which may
conveniently or advantageously be combined with the business of the company.
o To restrict or abandon any of the objects mentioned in the Memorandum.
o Sell or dispose off the whole or any part of the company’s undertaking or
o Or to amalgamate with any other entity.

• Application for confirmation to SECP
o To be submitted within 60 days from the date of special resolution signed by
responsible officer.
o Reason for change
o Documents with the application correct as on the day immediately preceding the day of
special resolution:
✓ a copy of the memorandum and the articles
✓ a copy of the special resolution
✓ particulars of dissenting shareholders or creditors together with their
objections
✓ a copy of the latest audited balance sheet
✓ comparison existing and altered clause
✓ the section of the Act under which alteration is permissible
✓ pattern of share holding
✓ name and address of each creditor to whom amount exceeding 50,000 is due
and along with the amount
✓ name and address of the persons likely to be affected along with their
consents.
• After confirmation from SECP
o File within 30 days, which may be extended,
o printed copy of Memorandum to the registrar,
o who shall register the same and
o provide a Certificate of Alteration.
o The certificate is a conclusive evidence that all the requirements have been complied
with.
• Where the alteration involves change in principal line of business (as confirmation from
commission is not required), the company shall file the amended MOA with the registrar
within thirty days of special resolution, which shall be recorded for the purposes of this Act.
• Effects of Alteration of Memorandum

o Existing members shall not be bound by any alteration
✓ requiring him to subscribe more share
✓ or increase his liability
✓ unless agreed by them in writing.
• After date of alteration every copy of Memorandum and Articles issued shall conform to the
alteration. Penalty Level 1

Articles of Association
• Rules
• Regulations and
• By-laws
• To carry out operations of the company.
A Contents of Articles
• Share capital including right

• Transmission of share
• Transfer of shares
• Alteration of capital
• General meetings and proceedings
• Voting rights of members, poll, and proxies.
• Details f directors
• Secretary and chief executive
• Dividend and reserves
• Accounts and audit
• Winding up
B Articles that can be adopted 26-36
• Company Limited by shares----------------------------Table A

o Adopt Table A in full
o Exclude table A and set out its own articles
o May adopt a portion of table and frame its own Articles.
o Table A shall apply automatically unless the Articles of the company expressly
exclude any or all of its provisions.
• Comp ltd by guarantee and not having share cap---------Table C
• Comp ltd by guarantee and having share cap-------------Table D
• Unlimited Comp---------------------------------------------------Table E
C Printing, signature etc of the Articles same as Memorandum 27-37
D Alteration of Articles 28,35,40-38,39,36
• How to alter articles?

o Special resolution
o It’s a power given by the Ordinance.
o So any restriction on alteration in Articles or any contract shall be void.

• If alteration is related to substantial rights and liabilities of members or a class of members,
it will be valid only if:
o 3/4th of members of that class vote for the alteration, means it will be than two step process:
1. Approval from that class of members and
2. Special resolution within general meeting.
• Existing members shall not be bound by any alteration related to their rights and liabilities unless the
member agrees in writing to be bound thereby.
• A copy of the special resolution shall be filed to the registrar within 15 days duly authenticated by CEO or
Company Secretary. A copy of special resolution shall be annexed to every copy of the Articles issued after
the date of the resolution.
• A copy of the altered AOA shall be filed with the registrar with in 30 days of the passing of the special
resolution, who shall register the same than altered AOA shall be the AOA of the company.
• After date of alteration every copy of Memorandum and Articles issued shall conform to the alteration.
Penalty Level 1
• Company shall send the copy of MOA and AOA within 14 days of the request of the member on the
payment of the prescribed fee as fixed by the company, Penalty Level 1.

Directors
• The persons chosen by the members of the company to be responsible for the management of the
business of the company.
• Only natural person can be a director of the company.
A. Minimum Number of Directors 174-154,155

• Single member comp---------------------------------------------------------------------- 1
• Other private comp-------------------------------------------------------------------------2
• Public company- unlisted------------------------------------------------------------------3
• Public Company- listed---------------------------------------------------------------------7
Number of Directorship 155
• Maximum number of directorship not more than in 7 companies;

o Including holding office as alternate director
o Excluding directorship in listed subsidiary
• Compliance shall ensured with in one year of the commencement of this Act
• The casual vacancy on the BOD of the listed company due to compliance of this section shall be filled up
by the directors at the earliest but not later than ninety days from the date of vacancy.
B. Types f Directors
• First director 176-157

o Number and names of the first directors shall be determined by the subscribers in
o Number of first directors can be increased by the members in the general meeting.
o They shall hold the position as directors till the first AGM.
• Elected director
o Directors elected at the general meeting.
• Appointee director
o To fill casual vacancy.
• Nominee Director 182,164
o Nominated by
✓ the company’s creditors or other special interests as per the contractual arrangements.
✓ A body corporate owned by Federal or Provincial govt who has extended credit to the
company
• Assignee Director
o A director can assign his office to another person if such provision is made in the Articles or an
agreement between the director and the company. However, special resolution is required for
such assignment.

• Alternate or substitute director
o Alternate director is normally appointed to avoid cessation of directorship u/s 188 or if a director
wants his representative to attend meetings during the period he is out of Pakistan for not less
than 3 months.
• Whole time employee director or associate director
o As per the terms of employment.
C. Retirement and terms of office of Director 177,180-158,161
• First director shall retire--------------------------------On the date of First AGM.

• Subsequent director shall retire----------------------On the expiry of 3 years.
o Unless (first director or subsequent director)
✓ Resigns earlier, becomes disqualified or otherwise ceases to hold the office as director.
• In case of company limited by guarantee not having share capital
o If provided in AOA
o Period of subsequent directors can be less than 3 years.
• Casual vacancy if any during the term of director
o May be filled by the directors and
o New director shall hold office for the remainder period of the director in whose place he is
appointed.
• Retiring director shall continue to perform their duties until their successors are elected.
• They shall take immediate steps to hold the elections and incase of any hindrances, report the
circumstances to the Registrar atleast 45 days before the due date of the AGM or EGM.
• Holding of AGM or EGM for the purpose of election of directors shall not be delayed for more than 90
days from the due date of the meeting or by such time as may be allowed by the registrar for the reason
to be recorded in writing which is out of the control of the directors or in compliance with the court
orders.
• The registrar, may on expiry of period
o on its own motion; or
o on the representation of the members holding not less than 1/10 th of the total voting powers in a
company having share capital; or
o on the representation of the members representing not less than one tenth of the total members
of the company not having share capital of the company
✓ directs the company to hold annual general meeting or extra ordinary general
meeting for the election of directors on such date and time as may be specified in the
order.
• Any officer of the company who fails to comply: Penalty: level 2.

D. Election of Directors 178-159,162
• Number of directors to be elected shall be fixed by the directors at least 35 days before election in the
general meeting.
• Number of directors to be elected once fixed shall not be changed except with the prior approval of a
general meeting.
• Notice shall be given to the members at least 21 days before the date of general meeting. In case of a listed
company such notice shall also be published in one English and one Urdu newspapers having circulation in
the province of stock exchange.
• Such notice shall inter alia state the number of directors to be elected and the names of retiring directors.
• The persons wish to contest the election are required to give notice to the company at least 14 days before
election. A person may withdraw himself any time before election.
• Notices for the contest of election shall be transmitted by the company to the members at least 7 days
before election. In case of a listed company the notice shall also be published in one English and one Urdu
newspapers having circulation in the province of stock exchange.
• If the number of candidates is equal to or less than the number of directors fixed to be elected then they
will be elected without any election procedure. In this case all the candidates shall be deemed to have
obtained equal votes.
• If the number of candidates is more than the number of directors to be elected then :
o Votes available to a member is the product of number of voting shares multiplied by the number
of directors to be elected.
o A member may give all his votes to a single candidate or divide them at his discretion.
• A candidate who obtains highest votes shall be declared successful then 2nd highest votes and so on.
• Election is normally held in AGM. It can be through EGM (Extra ordinary GM) if election are to be held
before the expiry of 3 years term.
• In case of a company not having share capital, directors may be elected in the manner provided in the
AOA.
• Fresh Election for Unlisted Company:
A member of a company other than listed company:
o Acquired required number of shareholding to get elected as director
o request the company to hold fresh election and
o board shall proceed to hold the fresh elections within 30 days of the request
o without decreasing the number of directors fixed in the preceding elections.
D (I). Manner of selection of independent directors and maintenance of databank of independent

directors 166
• An independent director with the written consent in writing to be appointed under any law, rules shall be
selected from
o a data bank of eligible persons and willing to act as independent directors,
o maintained by entity, as may be notified by the Commission, having expertise and post on their
website for the use by the company.
o the responsibility of exercising due diligence before selecting a person shall lie with the company
or the Government.

• The manner and procedure of selection of independent directors on the databank who fulfill the
qualifications and other requirements shall be specified by the Commission. Till such time a notification is
issued by the Commission, the requirement of this section shall be deemed relaxed.
• The Commission may relax the compliance of this section on an application made by the company
supported with the sufficient justification or the practical difficulty.
• General Definition of Independent Director: A director
o who is not connected or have any relationship,
o whether financial or otherwise,
o with the company and companies within the same group and
o he can exercise independent business judgment without conflict of interest.
• Director shall not be considered independent if fall in any one circumstance below:
o During the last 3 years has been/has:
✓ Employee including chief executive of the company, or of any of the group;
✓ a material business relationship with the company either directly, or indirectly as a
partner, major shareholder or director of a body.
✓ he has received remuneration or benefit excluding retirement benefit for services
provided to the company other than director’s fee
➢ For public sector companies for above three points, the time period shall be
taken as 2 years instead of three years
➢ For public sector companies independent director shall not be in the service of
Pakistan or of any body owned or controlled by the Government.
✓ participated in stock option or other performance-related pay scheme;
o close relative of the promoters, directors or major shareholders
o cross-directorships or has significant links with other directors through involvement in other
bodies other than association not for profit.
o as served on the board for more than 3 consecutive terms from the date of his first appointment
and for more than two consecutive terms in case of a public sector company.
✓ shall be deemed independent director after a lapse of
one term.
o Nominee director
o Director representing special interest
Close Relative means spouse, lineal (blood relation like children, grandchildren, great grandchildren etc)
ascendants and descendants and siblings.
Major Share Holder means a person who, individually or in concert with his family or as part of a group, holds 10%
or more shares having voting rights in the paid-up capital of the company.

E. Election of Director on request of SUBSTANTIAL ACQUIRER 178A
• Where a person
o acquires 12.5% or more voting shares
o of a listed company
o in his own name,
o he may apply to SECP for requiring the company to hold fresh election of directors in the forthcoming
AGM of the company.
• The SECP may direct the company to hold fresh election of directors if it deems appropriate in the interest
of the company, its minority shareholders and the capital market generally.
• In this case the said person shall not dispose off the shares acquired by him for at least one year from the
date of election of directors.
F. Invalid Election of Directors 179-160
• Members having 10% or more voting power

• may apply to the court within 30 days of election in case of any material irregularity and
• the court, if satisfied, may declare the election invalid in total or in part.
G. Removal of Directors 181-163
• First director, a director filling casual vacancy or an elected director by

• ordinary resolution.
• Ordinary resolution shall not be deemed to have been passed if
o the number of votes against such removal is equal to or exceeds
✓ in case of elected director, minimum number of votes that were cast at the
immediately preceding election of directors for the election of that director
✓ in case of first or director filling casual vacancy, total number of votes divided by the
number of directors for the time being.
H. Certain provisions not to apply to Directors representing Special Interest 183-165
• Provisions in respects of election of directors, term of office of directors, casual vacancy and removal of
directors shall not apply.
• To whom: Directors
o nominated by any government corporation having investment in, or provided credit facility to
the company,
o nominated by Federal or Provincial Government or SECP
o nominated by foreign equity holders on BOD or any other body corporate set up under regional
or other co-operation arrangement approved by the Federal Government.
• Such nominated directors shall hold office during the pleasure of corporation, government or nominating
authority which nominates him.
• Where nominating authority has a right to nominate directors on BOD of the company and also has voting
rights for election of directors then total number of votes available to nominating authority shall be
reduced by the minimum number of votes required to elect a director.
o It means that after nomination of a director, nominating authority is not entitled to cast its full
available voting rights in the election of directors.

I. Consent to act as Director 184-167
• No person shall be appointed or nominated as director or CE or described as such or proposed director or

CE of the company unless
o such person has given his consent in writing for his appointment or nomination.
• The company shall file with the Registrar within 15 days of their appointment or nomination.
J. Acts of Director 185-168
• All the act of director before:

o the discovery of defect in his appointment, or
o disqualification, or
o ceases to hold the office,
✓ are valid.
• After the detection he cannot exercise his powers and functions unless such defect is rectified.
• However defect must be such that can be rectified. E.g consent of director not filed. E.g of defects that
cannot be rectified are insolvent person or a person of unsound mind.
Penalty for Contravention of Sec 154-168 (all the above sections) 186-169
• Level 2 penalty and

• May be debarred from continuing or becoming the director for the maximum period of 3 years.
K. Ineligibility to become a Director Sec-187-153
• A minor
• A person of unsound mind
• A person applied to be adjudicated as insolvent and his application is pending
• Is an undischarged insolvent
• Convicted by a court for an offence involving moral turpitude
• Has been debarred from becoming a director under any provision of the Act.
• Has betrayed lack of fiduciary behavior and a declaration to this effect has been made by the court at any
time during the preceding 5 years
• does not hold NTN number
• Is not a member.
o The following persons need not to be a member
✓ a person representing a member which is not natural person
✓ a whole time employee director
✓ a chief executive
✓ a person representing a creditor
• In case of listed comp following are the additional ineligibility criteria
o loan defaulter of an amount exceeding Rs.1 million declared by a court as such
o is a member of stock exchange engaged in the business of brokerage or is a spouse of such
member.

L. Vacation of office by the Directors 188-171
A director shall automatically cease to hold office if:
• he is ineligible as per sec-153

• he absents from
o 3 consecutive directors’ meetings without leave of absence from the directors.
• If director or a firm in which he is a partner or a private comp in’ which he is a director:
o accepts a loan or guarantee from the company in contravention of S 182; or
o accepts or holds any office of profit without sanction in the general meeting other than that of
CE or a legal or technical advisor or a banker.
• Additional grounds may also be provided in the articles.
L (I). Disqualification Order by the Commission 172
Commission may
• on its own motion or upon complaint received

• after giving the opportunity of being heard
• pass disqualification order against any director
• for a period up to 5 years from the date of the order If:
(a) conviction of an offence in connection with the promotion, formation, management or liquidation of a
company, or with the receivership or management of a company‘s property;
(b) continuous default in relation to provisions of this Act requiring submission of any information, documents,
notices etc, to the Commission or the registrar;
(c) a person has been a director of a company which became insolvent at any time while he was a director or
subsequently. Order shall be made within two years after the date of the insolvency.
(d) the business of the company in which he is or has been a director, has conducted to defraud any persons or for
a fraudulent or unlawful purpose, or in a manner oppressive of any of its members or that the company was
formed for any fraudulent or unlawful purpose; or
(e) the person concerned in the formation of the company or the management have been guilty of fraud,
misfeasance, breach of trust or other misconduct towards the company or towards any of its member; or
(f) the affairs of the company of which he is a director have been conducted in a manner which has deprived the
shareholders thereof of a reasonable return; or
(g) the person has been convicted of allotment of shares of a company for inadequate consideration; or (h) the
person is involved in illegal deposit taking; or
(i) the person has been convicted of financial irregularities or malpractices in a company or
(j) the company of which he is a director has acted against the interests of the sovereignty and integrity of
Pakistan, the security of the State, friendly relations with foreign States; or
(k) the company of which he is a director refuses to act according to the requirements of the memorandum or
articles or the provisions of this Act or the directions of the Commission; or

(l) the person is convicted of insider trading or market manipulation practices; or
(m) the person has entered into a plea bargain arrangement with the National Accountability Bureau or any other
regulatory body;
(n) the person has been declared a defaulter by the securities exchange;
(o) that it is expedient in the public interest so to do.
L(II) Personal liability for company’s debts where person acts while disqualified in a Public Interest Company 173
• A person shall be personally responsible for all the relevant debts of a company if at any time—
o in contravention of a disqualification order, he is involved in the management of the company,
✓ Relevant debt means such debts and other liabilities of the company as are incurred at a
time when that person was involved in the management of the company ;
or
o he acts on instructions given, without the leave of the Commission, by a person whom he knows
is named in the disqualification order:
✓ debts and other liabilities of the company as are incurred at a time when that person
was acting on instructions given
• if any decision is taken in the board, the disqualified director shall be personally responsible to
the extent of proportionate amount of liability so incurred.
• Public Interest Company Means (as per third schedule):

1. Listed company
2. Unlisted company which is:
✓ Public interest company or
✓ Public utility or company carrying on business of essential public service or
✓ Holding assent in the fiduciary capacity of broad group of outsiders, such as banks or
✓ Having such number of shares as notified
✓ Holding assets exceeding such value as notified.
M. Restriction on Director’s Remuneration 191-170
• Remuneration for extra services including remuneration of chairman shall be determined by the directors
or the company in general meeting as per Articles.
N. Restriction on Assignment of office of Directors 192-174
• A director cannot assign his office,

o Any such appointment shall be void.
• A director can appoint his alternate or substitute
o with the approval of the board
o if he is absent from Pakistan for not less than 90 days.
o If original returns alternate director shall automatically vacate the office.

O. Proceedings of directors 193-176
• Quorum for a directors’ meeting of a listed company shall be 1/3rd of their number or four whichever is
greater.
• For other companies quorum shall be as provided in the articles
• Directors of a public company shall meet at least once in each quarter of a year.
• To fill the casual vacancy (only for this purpose), if the quorum is not present,
o Quorum shall be the remaining directors present.
O(I). Records of resolutions and meetings of board 178
• Every company shall keep record of:

o Resolutions passed be circular
o Minutes of the meeting of board or any committee of directors authenticated by chairman of the
meeting or the chairman of the next succeeding meeting.
o Minutes accordingly prepared shall be evidence that the meeting has been conducted duly until
contrary is proven
o A copy of the draft minutes of meeting of board shall be furnished to every director within
fourteen days of the date of meeting.
o Record shall be kept at registered office and preserved for atleast 10 years in physical form and
permanently in electronic for.
• Penalty Level 1c
O(II) Passing of resolution by the directors through circulation 179
• A resolution in writing
o Circulated
o Along with necessary papers if any
o Signed by all directors
o Shall be valid as if passed in the board meeting.
• It shall be note in the subsequent meeting and be the part of the minutes.
• A directors’ agreement by signing to the written resolution passed by circulation, may not be revoked
subsequently. Means if the director has signed the circular resolution for agreement of what is contained
in the resolution, he may not be able to take back or revoke his agreement after that.
P. Liability of directors 194-180
• A company cannot indemnify or render exempt any officer (a director, CE, auditor or other officer)
against any liability attached on him for any default of which he may be guilty in relation to the company.
• Any provision of such indemnity in Articles or an agreement shall be void.
• Except if the company has undertaken of behalf of such officer:
o provisions of insurance or
o qualifying third party indemnity provisions
• But if it is proved that he is not guilty then proceeding cost can be paid by the company.

P(I). Protection to independent and non-executive directors 181
• An independent director; and

• A non-executive director; of a
o a listed company or
o a public sector company
✓ shall be held liable only for such acts which occurred
➢ with his knowledge or
➢ through board processes or
➢ consent or
➢ where he had not acted diligently.
• Non-executive director means, a person on the board of the company who:
a) is not from among the executive management team and may or may not be
independent;
b) is expected to lend an outside viewpoint to the board of a company;
c) does not undertake to devote his whole working time to the company and not involve
in managing the affairs of the company;
d) is not a beneficial owner of the company or any of its associated companies or

undertakings;
e) does not draw any remuneration from the company except the meeting fee.
Q. Loans to directors 195-182
• A company cannot give loan to, or provide guarantee / security in respect of loan to, the following:
o Any director of the company or a director of the holding company [such directors]
o Any relative of such directors [relative means spouse and minor children]8
✓ unless transaction is approved by resolution of the members and
✓ in case of a listed company the pre-approval is also required from the commission.
• A company which in the ordinary course of its business provides loans or gives guarantees or securities for
the due repayment of any loan.
• In case of default all knowing parties are jointly and severally liable to repay the loan or to make good any
loss on account of guarantee / security provided by the company with mark up not less than the
borrowing cost of the company.
• Penalty: Upto one million ruppes or
Simple imprisonment upto one year

R. Powers of Board 196-183
The directors can pay expenses on behalf of the company and can exercise all powers to manage the business
affairs of the company unless a matter is required to be exercised thru BOD meeting or general meeting by the
Companies Ordinance or Articles of the company.
• Circumstances in which BOD meeting is required

o To issue shares, debentures or other redeemable capital
o To borrow money, make loans or invest the funds of the company. Not necessary if ordinary
course of business ie in case of banking company.
o To authorize the following to enter into a contract for sale, purchase or services with the
company:
✓ A director of the company
✓ A firm of which he is a partner
✓ Any partner of such firm
✓ A private company in which he is a member or director
o To approve annual or periodical financial statements
o To approve bonus to employees
o To incur capital expenditure or dispose off a fixed asset in accordance with the limits as
prescribed by SECP. Limits are Rs 1m on cap expenditure in a single item and Rs 100,000 (book
value) for disposal.
o To undertake obligations under leasing contracts exceeding Rs.1 million
o To declare interim dividend
o In respect of the following if the same is considered material by BOD as per generally accepted
accounting principles:
✓ to write off bad debts, advances and receivables
✓ to write off inventories and other assets of the company
✓ circumstances in which a lawsuit may be compromised or a claim or right may be
released or surrendered.
• Specific circumstances in which resolution in GM is required
Resolution must be implemented within one year of passing otherwise lapsed:
o Sell, lease of disposal of the undertaking or a sizeable part of the undertaking unless it is
ordinary business of the company
✓ undertaking‖ shall mean an undertaking in which the investment of the company
exceeds twenty percent of its net worth as per the audited financial statements of the
preceding financial year or an undertaking which generates twenty percent of the total
income of the company during the previous financial year
✓ the expression ―sizeable part‖ in any financial year shall mean twenty five percent
or more of the value of the assets in that class as per the audited financial statements of
the preceding financial year
o Remit, give any relief or give extension of time for the repayment of any debt outstanding
against any person specified u/s 182.
o sell or otherwise dispose of the subsidiary of the company.
Penalty: Level 2

Directors of are allowed to attend BOD meeting thru video conferencing or other audio visual aid where it is not
possible for the directors to be physically present. However, quorum and other formalities of the meeting must be
strictly observed and the secretary is required to secure the video recording and keep it in his custody along with
the other relevant record.
S. Prohibition regarding making of political contributions 197-184
• A company shall not contribute any amount or allow utilization of its assets—
o to any political party; or
o for any political purpose to any individual or body.
• Penalty for company: Level 2
• every director and officer of the company who is in default shall be punishable with imprisonment
which may extend to two years and shall also be liable to a fine of one million rupees.
S(I). Prohibition regarding distribution of gifts 197A-185
• A company shall not distribute gifts in any form to its members in its meeting.
• Penalty level 1
T. Unlimited Liability of Directors Sec 111, 112-98,99
• The liability of any or all of the directors may be unlimited in a limited company if so provided by the
Memorandum.
• A notice shall be given to a person who is accepting, or is being proposed for election or appointment for,
the office of director that his liability as a director will be unlimited. The promoters or officers including a
member who is proposing the said person shall give this notice.
• A limited company can alter its Memorandum by special resolution if so provided in the article so as to
render the liability of any or all of its directors unlimited. However, such alteration shall not apply to a
director without his consent who is holding office of director before such alteration.
U. Disclosure of interest by a director 214 to 217-206,207,212
• Every director who is concerned or interested directly or indirectly (shall also be interested if his spouse
or any child or parents is so interested )in any contract or arrangement by or on behalf of the company is
required to disclose by notice the nature of his interest
o at the first meeting of directors after becoming interested or
o at the meeting in which such agreement or arrangement is considered.
• If a director of the company is
o a director, member or partner of any other entity then
o a general notice to this effect may be given and
o thereafter a contract or arrangement may be made by the company with such entity.
o Such a general notice is valid up to the end of the financial year and a fresh notice is required
in the last month of the financial year.
• Interested director shall not vote for that contract or arrangement
• His presence shall not be counted for the purpose of quorum.
• In case of a listed company such director interested shall not even attend the part of the meeting in which
the matter is being considered.
• If majority of the directors are interested in, any contract or arrangement, the matter shall be laid before
the general meeting for approval

• He can vote for any other matter in the same meeting.
• This restriction is not applicable in the following cases:
o a private company which is not a subsidiary or holding of a public company.
• The Court may declare a director to be lacking fiduciary behavior if he does not disclose his interest.

Association Not for Profit – Sec 42-41,42
• Any association for promoting commerce, art, science, religion, sports, social services, charity or other
useful object may be formed as a limited company under the Companies Ordinance.
• Profits shall be applied only in promoting its objects and there shall be no payment of dividend to its
members
• Activities shall not be against the laws, public order, security, sovereignty and national interests of
Pakistan
• The association shall be granted a license by SECP for registration as a public limited company without
the addition of the words ‘Limited’ or ‘(Guarantee) Limited’ to its name. After granting the said license
by SECP, the association may be registered accordingly.
• A license may be granted on such conditions and subject to such regulations as the Commission
thinks fit and those conditions shall be inserted in and deemed part of the memorandum and
articles, or in one of those documents.
• Memorandum and articles of association -------Table F in the First Schedule or as near as possible
and approved by the Commission.
• SECP may revoke the said license after giving notice and providing an opportunity of being heard, if:
o Failure to comply with the terms and conditions of the license
o Contravention of this section
o affairs are conducted in a manner prejudicial to public interest
o Failure to file with registrar FS or annual return for preceding two consecutive years
o acted against the interest, sovereignty and integrity of Pakistan, the security of the State and
friendly relations with foreign States
o number of member reduced below 3
o unlawful or fraudulent activities
o run and managed by persons who fail to maintain proper and true accounts or they commit
fraud, misfeasance or malfeasance in relation to the company
o involved in terrorist financing or money laundering
o managed by persons who refuse to act according to laws, AOA, MOA, or orders of authorities
o not carrying on its business or is not in operation for one year
o it is just and equitable
• Upon revocation of the license, the words ‘Limited’ or ‘(Guarantee) Limited’ shall be added at the end of
its name.
• Effect of revocation of licence
o stop all its activities except the recovery of money owed to it
o shall not solicit or receive donations
o all the assets of the company after satisfaction of all debts and liabilities shall, be transferred to
another company licenced, preferably having similar or identical objects to those of the
company, within ninety days from the revocation of the licence or such extended period as may
be allowed by the Commission
o After compliance of the requirements, file within 15 days from the date of such
compliance, a report to the registrar containing such information and supported with
such documents as may be specified.
o Within 30 days of acceptance of the report by the registrar, the board shall initiate
necessary proceedings for winding up of the company voluntarily or where it has no
assets and liabilities make an application to the registrar for striking the name of the
company off the register.
o If the company fails to comply with any of the requirements of this section within the

period specified or such extended period as may be allowed, the commission may allow:
✓ appoint an administrator to manage affairs of the company
o Where any assets of the company are transferred, in consequence of revocation of
licence, to another company licenced, the members and officers of the first mentioned
company whose license is revoked or any of their family members shall not be eligible to
hold any office in the later company for a period of five years from the date of transfer
of such assets.
o Where the licence of a company has been revoked before the commencement of this Act and
such company is not in the process of winding up, this section shall apply as if the licence was
revoked immediately after the commencement of this Act.
o Penalty Level 2
• Application for grant of license shall be accompanied by:

o 3 copies of the draft memorandum and articles of association
o List of promoters with their occupations and addresses
o A statutory declaration that all the legal requirements have been complied with. This declaration
shall be signed by:
✓ An advocate of High Court or the Supreme Court;
✓ A chartered accountant or cost and management accountant practicing in Pakistan; or
✓ A director named in the Articles of Association
o The names of entities in which the promoters hold any office and the position held.
o A copy of immediately preceding audited accounts if the association is already in existence and a
brief statement of the work already done
o An estimate of the future annual income and expenditure and the proposed work to be done.

Conversion of Private Company into Public Company and vice versa or Private Company into Single Member
Company Sec 44,45-46,47
A. Conversion of a Private Company into Public Company
• Special resolution is required to alter Articles of association to exclude restrictions for a private
company. Restrictions on a private company are:
o Maximum number of members 50 not including persons who are in the employment of the
company
o Restriction on freely transfer of shares; and
o Prohibition on invitation to public to subscribe shares or debentures of the company
B. Conversion of a Public Company into Private Company
• Prior approval of SECP in writing is required.

• Special resolution is required to amend Memorandum and Articles.
• Incase of listed company converted in to private company, Commission shall notice of every application
received for conversion to stock exchanges.
• If commission is satisfied shall issue the order allowing conversion and forward to the company and the
registrar within 7 days of the date of the order.
• A copy of the memorandum and articles of association as altered shall be filed within fifteen days
from the date of the order, with the registrar and he shall register the same and thenceforth the
memorandum and articles so filed shall be the memorandum and articles of the newly converted
company.
• An application to SECP is required to be filed within 60 days from the date of special resolution
containing the following:
o Copy of special resolution
o Existing capital structure
o Attested copy of memorandum and articles of association
o Latest audited accounts
o Precise reasons for conversion into private company
o Number of members of the company
o Names and addresses of the major creditors indicating the amount due to each creditor
o Names of members with voting power / proxies held by them:
✓ Members present at the meeting
✓ Members who voted in favor of the proposed conversion
✓ Members who voted against the proposed conversion together with their objection in detail.
Penalty: Level 2

C. Conversion of a Private Company into Single Member Company
• Prior approval of SECP in writing is required.

• Special resolution is required to amend Memorandum and Articles.
• If commission is satisfied shall issue the order allowing conversion and forward to the company and the
registrar within 7 days of the date of the order.
• A copy of the memorandum and articles of association as altered shall be filed within fifteen days from
the date of the order, with the registrar and he shall register the same and thenceforth the memorandum
and articles so filed shall be the memorandum and articles of the newly converted company.
• A copy of the memorandum and articles of association as altered shall be filed within fifteen days from
the date of the order, with the registrar and he shall register the same and thenceforth the memorandum
and articles so filed shall be the memorandum and articles of the newly converted company.
Penalty Level 2

Directors’ Duties
Behavior of directors when involved in the day-to-day running of the company should meet certain minimum
standards. Such duties can be categorized as follows:
• duties of honesty and good faith; and

• duties of care and skill.
Duties of honesty and good faith (known as fiduciary duties)
These require the directors to:
• act in what they believe to be the best interest of their company;

• exercise their powers for the particular purposes for which they were conferred; and
• not put themselves in a conflict between duty and personal interest.
(a) Duty to act in good faith in the interest of the company
This is a primary duty of a director. The test of good faith in subjective, so that if a director honestly believes that he
is exercising his power in the best interest of the company, a court will not consider his duty broken merely because,
in the court’s opinion, his actions are not in the interest of the company.
The directors must have regard to the interests of the company’s employees in general as well as the interests of it
members. This duty, like directors’ other duties, is owed to the company itself and is not enforceable by individual
employees. The scope of this duty does not alter the overriding requirement that directors must act in the interest
of the company as a whole.
(b) Duty to use powers for their proper purpose
The powers a directors, as granted in the Articles, are held in trust for the company and must not be exercised for
any purpose other than that for which the power was conferred.
A director who breaches this duty cannot argue that his action was done in good faith and in what he believes to be
the best interest of the company.
(c) Duty not to exceed powers
The directors must not do an act which is unlawful, or outside the company’s powers or outside the powers
conferred on the directors by the Articles. This is so even if they are acting honestly, believing that what they are
doing is in the best interests of the company. Directors may be personally liable if they dispose of the company’s
property in an unauthorized manner (for example, by paying dividends out of the company’s capital).
(d) Conflicts of interest and duty
A director must not take advantage of his position including the duty not to make a personal profit from his position
and a number of statutory provisions designed to eliminate conflicts of interest and abuses by directors of their
position.

Duties of care and skill
In contrast with the extensive duties of good faith, which largely restrict certain acts conflicting with the director’s
duty to his company, a director has duties of care and skill which are positive side to promote the welfare of the
company.
(a) The test of skill
The traditional test has been that a director need not display in the performance of his duties a greater degree of
skill than may reasonably be expected from a person of his knowledge and experience. In other words, the degree
of skill to be expected of a director is judged subjectively by looking at his particular qualifications and not according
to an objective standard.
However, the conduct that might be expected of a person carrying out the same functions as a director and the
general knowledge, skill and experience that a director has, should be used to interpret the test of skill.
(b) Attendance at broad meeting
Traditionally, a director is not bound to give continuous attention to the affairs of the company. His duties are of an
occasional nature to be performed at periodical meetings of the board and any committee of the board on which he
may sit. He should ideally attend all such meetings but he is bound to.
A greater duty can be imposed upon the directors. This is often done in the case of an executive director through
the service contract between the director and the company. This often contrasts with the less formal arrangements
for a non-executive director, who may not attend all board meetings and who will usually not be a company
employee.
(c) Delegation
A director may delegate his duties to employees or agents of the company provided he ensures that the relevant
person is suitably qualified, but in the absence of authority from the company the directors must act collectively as
a board and have general right to delegate their powers. However, the Articles usually allow the directors to delegate
their powers to a managing or other executive director or to a committee of the directors.
In recent case laws the courts have taken a view that the directors can delegate their powers as per the Articles but
such delegation does not abrogate their responsibilities to supervise the extent of that duty.
As regards liability between directors, the default of one director does not necessarily impose liability on the others.
A director is not generally liable for the acts of other directors and is under no duty to supervise their conduct.
However, a director who knows the default and participated to an extent or a director who has failed to supervise
or enquire when there are suspicious circumstances, may be liable to the company.

Meetings – Sec 157-173
A. Statutory Meeting 157-131
• Every public company

• having share capital
o are required to hold a general meeting called ‘Statutory Meeting’.
o Required to be held within a period of
✓ 180 days from date of entitlement of commencement of business or
✓ 9 months from the date of its incorporation
➢ Whichever is earlier
• In case first annual general meeting of a company is decided to be held earlier, no statutory meeting shall
be required.
• The directors shall forward notice and ‘Statutory Report’ to every member (and 5 copies to the Registrar)
at least 21 days before the meeting. Statutory Report shall be certified by the CE and two directors and
incase of a listed company also by CFO .
• A list of members shall be made available during the meeting showing names, occupations, nationality,
addresses and number of shares held by each member.
• Members may discuss any matters in respect of:
o Formation of the company
o Statutory report
o Other items for which statement of material facts was annexed with the notice of the meeting
• The provisions of this section shall not apply to a public company which converts itself from a private
company after one year of incorporation
B. Contents of the statutory reports
• Total number of shares allotted in cash and otherwise than in cash and consideration thereof.
• Total cash received against shares allotted
• An abstract of Receipts and Payments account up to a date within 7 days of statutory report stating:
o Receipts from shares, debentures and other sources
o Payments from the above receipts
o Balance in hand
o Preliminary expenses (estimated or actual) showing separately any commission or discount on
issue of shares and debentures.
✓ The above 3 points must be certified by the auditors for correctness.
• Names, addresses and occupations of directors, CE, secretary, auditors, legal adviser and any change since
incorporation.
• Underwriting contracts, if any, fulfilled and unfulfilled with reason.
• Particulars of commission or brokerage for issue of shares to any directors, CE, secretary, other officer or
to a private company of which any of such persons is a director.
• Brief statement of the company’s affairs since incorporation and the business plan including any change
or proposed change affecting the shareholders’ interest and business prospects of the company.

C. Annual General Meeting 158-132
• First AGM shall be held within 16 months from the date of incorporation of a company.
• Subsequent AGM shall be held
o At least once in every calendar year
o Within 4 months from the close of financial year; and
• Extension to hold AGM
✓ Not exceeding 30 days
✓ For any special reason
✓ May be allowed by SECP in case of listed comp and
✓ By registrar in case of other company.
✓ Application for extension is required to be submitted at least 30 days before the last
date of AGM.
• AGM of a listed company is required to be held in the town of registered office or in a nearest city.
• If the members demands of a listed company who are
o residing in any same city,
o holding not less than 10% of the paidup capital
➢ the listed company must provide the facility of video- link to such members
enabling them to participate in its annual general meeting.
• Notice of AGM shall be sent to the members at least 21 days before the date of AGM.
• In case of a listed company such notice shall also be sent to the Commission and be published in once
English and one Urdu newspapers having circulation nationwide.
• This section shall not apply to single member company
• Penalty level: For listed- Level 2 For other companies- Level 1
D. Ordinary Business AGM
• Consideration of the accounts

• Consideration of directors’ report and auditors’ report
• Declaration of dividend
• Appointment of auditors and fixation of their remuneration
• Election of directors
Matters other than ordinary are special matters. Statement of material facts for any special matter is required to
be annexed with the notice including interest of every director in the matter, directly or indirectly. If a document is
to be discussed in the meeting then the said statement shall also disclose the time and place where the document
is available for inspection.

D. Extra Ordinary GM 159-134
• Meeting other than AGM, First AGM and statutory meeting.

• Directors may call EGM for any matter
o at their own discretion or
o in case of a company having share capital on requisition of the members having 10% or more
voting powers on the date of requisition or
o in case of a company not having share capital, not less than one- tenth of the total members.
o The said requisition stating the objects of meeting shall be signed and deposited at the registered
office with relevant documents, if any.
• If directors do not proceed to call EGM within 21 days then
o the members who filed the requisition may hold EGM within 90 days from the date of deposit of
the requisition in the same manner, as nearly as possible, as a meeting called by the directors.
o Reasonable expense to convene the meeting by the members shall be repaid by the company the
same shall be deducted from the remuneration of director who were in default.
• Notice requirement same.
• The Registrar may authorize on an application by the directors to convene an EGM on a shorter notice in
case of an emergency affecting the business of the company.
• In case of a company other than listed, if all the members entitled to attend and vote at any extraordinary
general meeting so agree, a meeting may be held at a shorter notice.
E. Notice of GM or meeting of class of members 160-134
• Notice specifying the place, date and time with agenda of the general meeting shall be given to:
o Every member or class of member
o Next of kin
o Auditors of the company.
• Where any special business is to be transacted at a general meeting, the notice set out
o all material facts concerning such business,
o the nature and extent of the interest, if any, every director,
o where any item of business consists of an approval to any document by the meeting, the time
when and the place where the document may be inspected
• Incase of a listed company notice shall include that the members may demand who are
o residing in any same city,
o holding not less than 10% of the paidup capital
➢ the facility of video- link to such members enabling them to participate in its
annual general meeting.
• Accidental omission shall not invalidate the meeting.

F. Quorum of GM 160-135
• PLC--------- At least 10 members who represent not less than 25% voting power on their own account or
as proxies.
• Others---- At least 2 members who represent not less than 25% voting power on their own account or as
proxies.
• Larger quorum may be provided in the AOA.
• If quorum is not present in 30 minutes
o If the meeting is called upon requisition of the members then the meeting shall be dissolved
o If the meeting is called by the directors then
✓ the meeting shall stand adjourned to the same day in the next week at the same time
and place and
✓ if at the adjourned meeting a quorum is not present within 30 minutes then 2 members
shall be a quorum unless articles provide otherwise.
• If quorum is not present even in an adjourned meeting then the Registrar may allow quorum as one
member.
• If any matter is resolved at any adjourned meeting of directors, members or creditors then the date of
resolution shall be the date of adjourned meeting.
G. Chairman of a general meeting 160-134
• Chairman of BOD shall be the chairman of the general meeting.

• If the chairman
o is not present within 15 minutes or
o unwilling to act as chairman or
o if there is no such chairman of BOD
✓ then one of the directors present at the general meeting may be elected as chairman or
✓ alternately one of the members shall be chosen as the chairman.
H. Voting Power 160,165-134,141,142
• In case of a company limited by guarantee and not having share capital every member shall have one
vote.
• In case of a company having share capital every member shall have voting power in proportion to the
paid up value of shares / securities.
• Any member having voting power shall not be debarred from casting his votes and any such restriction,
if any, in the Articles shall be void.
• Voting will be by show of hands unless otherwise provided.
• Votes on a poll may be given personally or by proxy or through video link or through postal ballot.
• If poll is not demanded then the chairman’s declaration regarding a decision on a show of hands and
entry to that effect in the minutes book shall be evidence of the fact without proof of the number or
proportion of votes cast in favor of or against such resolution, until the contrary is proved.
• All the requirements of this Act regarding calling of, holding and approval in general meeting, board
meeting and election of directors in case of a single member company, shall be deemed complied with; if

the decision is recorded in the relevant minutes book and signed by the sole member or sole director as
the case may be.
• Penalty level 2 for listed and penalty level 1 for others.
I. Notice of the Resolution 164-140
• Draft resolution by the company: Send copies of the draft special resolutions to the members with notice
of a general meeting.
• Draft resolution by the members:
o If the meeting is requisitioned by the members, the members shall also submit draft resolution
along with the requisition.
o If the meeting is called by the directors then the members having 10% or more voting power
may give notice of a resolution which they propose to be considered. Draft resolution shall be
forwarded so as to reach the company:
✓ at least ten days before the meeting;
➢ and the company shall forthwith circulate such resolution to all the members
o Penalty level 2 for listed and level 1 for others.
J. Power of the Court to declare the proceedings of a general meeting invalid 160A-136
• A petition may be filed in the court

o By members having at least 10% voting power
o within 30 days of the GM, if
✓ there is any material defect or omission in the notice or
✓ Members were prevented from using their rights effectively.
• The court, if satisfied, may declare such proceedings invalid in full or in part and direct to hold a fresh
general meeting.
K. Proxies 161-137
• Every member’s entitlement.

• Must be a member unless provided by Articles. If nothing is provided in AOA must be a member.
• All rights same as of a member.
• Member of a company not having share capital cannot appoint proxy unloess otherwise provided in the
AOA.
• Only one proxy for a (one) meeting. If more than one proxy forms submitted, all shall stand cancel.
• Notice of GM shall accompany proxy form- Table A First Schedule- Reg 43. Stating all proxy related
provisions.
• Articles may provide certain special requirements for proxy form. However non-compliance of special
requirement will not render it invalid.
• Form to be submitted atleast 48 hours before meeting. Only working days will be counted. Any provision
contrary in the AOA shall be void.
• Proxy form
o Must be in writing
o Signed by the appointer or his attorney or incase appointer being the body corporate, under its
seal and signed by authorized officer
• Penalty level 2 for listed companies and penalty level 1 for other.

• A member or his proxy is entitled to:
o Demand a poll.
o Abstain from voting for a particular matter or not to exercise his full voting rights on any poll.
o Inspect, during the business hours, all proxies lodged with the company.
L. Govt. or corporate representation at meetings of a company 162,163-138,139
• The following may appoint any of its officials or any other person as its representative to attend meetings
of the company and such person shall be entitled to exercise all powers as if he were an individual
member:
o Government, if the government is a member of the company
o A company which is a creditor as per contractual arrangement
o A company which is a member, such appointment shall be decided by a resolution of the
directors of the company which is a member.
M. Demand and Time for Poll, Poll through Secret Ballot 167,168,169-143,144,145,146
• On or before declaration of voting in a GM by show of hands

o the chairman may order a poll at his own motion or
o poll may be demanded by the members
✓ having not less than one-tenth of the total voting power.
✓ present in physically or through video conferencing or through proxies
• The chairman may order a poll by secret balloting
o at his own motion or
o on demand by the members
✓ having not less than one-tenth of the total voting power.
✓ present in physically or through video conferencing or through proxies
• Demand for poll may be withdrawn at anytime.
• Time for Poll
o Immediately for the matters of election of chairman of the general meeting and adjournment
of the general meeting.
o For any other matter, time and manner for poll shall be decided by the chairman not later than
14 days.
• When a poll is taken, the chairman or his nominee and a representative of the members demanding the
poll shall scrutinize the votes given on the poll and the result shall be announced by the chairman.
• The chairman shall have power to regulate the manner in which a poll shall be taken.
• Date of decision by Poll: Date of decision of a particular matter shall be deemed to the date when the
poll is taken.

N. Resolution Filling 172-150
• A printed or typed copy of every special resolution duly authenticated by a Director or Secretary of the
company is required to be filed within 15 days to the Registrar.
• Articles must accompany copy of special resolution.
• Copy shall be given to requesting member on the payment of the amount not more than prescribed by
the comp.
• Penalty level 1
O. Records and Inspection of records of resolutions and meetings 173-151,152
• Minutes books and copies of the resolutions are required to be maintained.

• Shall be kept at the Registered Office in respect of general meetings and resolution and be preserved for a
period of 20 years in physical and permanently in electronic form.
• Shall be signed by the chairman of the meeting or by the chairman of the next succeeding meeting
• Minutes book of general meeting shall be open to inspection by the members
o without any charge
o during business hours
o subject to restrictions imposed by Articles or general meeting
o but at least 2 hours each day excluding a public holiday.
• A member may apply after 7 days of the general meeting for the certified copy of minutes and the
company shall provide the same within 7 days of the application with a charge not exceeding the amount
prescribed by the company.
• Penalty level 1
P. Power of Commission to call meetings 170-147,148
• If default is made in holding the statutory meeting, annual general meeting or any extraordinary general
meeting
• the Commission may
o either of its own motion or
o on the application of any director or member of the company
✓ call, or direct the calling of, the said meeting of the company in such manner as the
Commission may think fit.
➢ The directions may include a direction that one member of the

company present in person or by proxy shall be deemed to constitute
a meeting.
• Penalty level 3

Q. Passing of resolution by the members through circulation 149
• For matters other than ordinary

o A pvt comp or
o A public unlisted company having not more than fifty members
✓ may pass a ordinary or special resolution
✓ Circulated
✓ Along with necessary papers if any
✓ signed by all directors
✓ Shall be valid as if passed in the general meeting.
• It shall be note in the subsequent meeting and be the part of the minutes.
• A member’s agreement by signing to the written resolution passed by circulation, may not be revoked
subsequently. Means if the member has signed the circular resolution for agreement of what is contained
in the resolution, he may not be able to take back or revoke his agreement after that.
Register of Members & Debenture holders
A. Register and Index 147, 149-119,120,122,123,
• Must for every company to keep register of its members and debenture holders.
• Register should contain
o Names, father’s / husband’s name, nationality, occupation and addresses
o Number and amount paid on their shares or debentures
o Date of becoming a member or debenture holder in the register
o Date on which a person ceases to be a member and the reason for ceasing to be a member
o Date on which a person ceases to be a debenture holder
• A company having more than 50 members or debenture holders must keep index of the register and
shall make necessary alteration in the index within 14 days from any alteration.
B. Inspection150-124
• Same as that of minutes book.

• Inspection of register by member without any charge and for any other person as fixed by the company.
• A person may make extracts.
• Every company shall provide a certified copy of register or index or any part thereof on payment of fee
not exceeding fixed by the company within 7 days of application by any person excluding non-working
days and days on which the transfer books of the company are closed.
• Penalty level 1

C. Power to close register 151-125
• A company may close its register of members and debenture holders

o By giving atleast 7 days prior notice
o for any time
o not exceeding 30 days in the whole in a year
o 15 days extension on application to Commission
✓ In the case of listed company, notice must be given by advertisement in English and
Urdu languages at least in one issue each of a daily newspaper of respective
language having wide circulation.
• Penalty level 2
D. Power of Court to rectify register 152-126
• If the name of any person is entered in or omitted from the register fraudulently or unnecessary delay
takes place in any entry in the register then the aggrieved person may apply to the court for rectification
of the register.
• The court, if satisfied, may order rectification of the register. The court may also order for payment by the
company to the aggrieved person for any damages sustained e.g. dividend could not be received by the
aggrieved person due to unnecessary delay in the transfer of shares.
• The court may also decide entitlement of a person related to shares or debentures.
E. Annual list of members, debenture holders etc 156-130
Every company shall prepare and file with the register Form A (company having share capital) or Form B (company
not having share capital) of the Third Schedule containing the specified particulars as on the date of AGM (or as on
the last date of the calendar year if AGM is not held). This form shall be submitted within 30 days of the AGM.
In the case of a listed company the Registrar may allow 15 days extension for filing of annual list for any special
reason.
Nothing in this section shall apply to a company, in case there is no change of particulars in the last annual return
filed with the registrar
However the company other than a single member company or a private company having paid up capital
of not more than 3 million rupees, shall inform the registrar that there is no change of particulars in the
last annual return filed with the registrar.
Penalty listed level 2 and other level 1

F. Register of Directors and other Officers 205-197,198
• Every company is required to keep register of its directors and officers including CE, managing agent,
secretary, chief accountant, auditors and legal advisor containing certain specified particulars).
• Each of the above persons shall file his particulars to the company within 10 days of his appointment or
change in any of his particulars.
• The company shall file return of the above particulars with the registrar within 15 days from the date of
appointment or any change therein.
• Penalty level 1
• If the name of any person is fraudulently entered in or omitted from the register of directors
o the person aggrieved or the company, may apply to the Court for rectification
of the register of directors.
o The Court may either refuse the application or
o may order rectification of the register on such terms and conditions.
o When the order is forwarded to the company and shall, by its order, direct the company
to file notice of the rectification with the registrar within fifteen days from the receipt of
the order.
o The persons involved in shall be punishable with imprisonment for a term which may
extend to three years or with fine which may extend to one million rupees, or with both.
• Inspection of register same as minutes of meeting.
o For members free of cost and for any other person without any charge.
o Penalty level 1

Books of Account
A. Books of Account to be kept by a company 230-220
• Every company including of its branch office shall keep

o proper books of account
o other relevant books and papers and
o financial statements for every financial year.
o Production records as may be required by SECP thru a general or special order where a company
is engaged in manufacturing, processing or mining activities.
• Books of account should be preserved at least for ten years.
• Books of account shall be kept at the registered office of the company. However, the directors may
decide to keep the books at any other place and in this case, a notice within 7 days of such decision shall
be filed to the Registrar giving full address of the other place.
• Books of branch, if any, may be kept at branch office but
o in this case proper summarized returns periodically are required to be sent to the registered
office or other place where books of account are kept by the company.
• Books of account should give a true and fair view of the state of company’s affairs and should contain
explanation of transactions.
• Directors can inspect the books of account and other papers during business hours.
• Every director, including chief executive and chief financial officer in default:
o in respect of a listed company,
✓ be punishable with imprisonment for a term which may extend to two year and
✓ with fine which shall not be less than five hundred thousand rupees nor more than five
million rupees, and
✓ with a further fine which may extend to ten thousand rupees for every day after the first
during which the default continues.
o in respect of any other company,
✓ be punishable with imprisonment for a term which may extend to one year and
✓ with fine which may extend to one hundred thousand rupees
B. Annual Accounts and Balance Sheet 233,223
• First annual accounts of a company must be presented before AGM within 16 months from the date of
incorporation.
• Subsequent annual accounts should be presented once at least in every calendar year before an AGM
within a period 120 days of the date of closing of the financial year
o Extension up to 30 days may be provided for any special reason by SECP in the case of a listed
company and by the Registrar in the case of other company.
• The accounts shall be prepared for a period not exceeding 1 year except
o in case where special permission is granted by the Registrar for preparation of accounts for a
longer period.
• Financial Statements shall be audited and auditor’s report shall be attached thereto.
o Except a private company having paid up capital not exceeding 1 million rupees
• Copy of accounts, auditor’s report and directors’ report and incase of listed company chairman’s review
report shall be sent either by post or electronically

o to every member at his registered address
o at least 21 days before AGM and
o a copy shall be kept at the registered office of the company for inspection by the members.
• Listed companies are required to send 3 copies of their FS together with reports and a copy electronically
at least 21 days before AGM to
o the Registrar,
o SECP and
o the stock exchange
o and also post on company’s website.
C. Copy of FS to the Registrar 242-233
• Copies of audited FS and auditor’s report in case of a listed company within 30 days and in case of other
company within 15 days from the date of AGM shall be filed with the Registrar.
• If AGM does not adopt the accounts or defers its consideration or AGM is adjourned then a statement of
this fact with reason shall be annexed to the accounts required to be filed within the said 30 days time
limit.
• This section is not applicable for a private company having paid up capital of less than Rs.10 million.
• Penalty for listed level 2 and other level 1.
D. Contents of Financial Statements 234-225
• Shall be prepared in accordance with the requirements contained in the Third Schedule for different class
or classes of companies.
• FS should give a true and fair view of the state of the company’s affairs.
• Such IASs and other standards shall be followed as notified by SECP.

G. Directors’ Report 236-226,227
• The board shall prepare a directors‘ report for each financial year of the company.
• Directors’ report shall be attached to the FS in case of every company.
• Directors’ report shall state business affairs, proposed dividend, if any, and amounts set aside to reserves,
if any.
• Directors’ report shall also include the following in the case of a public company or a private company
which is a subsidiary of a public company:
o the names of the persons who, at any time during the financial year, were directors of the
company
o the principal activities and the development and performance of the company‘s business during
the financial year
o a description of the principal risks and uncertainties facing the company
o Disclosure of any material changes and commitments affecting the financial position of the
company which have occurred between the year end and date of directors’ report.
o Disclosure of any material changes in the business of the company or of its subsidiaries which
have occurred during the year.
o Full information and explanation to any modification in the auditor’s report.
o Pattern of holding of shares in the prescribed form
o Name and country of incorporation of holding company, if any, where such holding company is
established outside Pakistan.
o Earning per share
o Reasons for loss, if any, and reasonable indication of future prospects of profit, if any.
o Information about default in payment of debts, if any, and reasons thereof.
o comments in respect of adequacy internal financial controls
• In the case of a listed company, the business review must, to the extent necessary for understanding the
development, performance or position of the company‘s business, include
o the main trends and factors likely to affect the future development, performance and
position of the company‘s business;
o the impact of the company‘s business on the environment;
o the activities undertaken by the company with regard to corporate social responsibility
during the year; and
o directors‘ responsibility in respect of adequacy of internal financial controls
• Statement of compliance as may be specified regarding the directors report shall also be attached with
the FS
• Directors’ report and statement of compliance must be approved by the board and shall be signed by CE
and one director .
• A holding company shall prepare directors’ report containing the above information in respect of group’s
affairs and shall attach the same to the consolidated financial statements.

• Penalty: Whoever contravenes
o For a listed company, be punishable with
✓ imprisonment for a term which may extend to two years and
✓ with fine may extend to five hundred thousand rupees and
✓ with a further fine which may extend to ten thousand rupees for every day after
the first during which the default continues;
o For other company, be punishable with
✓ imprisonment for a term which may extend to one year and
✓ with fine which may extend to one hundred thousand rupees.
H. Approval and authentication of Financial Statements 241-232
• FS shall be approved by the Board of Directors.

• FS shall be signed by
o the CE and
o at least one director
o and in case of listed company by CFO also
o If CE is out of Pakistan for the time being then accounts shall be signed by
✓ at least two directors.
• The financial statements of a single member company shall be signed by one director.
• Penalty level 1
I. FS of holding company 237,238,239-228,229,230
• A holding company is also required to prepare consolidated financial statements of the group and attach
the same to its financial statements.
• Consolidated financial statements shall comply with the disclosure requirements of the relevant Schedule
and financial reporting standards notified by the Commission
• The above two points are not applicable for
o a private company and its subsidiary,
✓ both having the paid up capital not exceeding one million rupees individually.
• Financial year end of a subsidiary should coincide with the year end of holding company except board of
a holding company shall ensure that, except where in their opinion there are good reasons against it.
Directors of the holding company shall ensure that the financial year of each subsidiary coincides with the
holding company’s financial year.
o If it does not coincide then the year end of the holding company or a subsidiary company may be
changed accordingly.
• If the year end is changed then provisions related to submission of accounts in AGM at least once in
every calendar year etc. may be relaxed by SECP on the application of the directors.
• Where the financial year of a subsidiary precedes the day on which the holding company‘s
financial year ends
o by more than ninety days,
o such subsidiary shall make an interim closing,
o on the day on which the holding company‘s financial year ends, and
o prepare financial statements for consolidation purposes.
• Auditor of the holding company shall also report on consolidated financial statements.
• Consolidated financial statements shall be signed by the same persons who have singed financial
statements of the holding company.

• Consolidated financial statements shall disclose any qualification contained in the auditor’s report on the
accounts of a subsidiary together with any note or saving with reference to such qualification and which
is material from the point of view of the members.
• SECP may relax any provision in total or in part in respect of consolidation of financial statements on an
application of the directors of holding company.
• A holding company may, by resolution, authorize its representatives to inspect books of account of a
subsidiary which shall be open to inspection by such representatives at any time during business hours.
J. Quarterly accounts by a listed company 245-237
• Every listed company shall prepare quarterly accounts

o 30 days of the close of first and third quarters and
o sixty days of the close of its second quarter.
✓ 30 days extension may be allowed on application for the first quarter only.
• Cumulative figures for the half year, presented in the second quarter accounts shall be subjected to a
limited scope review by the statutory auditors of the company
• Posted on company’s website.
• Sent electronically to the Commission, SECP and registrar
• Send physically to the member if requested without any fee
• Approval and authentication of quarterly FS same as annual FS
• Penalty Level 2
K. Power of SECP to call additional statements of accounts and reports 246-238
SECP may require any company by a general or special order to prepare any periodical accounts or other specified
information or reports audited by an auditor and to submit the same to the Registrar, SECP, stock exchange or any
other specified person.
Penalty Level 3
L. Rights of members and debenture holders to obtain accounts 243-235
• Members and debenture holders including trustee for debenture holders shall have right to receive and
obtain copies of FS and other reports report on payment of the prescribed amount.
• Must be provided to the members within 7 days of request
M. FS circulate must accompany 244-236
• Component of financial statements or reports, or statements

• the auditors‘ report
• review reports on the statement of compliance
• the directors‘ report
• the statements of compliance
Any circulation without above, penalty level 1

N. Inspection of books of account by the Commission 232-222
• Shall be open for inspection by the person authorized by the commission for the reason to be recorded in
writing.
• Every director, officer or other employee shall assist and make available all the required information in his
custody.
• The inspector may:
o make copies of books of account and other books and papers
o placed by marks of identification thereon in token of the inspection having been made
o take possession of such documents and retain them for thirty days if there are reasonable
grounds for believing that these docs are evidence of the commission of an offence.
• Inspector authorised to make an inspection shall have all the powers that the Commission has in
relation to the making of inquiries.
• Inspector shall make a report of the inspection to the Commission.
• Penalty for the person in default
o Imprisonment 180 days
o Fine maximum Rs 100,000
o Shall vacate the office and shall hold such office in any other company for a period of 3 years.

Distinctions between Memorandum and Articles
Memorandum Articles
1 It contains the conditions and objects for It contains the rules and regulations for internal
which the company is incorporated. It is the management of the company.
charter of the company.
2 It is sub-ordinate to the Companies Articles are sub-ordinate to the Companies

Ordinance. Ordinance as well as the Memorandum.
3 Every company must have its own It is not essential for a public company limited
Memorandum. No company can be formed by shares to have its own Articles. It may adopt
unless Memorandum is filed with the Table A.
Registrar at the time of registration.
4 It defines the relationship between the It defines the relationship between the company
company and the outside world. and the members (as members only and as
members inter see).
5 It is a constitution of the company and Articles can be altered by special resolution and
therefore it is not easy to make any normally SECP approval is not required.
alteration in it. Normally, SECP approval is
required.
6 Ultra Vires: Indoor Management:
When a company enters into any contractual This doctrine relates to Articles of Association
relationship which is outside the scope of its and is an exception to the doctrine of
Memorandum (i.e. beyond the stated constructive notice.
objects) then situation of Ultra Vires arises.
Where an act is done by the directors or the
The company cannot do anything outside company beyond the powers conferred by the
the powers specified in the object clause. Articles, such an act can be ratified by the
Anything so done is Ultra Vires (beyond the company and subsequently binds the company.
powers of) the company and hence void. The
company cannot even ratify such acts.

Distinctions between company limited by shares and by guarantee
Company limited by shares Company limited by guarantee
1 The words ‘Limited’ or ‘(Private) Limited’ are The words ‘(Guarantee) Limited’ are used at the
used at the end of name. end of name.
2 This type of company is always limited by This type of company may or may not have
shares and having share capital share capital
3 In the case of winding up, liability of In case of winding up, members are liable to the
members is limited to the extent of share extent of guarantee provided by them.
capital which are already issued as fully paid
up
4 These type of companies are mostly made These type of companies are mostly made for
for business purposes promotion of other trade and activities
5 Liability clause contains share capital and its Liability clause contains facts about guarantee
division. provided by the members
Distinctions between Annual General Meeting (AGM) and Extra-Ordinary General Meeting
(EGM)
AGM EGM
1 It is a routine meeting of a company and has It is a non-routine meeting and is held in case
to be held each year of any emergency requirement.
2 Ordinary matters are normally dealt with in Special matters are normally resolved in EGM
AGM. However, special matters may also be
resolved.
3 AGM can be called by BOD and in case of EGM can be called:

default by SECP
o By BOD
o By BOD on requisition by the members
o By requisitionists if not called by BOD
on requisition
o By SECP
4 21 days notice is required for AGM 21 days notice is required. However, less than
21 days notice may be served in case of
emergency with the permission of the Registrar

Distinctions between Voting by show of hands and Voting by Poll
Voting by show of hands Voting by Poll
1 It is always on the discretion of chairman It is on the discretion of chairman or it may be

demanded by the members
2 Principle of ‘one hand one vote’ is applicable Principle of ‘one share one vote’ is applicable
3 Voter uses his right by raising one hand Voter uses his right by casting vote in the ballot
box
4 Poll can be demanded after voting thru show Polling results are final
of hands

Investments by the Company Sec 208,209-199,200
A. Investment in associated companies and undertakings
• ‘Investment’ shall include loans, advances, equity, by whatever name called, or any amount,
which is not in the nature of normal trade credit.
• Special resolution is required specifying the nature, period, amount, terms and conditions of
investment.
• No subsequent change in terms and conditions without special resolution.
• The company shall not invest by way of loans or advances except
o in accordance with an agreement in writing stating, in accordance with the special
resolution,
✓ the nature, purpose, period of the loan, rate of return, fees or commission,
repayment schedule for principal and return, penalty clause in case of default or
late repayments and security.
• Return on investment in the form of loan or advance shall not be less than the borrowing cost of
the company and shall be recovered regularly as per terms of agreement.
o The directors of the investing company shall certify that the investment is made after
due diligence and financial health of the borrowing company is such that it has the
ability to repay the loan as per the agreement.
o In case of non compliance, every director of a company who is knowingly and wilfully in
default shall be liable personally.
• Penalty level 3 and the directors shall jointly and severally reimburse to the company any loss
sustained by the company in consequence of an investment which was made without complying
with the requirements of this section.
• Not applicable on
o Banking Company
o Any other approved financial institution
o Pvt comp which is not the subs of the public company
o a company whose principal business is the acquisition of shares, stock, debentures or
other securities.
• The requirement of special resolution is exempt for the following companies as per SRO:
o Banking comp, Development finance institution or NBFC licensed by State Bank or SECP to the
extent of investment made in the ordinary course of its business
o A pvt company which is not the subsidiary of public comp
o Modaraba management Comp to the extent of investment made in Modaraba being managed by
such company.
o A holding company to the extent of investment made in its wholly owned subsidiary. However,
disinvestment resulting reduction below 75% of shareholding would require special resolution.
o Investment by an investment company in accordance with its investment policy given in the
prospectus.
o a company whose principal business is the acquisition of shares, stock, debentures or other
securities.

B. Investment to be held in its own name
• All investments made by a company shall be held in its own.

• Penalty: The company shall be punishable
o with fine which may extend to five million rupees and
o every officer of the company who is in default shall be punishable with
imprisonment for a term which may extend to two years or with fine which may
extend to one million rupees, or with both.
• Exception
o Provided that the company may hold any shares in its subsidiary company in the name
of any nominee of the company, if it is necessary to do so, to ensure that the number of
members of the subsidiary company is not reduced below the statutory limit.
o A company may hold shares of another company in the name of a person nominated by
it as a director not exceeding qualification shares which may be required to be held by a
director being its nominee appointed or elected by it. Such qualification shares may be
held:
✓ Jointly i.e. company + nominee; or
✓ In the name of such nominee alone
✓ A holding company may hold any shares of its subsidiary company in the name
of its nominees to maintain the minimum number of members, if required.
o A company can deposit its investment with any bank, central depository company or
any other person for the purpose of
✓ Collection of dividend
✓ Transfer of investment
✓ Security for repayment of any loan or performance of any obligation e.g.
mortgage
• If any shares or securities are not held by a company in its own name, the company shall
maintain a register for this purpose at its registered office and shall enter the nature, value,
particulars and names of the person in whose name or custody such shares or securities are
held. The register shall be open for inspection by any member, debenture holder or creditor
without any charge during business hours subject to reasonable restrictions but not less than
two hours each day. For person other than member on the payment of fee fixed by the
company.
o The certified copies of register shall be issued within a period of seven days
o Penalty LEVEL 1

WINDING UP
Winding up of the comp may be defined as the proceedings by which a comp is dissolved i.e putting an end to the
comp. And during this process, the assets of the comp are disposed off, debts of the comp are paid off out of the
assets realized or from the contributories.
Modes of winding up 297-293
• A- By court [Compulsory winding up].
• B- Voluntary.
• C- Under supervision of court.
Contributory 300-296: a person liable to contribute towards the assets of the company on the event of its being
wound up. A person holding fully paid-up shares in a company shall be considered as a contributory.
A- Winding up by Court
AA Circumstances In which Comp May be wound up by the Court Sec-305-301

• If Co. has resolved by special resolution
• Default by company in
o Delivering the Statutory report to the registrar
o Holding Statutory meeting
o Holding any 2 consecutive AGM
o filing with the registrar its financial statements or annual returns for immediately preceding two
consecutive financial years.
• Number of members is reduced below (Pvt. = 2, Public = 3)
• if a listed company suspends its business for a whole year.
• Company Ceased to be a listed company.
• Unable to pay debt (refer-AB).
• If court thinks it just and equitable
• If the company is
o (conceived or brought forth for,) or is or has been carrying on, unlawful or fraudulent activities
o carrying on business prohibited by any law
o carrying on business not authorized by the memorandum
o conducting its business in a manner oppressive to any of its members, persons concerned with
the formation or promotion of the comp or the minority shareholders (shareholders together
holding at least 10 % of the share holding).
• managed by persons who
o refuse to act according to the requirements of the MOA , AOA or Ord.
o who fail to maintain proper and true accounts, or commit fraud, misfeasance or malfeasance
o fail to carry out the directions or decisions of Court or Registrar or Commission
• If Comp. ceases to have any member.
• if the sole business of the company is the licensed activity and its license is revoked as a results ceases to
operate.
• If license is granted for association not for profit ANP (Sec 42) and the license is revoked or company has
failed to comply with the relevant provision and laws ANP or ANP is under voluntary winding up and the
liquidator has fail to complete the winding up with one year from the date of winding up.

AB Company unable to pay its debt S-306-302
IF,
1. If a creditor (by assignment or otherwise) to whom amount exceeding:
o Rs.100,000 is due
• Serves a notice at registered office (through registered post or otherwise ) of company for payment of
sum, under his hand writing or through Legal Advisor or Agent duly authorized on his behalf or in case of
the firm signed by agent or legal advisor or also by any member and
• within 30 days of the notice by the creditor Comp has neglected to :
• pays the same
• secures it to reasonable satisfaction of the creditors.
2. If order of court or other competent authority in favor of creditor is returned unsatisfied in whole or part.
3. It is proved to court that company is unable to pay debt and in determining whether Comp is unable to pay,
Court shall take into account Contingent and Prospective liabilities.
AC Petition for Winding up S-309,310-304,305

Following persons may file petition to court subject to certain conditions mentioned
1. Company, after Special resolution
• Company has to furnished prescribed manner particulars of assets, liabilities & business operation & suits
or proceedings pending against it.
2. Creditors (including contingent or prospective creditors)
• After security for costs of winding up as the Court thinks fit and a prima facie case for winding up to the
satisfaction of the court has been established that the comp should be wound up.
3. Contributories
• If no. of members reduced below minimum numbers (2 in pvt comp or 7 in pub comp).
• Shares were originally allotted to him or have been held by him and registered in his name for at-least 180
during the 18 months before commencement of winding up or have devolved on him through the death
of a former holder.
4. Registrar with sanction of SECP and after Comp has been given an opportunity of making representation and of
being heard.
5. SECP or person authorized by SECP in that behalf, after investigation that
• Comp was formed for fraudulent or unlawful purpose
• carrying on business not authorized by MOA
• oppressive to members or
• Person concerned in formation or Management is guilty of fraud or misfeasance or misconduct toward
Comp or member
• Opportunity of being heard has been provided
• No investigation shall be required if license of the company’s activity is revoked.
AC(I) Powers of Court on hearing petition S-314-308
• The Court may, within 90 days on receipt of a petition pass any of the following orders,
o dismiss it, with or without costs;
o make any interim order as it thinks fit;
o appoint a provisional manager of the company till the making of a winding up order after
giving an opportunity of being heard;
o make an order for the winding up of the company with or without costs; or
o any other order as it thinks fit.

AC(II) Copy of winding up order to be filed with registrar S-315-309
• The petitioner and the company shall file copy of the certified order
o 15 days from the date of the order.
o Penalty level 1
• The registrar shall make the minutes and publish in the official Gazette.
AC (III) Suits stayed on winding up order 316-310

• No suit or other legal proceeding shall be proceeded with or commenced against the company except by
leave of the Court, and subject to such terms as the Court may impose
AC (IV) Effect of winding up order 318-312

• An order for winding up a company shall operate in favour of all the creditors and of all contributories of
the company as if made on the joint petition of a creditor and of a contributory
AD Commencement of winding-up S-311-306

A winding up of a Comp by the Court shall be deemed to commence at the time of the presentation of the petition
for the winding up.
AE Official Liquidator (OL)

A person appointed to carry out the winding up of a comp is called liquidator. If winding up by court it is called
official liquidator who acts under the supervision of the court.
AF Statement of Affairs to be made to Official Liquidator S-328-320
• Statement of Affairs shall be submitted to OL within 15 days from the relevant date or such extended
time not exceeding 45 days from that date as OL, PM, or Court may (for special reason) appoint.
o Relevant date for the purpose of statement of affairs means where PM or OL is appointed, its
date of appointment or where no such appointment is made, the date of winding up order.
• Statement of Affairs shall be submitted and verified by the following persons who
o Were Directors, CE, Secretary and CFO (or OL or PM) at the relevant date.
o Have within 1 year from relevant date
✓ Been Directors, Chief Executive or Officers of Comp.
✓ Taken part in formation of Comp.
✓ Are or been in employment of Comp and are capable of giving required information in
opinion of OL or PM.
• Statement of affairs shall contain the following particulars
o The assets of Comp. (stating separately, Cash in hand, Cash at bank and Negotiable securities)
o Debts and liabilities of Comp.
o The names, residences and occupation of the creditors of the company stating separately
secured debt (with particulars, value and date of security given),unsecured debt.
o Debts due to Comp. and names, residences and occupation of debtors and amount likely to be
realized from them.
o Where property of Co. is not in its custody or possession, name of person and place of property.

o Full address of places where Co. conducted its business during the 180 days preceding the
relevant date and name & particulars of persons in charge of the same.
o Detail of any pending suits or proceedings in which Comp is a party
o Such other prescribed particulars (as Court may order or OL or PM may require in writing)
including any information relating to secret reserves & personal assets of directors
• Daily Penalty of Level 2
AG Report by Official Liquidator S-329-321

• In case of winding up order is made, the liquidator shall as soon as practicable after receipt of Statement
of Affairs but not later than 60 days, shall submit a preliminary report to Court.
• Such statement shall contain following particulars:
o the nature and details of the assets of the company including their location and current
value duly ascertained by a registered valuer;
o the cash balance in hand and in the bank, if any, and the negotiable securities, if any,
held by the company
o the amount of authorised and paid up capital;
o the existing and contingent liabilities of the company indicating particulars of the
creditors, stating separately the amount of secured and unsecured debts, and in the
case of secured debts, particulars of the securities given;
o the debts due to the company and the names, addresses and occupations of the
persons from whom they are due and the amount likely to be realised on account
thereof;
o debts due from contributories;
o details of trademarks and intellectual properties, if any, owned by the company;
o details of subsisting contracts, joint ventures and collaborations, if any;
o details of holding and subsidiary companies, if any;
o details of legal cases filed by or against the company;
o any other information which the Court may direct or the official liquidator may
consider necessary to include.
• If OL thinks fit, he shall make a further report stating

o Manner in which company was formed or promoted
o Whether in his opinion any fraud has been committed by any person (director or other officer) in
its formation or promotion since its formation
o the viability of the business of the company or the steps which, in his opinion, are necessary for
maximising the value of the assets of the company
o Any other matter which (in his opinion) it is desirable to bring to the notice of the Court.
• Certified copy of report shall also be sent to Registrar.

AH Power of Court to stay winding up S-319-313
• The Court may
o stay, withdraw, cancel or revoke
➢ at any time not later than three years after an order for winding up,
➢ on the application of any creditor or contributory or of the registrar or the
Commission or a person authorised by it, and
➢ require the official liquidator to furnish to the Court a report with respect to any
facts or matters which are in his opinion relevant to the application
➢ on proof to the satisfaction of the Court
✓ on such terms and conditions as the Court thinks fit.
• A copy of every order shall be forwarded by the Court to the registrar, who shall make a minute
of the order in his books relating to the company.
AI Court may ascertain wishes of creditors or contributories S-320-314

• The Court may
o have regard to the wishes of creditors or contributories of the company, as proved to it by any
sufficient evidence;
o if it thinks fit, order meetings of the creditors or contributories to be called, held and conducted;
and
o appoint a person to act as chairman of any such meeting and to submit a report.
• The court shall also keep in view value of each debt of the creditor or the voting power exercised
by each contributory.
AJ Liability as contributories of present and past members 298,299-294,295

In the event of a company being wound up, every present and past member shall, be liable to contribute to the
assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and
expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, subject
to the following:
1. a past member shall not be liable to contribute if he has ceased to be member for one year or upwards
before the commencement of the winding up
2. a past member shall not be liable to contribute in respect of any debt or liability of the company
contracted after he ceased to be a member
3. a past member shall not be liable to contribute unless it appears to the Court that the present members
are unable to satisfy the contributions required to be made
4. in the case of a company limited by shares, no contribution shall be required from any past or present
member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such
member
5. in the case of a company limited by guarantee, no contribution shall be required from any past or present
member exceeding the amount undertaken to be contributed by him to the assets of the company in the
event of its being wound up
6. a sum due to any past or present member by way of dividends, profits or otherwise, shall not be deemed
to be a debt of the company payable to that member in a case of competition between himself and any
other creditor
o however, any such sum may be taken into account for the purpose of the final adjustments of
the rights of the contributories among themselves.
• In the winding up of a company limited by guarantee which has a share capital,

o Liability in addition to the amount undertaken by him shall be the amount not exceeding
the unpaid value of the shares held.
• In the winding up of a limited company where the liability of any director is unlimited,
o shall, in addition to his ability, if any, to contribute as an ordinary member, be liable to
make a further: except
✓ a past director shall not be liable to make such further contribution if he has
ceased to hold office for a year or upwards before the commencement of the
winding up;
✓ a past director shall not be liable to make such further contribution in respect of
any debtor liability of the company contracted after he ceased to hold office;
➢ subject to the articles, a director shall not be liable to make such
further contribution unless the Court deems it necessary to require
that contribution in order to satisfy the debts and liabilities of the
company, and the costs, charges and expenses of the winding up.
AK Nature of liability of contributory-301-297

The liability of a contributory shall create a debt accruing due from him at the time when his liability
commenced, but payable at the time specified in calls made on him for enforcing the liability.
AL Contributories in case of death of member302-298
• If a contributory dies, whether before or after being placed on the list of contributories of a
company:
o his legal representatives shall be liable and
o if the legal representatives make default, proceedings may be initiated for administering
the property and of compelling payment of the money due, out of assets of the
deceased.
AM Contributory in case of insolvency of member 303-299
• If a contributory is adjudged insolvent whether before or after he has been placed on the list of
contributories of a company then
o his assignees in insolvency shall represent him for all the purposes of the winding up,
and shall be contributories accordingly.
o may be called to allow to be paid out of insolvent persons assets in due course of law.
AN Contributories in case of winding up of a body corporate which is a member 304-300
• If a body corporate which is a contributory is ordered to be wound up, whether before or after it
has been placed on the list of contributories of a company—
o the liquidator of the body corporate shall represent it for all purposes of the winding up
of the company and shall be a contributory accordingly,
o and may be called on to allow to be paid out of its assets in due course of law, any money
due from the body corporate in respect of its liability to contribute to the assets of the
company.

Official Liquidator
• Official Liquidator occupies dual position on winding up, he represents company & creditors.
• He is bound to be impartial, not to make secret profits.
• He is paid agent of company, bound to carry out duties with due care and skills
A Appointment of Official liquidator (Sec-321-315)
• Commission shall maintain a panel of persons form amongst persons recommended by SECP. From this
panel 1 or more OL or Provisional Manager (PM) shall be appointed having
o at least ten years experience in the field of accounting, finance or law or
o persons specified by the Commission having at least ten years professional experience and
o shall be bound by code of conduct and comply with the req of any professional
accreditation programs as may be specified by the Commission.
• The Commission may of its own, remove the name of any person from the panel on the grounds of
misconduct, fraud, misfeasance, breach of duties or professional incompetence.
• The liquidator or OL shall
o file a declaration within 7 days from the date of appointment
✓ disclosing conflict of interest or lack of independence in respect of his appointment such
obligation shall continue throughout the term of his appointment.
• No person shall be appointed as liquidator of more than 3 Comps at one point of time.
• A person other than panel can be appointed if
o Court considers it necessary for reasons to be recorded or
o On application of creditors whom amount not less than 60% of issued share capital is due, after
notice to registrar that the person other than on official panel is appointed as the OL.
• Where more than 1 person are appointed, court shall declare whether any act (by this ord.) require or
authorized to be done by all or some or anyone.
• Court may determine whether any or what security is to be given by OL on his appointment.
B Resignation, Removal and filling vacancy etc Sec-322-315
• OL shall not resign or quit before conclusion of winding up except for the reason of personal disability to
the satisfaction of court.
• OL or PM can be removed by court any time (for reason to be recorded) including
o misconduct;
o fraud or misfeasance;
o professional incompetence or failure to exercise due care and diligence in performance of the
powers and functions
o inability to act as provisional manager or official liquidator, as the case may be;
o conflict of interest during the term of his appointment that will justify removal.
o lack of independence
o lack of impartiality
• If any loss or damage is suffered by the company due to acts of negligence etc of liquidator, the court may
order the recovery of the loss from the liquidator, and surrender the to the company.
• Any vacancy in office of OL to be filled by Court.
• Outgoing OL shall continue to act until successor takes his charge.

C Remuneration Sec-323-317
• The terms and conditions of appointment of a provisional manager or official liquidator and the fee
payable to him shall be fixed by the Court on the basis of task required to be performed, experience,
qualification of such liquidator and size of the company
• OL shall also be paid remuneration for his services by way:
o %age of amount realized by disposal of assets
✓ There may be different %age for different types of assets and items
✓ Fixed by the Court having regard to amount and nature of work actually done.
• In addition to remuneration Court may permit payment of monthly allowance for meeting expenses of
winding up not exceeding one year from date of winding up order.
• Subsequently, remuneration cannot be enhanced but may be reduced by court anytime.
• If OL resigns, removed or otherwise ceases to hold office before conclusion
o He shall not be entitled to any remuneration
o Remuneration already paid shall be refunded to company
• No remuneration shall be payable to an OL who fails to complete the winding up proceedings within the
prescribed period.
D Appointment and powers of Provisional Manager Sec-325-315
Manager appointed to deal with the matters of the company till the winding up order has been made.
• At any time after the presentation of winding up petition and before the making of a winding up order,
the Court may appoint a person (eligible for appointment as OL) to be PM.
• Before appointing a PM, the Court shall give notice to the Comp and afford to it a reasonable opportunity
to make its representations, if any, unless (for special reasons to be recorded) the Court thinks fit to
dispense with such notice.
• The Court may limit and restrict his powers (by the order appointing him or by a subsequent order)but
otherwise he shall have the same powers as a liquidator.
• The PM shall cease to hold office on the winding up order being made unless the Court directs otherwise.
E General provisions as to Official Liquidator Sec-326-319
• Past acts of OL having defects on appointment or qualification are valid till discovery.
• Winding up procedure shall be completed within the time frame as fixed by the Court after considering
the report from the official liquidator.
• If OL is convicted of misfeasance, breach of duty or other lapse or default, he shall
o cease to be OL
o become disqualified for 5 years to become OL or hold any other office including that of Director
in any company. If already hold, he shall deemed to have ceased to hold such office.
The registrar and the Commission shall take cognizance (knowledge or awareness) of any lapse, delay or other
irregularity on the part of the OL and may report the same to the Court.

CHIEF EXECUTIVE
A Appointment of first chief executive 198-186
1) Every company other than a company managed by a managing agent,

• shall have an individual appointed as chief executive.
2) The name of first chief executive shall be determined by the subscribers of the
memorandum and shall be submitted along with the documents for the incorporation of
the company.
3) The chief executive appointed as aforesaid shall, unless he earlier resigns or otherwise ceases to
hold office, hold office
• up to the first annual general meeting of the company or,
• if a shorter period is fixed by the subscriber as the time of his appointment, for such
period.
B Appointment of subsequent chief executive 199-187

1) Within fourteen days from
• the date of election of directors or
• the office of the chief executive falling vacant,
o shall appoint any person, including an elected director, to be the chief executive,
o for a period exceeding three years from the date of appointment.
2) The chief executive appointed against a casual vacancy shall hold office till the directors
elected in the next election appoint a chief executive.
3) On the expiry of his term of office a chief executive shall be eligible for reappointment.
4) The chief executive shall continue to perform his functions until his successor is appointed unless
non-appointment of his successor is due to any fault on his part or his office is expressly
terminated.
C Terms of appointment of chief executive and filling up of casual vacancy 200-188

1) The terms and conditions of appointment of a chief executive shall be determined by the Board
or the company in general meeting in accordance with the provisions in the company's articles.
2) The chief executive shall if he is not already a director of the company, be deemed to be its
director and be entitled to all the rights and privileges, and subject to all the liabilities, of that
office.
D Restriction on appointment of chief executive 201-189
No person who is ineligible to become a director of a company or either disqualified to be the director of
the company shall be appointed or continue as the chief executive of any company.

E Removal of chief executive 202-190
• the directors of a company by resolution passed by not less than three-fourths of the total
number of directors for the time being, or
• the company by a special resolution,
o may remove a chief executive before the expiration of his term of office
despite anything contained in the articles or in any agreement between
the company and such chief executive.
• The Government or an authority or a person authorized by it shall have the power to remove chief
executive of a company where more than seventy-five percent of the voting rights are held by
the Government.
F Chief executive not to engage in business competing with company's business 203-191
1) A chief executive of a public company shall not directly or indirectly engage in any business which
is of the same nature as and directly competes with the business carried on by the company of
which he is the chief executive or by a subsidiary of such company.
2) Every person who is appointed as chief executive of a public company shall forthwith on such
appointment disclose to the company in writing the nature of such business and his interest
therein.
H Public company required to have secretary.204A-194

A public company must have a company secretary; possessing such qualification as may be
specified.
I Listed company to have share registrar.204A-195

Every listed company shall have an independent share registrar possessing such qualifications
and performing such functions as may be specified.
J Chairman in a listed company 192

• The board of a listed company shall
✓ within fourteen days from the date of election of directors,
✓ appoint a chairman
✓ from among the non-executive directors
✓ who shall hold office for a period of three years
✓ unless he earlier resigns, becomes ineligible or disqualified
• The board shall clearly define the respective roles and responsibilities of the chairman
and chief executive:
Provided that the Commission may specify the classes of companies for which the
chairman and chief executive shall not be the same individual.
• The chairman shall be responsible for leadership of the board and ensure that the board
plays an effective role in fulfilling its responsibilities.
• Every financial statements circulated shall contain a review report by the chairman on
the overall performance of the board and effectiveness of the role played by the board
in achieving the company‘s objectives.
Penalty Level 2

DIVIDENDS AND MANNER AND TIME OF PAYMENT
A Certain restrictions on declaration of dividends 248, 249-240,241
1) The company in general meeting may declare dividends

2) Dividend shall not exceed the amount recommended by the board.
3) Shall be paid out of the profits.
4) No dividend shall be declared or paid by a company for any financial year out of the profits of the
company made from the sale or disposal of any immovable property or assets of a capital nature
5) No dividend shall be declared or paid out of unrealized gain on investment property credited to
profit and loss account
6) Any dividend may be paid by a company either in cash or in kind only out of its profits
• dividend in kind shall only be in the form of shares of listed company.
B Dividend not to be paid except to registered shareholders or to their order or to their bankers 250-
242
1) Dividend declared by a company must be paid to its registered shareholders or to their order or
to their bankers.
2) Dividend payable in cash may be paid by cheque or warrant or in any electronic mode to the
shareholders as per their direction.
C Directors not to withhold declared dividend 251-243

1) When a dividend has been declared, it shall not be lawful for the directors of the company to
withhold or defer its payment and the chief executive of the company shall be responsible to
make the payment
• within forty-five days of the declaration in the case of a listed company
• within thirty days in the case of any other company.
2) Dividend shall be deemed to have been declared
• on the date of the general meeting in case of a dividend declared or approved in the
general meeting and
• on the date of commencement of closing of share transfer for purposes of determination
of entitlement of dividend in the case of an interim dividend and
• where register of members is not closed for such purpose, on the date on which such
dividend is approved by the board.
3) If dividend is not paid within the period specified the chief executive of the company shall be
punishable with imprisonment for a term which may extend to two years and with fine which may
extend to five million rupees.
4) No offence shall be deemed to have been in the following cases,
• where the dividend could not be paid by reason of the operation of any law;
• where a shareholder has given directions to the company regarding the payment of
the dividend and those directions cannot be complied with;
• where there is a dispute regarding the right to receive the dividend;
• where the dividend has been lawfully adjusted by the company against any sum due
to it from the shareholder; or
• where, for any other reason, the failure to pay the dividend or to post the warrant
within the period aforesaid was not due to any default on the part of the company;
and

✓ the Commission has, on an application of the company on the prescribed
form made within forty-five days from the date of declaration of the
dividend, and after providing an opportunity to the shareholder or person
who may seem to be entitled to receive the dividend of making
representation against the proposed action, permitted the company to
withhold or defer payment as may be ordered by the Commission.
D Unclaimed shares, modaraba certificates and dividend to vest with the Federal Government
244
1) Where
shares or modaraba certificates have been issued; or
dividend has been declared;
• which remain unclaimed or unpaid for a period of three years from the date it is
due and payable, or
• any other instrument or amount which remain unclaimed or unpaid,
✓ 90 days notices to file claim by a registered post to the shareholders or
the owner,
✓ after expiry of notice period, final notice shall be published in two daily
newspapers of which one will be in Urdu and one in English having
nationwide circulation.
2) If no claim is made with in 90 days from the date of publication of notice
• in case of sum of money, deposit amount to the credit of the Federal
Government; and
• in case of shares or modaraba certificates or other instrument deliver to the
Commission and
✓ the Commission shall sell such shares or modaraba certificates or other
instrument deposit the proceeds to the credit of Federal Government.
3) The company shall preserve and continue to preserve all original record and provide
copies of the relevant record to the Commission until it is informed by the Commission
in writing that they need not to be preserved any longer.
4) The amount shall be maintained in a profit bearing account with the State Bank of
Pakistan or National Bank of Pakistan to be called Companies Unclaimed Instruments
and Dividend and Insurance Benefits and Investors Education Account.
5) After the amount has been deposited, any person entitled shall apply to commission and
commission after verification from the concerned company forward to the bank to make
within a period of thirty days from the date of verification by the company the payment
to entitled person of the sum equivalent to his unclaimed or unpaid dividend or amount
of proceed
6) In case of shares and certificates, a person making a claim shall be entitled to the
proceeds of the sale of the shares or modaraba certificates or the instrument less any
deduction for expenses of sale.
7) No claim whatsoever shall be entertained after the period of 10 years.
8) Every company within thir30 days of the close of each financial year shall submit to the
Commission a return of all unclaimed dividend and certificate.
Penalty Level 3

AUDIT
A Appointment and remuneration of auditors 252,253-246
1) First auditor within 90 days of incorporation. Retire on first AGM.

2) Every company shall at each annual general meeting appoint an auditor or auditors, on the
recommendation of the board, to hold office from the conclusion of that meeting until the conclusion of
the next annual general meeting.
3) A member or members having not less than 10% percent shareholding of the company
• shall also be entitled to propose any auditor or auditors for appointment
• whose consent has been obtained by him and
• a notice in this regard has been given to the company not less than seven days before
the date of the annual general meeting.
• The company shall forthwith send a copy of such notice to the retiring auditor and shall
also be posted on its website.
4) An auditor or auditors appointed in a general meeting or by the board may be removed before conclusion
of the next annual general meeting through a special resolution.
5) The directors may fill any casual vacancy in the office of an auditor, but, while any such vacancy continues,
the surviving or continuing auditor or auditors, if any, may act.
6) Any auditor appointed to fill in any casual vacancy shall hold office until the conclusion of the next annual
general meeting.
7) The auditors are removed during their tenure, the board shall appoint the auditors with prior
approval of the Commission.
8) Where
• the first auditors are not appointed within 90 days of the date of incorporation of the company, or
• where at an annual general meeting no auditors are appointed, or
• where auditors appointed are unwilling to act as auditors of the company, or
• where a casual vacancy in the office of an auditor is not filled within thirty days after the
occurrence of the vacancy,
the Commission may
o on its own motion
o on an application made to it by the company or any of its members
▪ direct to make good the default within such time as may be specified in
the order.
❖ Incase of failure to comply the Commission shall appoint
auditors of the company who shall hold office till conclusion of
the next annual general meeting
9) The remuneration of the auditors of a company shall be fixed:

• by the company in the general meeting;
• by the board or by the Commission, if the auditors are appointed by the board or the
Commission.
10) Where an auditor, other than the retiring auditor is proposed and the retiring shall have a right to make
representation in writing at least two days before the date of general meeting and be read out in the
presence of the retiring auditor at the meeting before taking up the agenda for appointment of the auditor.
11) Every company shall, within fourteen days from the date of any appointment of an auditor, send to the
registrar intimation thereof, together with the consent in writing of the auditor concerned.

B Qualification and disqualification of auditors 254-247
1) A person shall not be qualified for appointment as an auditor,-
(i) in the case of a public company or a private company which is subsidiary of a public company unless he
is a Chartered Accountant
(ii) in the case of a private company having paid up capital of three million rupees or more unless he is a
Chartered Accountant
o having valid certificate of practice from the Institute of Chartered Accountants of Pakistan
or a firm of chartered accountants.
(iii) in any other case,
o a chartered accountant or
o cost and management accountant
▪ having valid certificate of practice from the respective institute or a firm
of chartered accountants or cost and management accountants
2) A firm whereof all the partners practicing are qualified for appointment shall be appointed by its firm name
as auditors of a company
3) Where a partnership firm is appointed as auditor of a company, only the partners who meet the
qualification requirements, shall be authorized to act and sign on behalf of the firm
4) The following shall not be appointed as auditor:—
a) a person who is, or at any time during the preceding three years was, a director, other officer or
employee of the company;
b) a person who is a partner of , or in the employment of, a director, officer or employee of the
company;
c) the spouse of a director of the company;
d) a person who is indebted to the company other than in ordinary course of business;
e) a person who has given a guarantee or provided any security in connection with the indebtedness
of any third person to the company other than in the ordinary course of business of such entities.
f) a person or a firm who, whether directly or indirectly, has business relationship with the company
other than in the ordinary course of business of such entities
g) a person who has been convicted by a court of an offence involving fraud and a period of ten years
has not elapsed from the date of such conviction
h) a body corporate;
i) 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:
Provided that if such a person holds shares prior to his appointment as auditor, whether as an
individual or a partner in a firm the fact shall be disclosed on his appointment as auditor and such
person shall disinvest such shares within ninety days of such appointment.
5) A person shall also not be qualified for appointment as auditor of a company if he is disqualified for
appointment as auditor of any other company which is that company’s subsidiary or holding company or a
subsidiary of that holding company.
6) If, after his appointment, an auditor becomes subject to any of the disqualifications specified in this section,
he shall be deemed to have vacated his office as auditor with effect from the date on which he becomes so
disqualified.
7) An unqualified person acted as auditor shall be liable to level 2 penalty.
8) The appointment as auditor of a company of an unqualified person, or of a person who is subject to any
disqualifications to act as such, shall be void, and, where such an appointment is made by a company, the
Commission may appoint a qualified person in place of the auditor appointed by the company.

C Right to information and duties of auditors 255-248
1) Every auditor of a company shall have a right
1. of access at all times to the books, papers, accounts and vouchers of the company
2. of access to such copies of, an extracts from, the books and accounts of the branch as have been
transmitted to the principal office of the company
3. to require any of the following persons to provide him with such information or explanations as he
thinks necessary for the performance of his duties as auditor
o any director, officer or employee of the company
o any person holding or accountable for any of the company‘s books, accounts or vouchers
o any subsidiary undertaking of the company or any officer, employee or auditor.
2) Auditor shall conduct the audit and prepare his report in compliance with the requirements of International
Standards on Auditing as adopted by the Institute of Chartered Accountants of Pakistan.
3) The auditor shall make a report to the members of the company on the accounts and books of accounts of
the company and on every financial statement other document forming part financial statements, including
notes, which are laid before the company in general meeting and the report shall state—
(a) whether or not they have obtained all the information and explanations which to the best of their
knowledge and belief were necessary for the purposes of the audit and if not, the details thereof and the
effect of such information on the financial statements;
(b) whether or not in their opinion proper books of accounts as required by this Act have been kept by the
company;
(c) whether or not in their opinion the statement of financial position and profit and loss account and other
comprehensive income have been drawn up in conformity with the requirements of accounting and
reporting standards as notified under this Act and are in agreement with the books of accounts and returns;
(d) whether or not in their opinion and to the best of their information and according to the explanations
given to them, the said accounts give the information required by this Act in the manner so required and
give a true and fair view—
(i) in the case of the statement of financial position, of the state of affairs of the company as at the
end of the financial year;
(ii) in the case of the profit and loss account and other comprehensive income or the income and
expenditure account, of the profit or loss and other comprehensive income or surplus or deficit,
as the case may be, for its financial year; and
(iii) in the case of statement of cash flows, of the generation and utilisation of the cash and cash
equivalents of the company for its financial year;
(e) whether or not in their opinion-

(i) investments made, expenditure incurred and guarantees extended, during the year, were for
the purpose of company‘s business; and
(ii) zakat deductible at source under the Zakat and Usher Ordinance, 1980 (XVIII of 1980), was
deducted by the company and deposited in the Central Zakat Fund established under section 7 of
that Act
4) Where any of the above matters is answered in the negative or with a qualification, the report
shall state the reason for such answer along with the factual position to the best of the auditor‘s
information.
5) The auditor shall express unmodified or modified opinion in his report in compliance with the
requirements of International Standards on Auditing as adopted by the Institute of Chartered
Accountants of Pakistan.
6) The auditor of a company shall be entitled to attend any general meeting of the company, and to receive
all notices of, and any communications relating to, any general meeting which any member of the company

is entitled to receive, and to be heard at any general meeting which he attends on any part of the business
which concerns him as auditor.
7) In the case of a listed company, the auditor or a person authorised by him in writing shall be
present in the general meeting in which the financial statements and the auditor‘s report are to
be considered.
D Signature on audit report, etc. 257-251

1) The auditor‘s report must state the name of the auditor, engagement partner, be signed,
dated and indicate the place at which it is signed.
2) Where the auditor is an individual, the report must be signed by him.
3) Where the auditor is a firm, the report must be signed by the partnership firm with the
name of the engagement partner.
E Penalty for Company and Auditor for noncompliance 259,260-252,253
• Company Level 3
• Auditor Level 2 and if noncompliance is made to benefit or to deprive of any person from any
right full benefit than imprisonment for a term which may extend to two years and with penalty
which may extend to one million rupees.

RECEIVERS AND MANAGERS
A. A person who receives the order to appoint or a person who appoints a receiver of manager under any
authority contained in any instrument shall
• File a notice to the registrar within 7 days of the appointment or on ceasing to be the receiver or
manager and registrar shall enter the fact in the register of mortgage and charges. Penalty level.
137-113
B. Receiver or the manager shall file with the registrar 138-114
• An abstract of his receipt and payments
o On the expiry of every 180 days with in thirty day and
o Also within 30 days on ceasing to act as such.
• A notice within 15 days of ceasing to act as such to the effect.
C. When receiver or manger is appointed a statement to the fact shall be stated on all the documents on which
name of the company appears.
D. Penalty on receiver level 1
E. Disqualification for appointment as receiver or manager 139-115

i. a minor;
ii. a person who is of unsound mind and stands so declared by a competent Court;
iii. a body corporate;
iv. a director of the company;
v. an un-discharged insolvent unless he is granted leave by the Court by which he has been adjudged an
insolvent; or
vi. a person disqualified by a Court from being concerned with or taking part in the management of a
company in any other way, unless he is granted leave by the Court.
F. Power of Court to fix remuneration of receiver or manager-141-117

• The Court may, on an application made to it by the receiver or manager of the property, by order
fix the amount to be paid by way of remuneration.
• The order to fix the remuneration shall:
o extend to fixing the remuneration for any period before the making of the order or the
application therefore
o be exercisable despite that the receiver or manager had died or ceased to act before the
making of the order or the application.

SERVICE AND AUTHENTICATION OF DOCUMENTS
A. Service of documents on a company 48-53

• A document or information may be served on the company or any of its officers
o at the registered office of the company against
▪ an acknowledgement or
▪ by post or courier service or
▪ through electronic means.
B. Service of documents on Commission or the registrar 49-54
• A document or information may be served on the Commission or the registrar
o against an acknowledgement or
o by post or courier service or
o through electronic means.
C. Service of notice on a member 50-55
• A document or information may be served on a member
o at his registered address or,
• if he has no registered address in Pakistan,
o at the address supplied by him to the company for the giving of notices to
him
▪ against an acknowledgement or
▪ by post or courier service or
▪ through electronic means.
• A notice shall be deemed to have been sent, on the date when its delivered, if
properly addressed, prepaid and containing the notice and, unless the contrary
is proved.
• A notice may be given by the company to the joint-holders of a share by giving

the notice to the joint-holder named first in the register in respect of the share.
• A notice may be given by the company to the person

o entitled to a share in consequence of death or insolvency of a member
▪ addressed to him by name or by the title or representatives of
the deceased or assignees of the insolvent or by any like
description,
❖ at the address supplied for the purpose by the
person claiming to be so entitled.
D. Authentication of documents and proceedings 51-56

• A document or proceeding requiring authentication by a company may be signed either by an
officer or a representative authorized by the board.

REGISTRATION OF MORTGAGES, CHARGES, ETC
A. Requirement to register a mortgage or charge 121, 122, 127-100,105,106,107,109,110
1) A company that creates a mortgage or charge must file with the registrar
o specified particulars of the mortgage or charge
o a verified copy of the instrument
▪ within 30 days after the date of its creation.
❖ In case of mortgage or charge created outside Pakistan on
property situated outside Pakistan, 30 days period will start
from the date when instrument sent via courier will reach
Pakistan.
2) This section applies to the following mortgage or charges—

a) on any immovable property wherever situate, or any interest therein; or
b) for the purposes of securing any issue of debentures;
c) on book debts of the company;
d) a floating charge on the undertaking or property of the company stock-in-trade; or
e) on a ship or aircraft, or any share in a ship or aircraft;
f) on goodwill or on any intellectual property;
g) or pledge, on any movable property of the company;
h) or other interest, based on agreement for the issue of any instrument in the nature of
redeemable capital; or
i) or other interest, based on conditional sale agreement, namely, lease financing, hire-
purchase, sale and lease back, and retention of title, for acquisition of machinery,
equipment or other goods
3) The requirement of registration shall apply to a company acquiring any property subject to a mortgage or
charge.
4) No mortgage or charge created by a company shall be taken into account by the liquidator or any
other creditor unless it is duly registered and a certificate of registration of such charge is given
by the registrar.
5) Any person acquiring such property, assets, undertakings shall be deemed to have notice of the mortgage
or charge from the date of such registration
6) The registrar shall give the certificate of registration under his signature or seal which shall be the conclusive
evidence that all the requirements have been complied with.
7) It shall be the duty of the company to get the mortgage or charge registered or report any modification to
the registrar.
8) If mortgage or charge is not registered by the company, any interested person may file the particulars for
registration with the registrar and can claim the expenses from the company.
9) Copy of all the instrument creating mortgage or charge or every document evidencing any modification
shall be kept at the registered office of the company.
10) The company shall intimate within 30 days to the registrar of the payment or satisfaction, in full, of any
charge or mortgage created by the company.
• Unless the NOC on behalf of holders of mortgage or charge is furnished by the company,
• the registrar shall on receipt of such intimation cause a notice to be sent to the holder of the charge
or mortgage calling upon him to show cause, within a time, not exceeding fourteen days, to be
fixed by such notice, why the payment or satisfaction of the charge or mortgage should not be
recorded.
o in case of any objection registrar shall give a notice the company.
11) The register if proved to its satisfaction by any person, may update the register of mortgage and charge to
the effect that property has been released from the mortgage or charge.

B. Register and Index of mortgages and charges 102,103
1) The registrar shall keep, with respect to each company, a register of all mortgages and charges created by
the company and shall, on payment of the prescribed fee, enter in the register, with respect to every such
mortgage, or charge, the date of creation, the amount secured by it, short particulars of the property
mortgaged or charged, and the names of the mortgagees or persons entitled to the charge. The register
shall be open for inspection for any person n the payment of the prescribed fee.
2) The registrar shall keep a chronological index, in the prescribed form and with the prescribed particulars,
of the mortgages or charges registered with him.
C. Particulars in case of series of debentures entitling holders pari passu 101

Where a series of debentures containing any charge to the benefit of which the debenture-holders,
• it shall be sufficient to file within 30 days with the registrar

✓ trust deed or
✓ if there is no such deed the following particulars
o the total amount secured by the whole series;
o the dates of the resolutions authorizing the issue of the series and the date of
the covering deed, if any, by which the security is created or defined;
o a general description of the property charged; and
o the names of the trustees, if any, for the debenture-holders;
D. Company’s register of mortgages and charges 112
1) Every company shall maintain a register of mortgages and charges requiring registration containing the
specified particular shall be kept at the reg.
2) Shall be open to inspection of-
• any member or creditor of the company without fee; and
• any other person on payment of such fee as may be fixed by the company for each
inspection.
E. Extension of time by the Commission 108

1) The commission may
o on the application by the company or any interested person subject to terms and conditions, if satisfied
that
o the omission or misstatement to file with the registrar the particulars of any mortgage or charge
or any modification therein within the time limit was
• was accidental or due to inadvertence or to some other sufficient cause, or is not of a
nature to prejudice the position of creditors or shareholders of the company, or that on
other grounds it is just and equitable
✓ order that the time for filing the required particulars be extended, or,
✓ as the case may be, that the omission or mis-statement be rectified.
2) The order so passed shall be forwarded to the registrar within 7 days from the date of the order
Penalty Level 1

SHARE CAPITAL AND NATURE, NUMBERING AND CERTIFICATE OF SHARES 89-
61,61,62
• Numbering of shares.—Every share in a company having a share capital shall be

distinguished by its distinctive number:
• Nature of shares or other securities.—The shares or other securities of any member in
a company shall be movable property transferable in the manner provided by the articles
of the company.
• Shares certificate to be evidence.—(1) A certificate, if issued in physical form under
common seal of the company or under official seal, which must be facsimile of the
company‘s common seal, or issued in book-entry form, specifying the shares held by any
person or shares held in central depository system shall be prima facie evidence of the
title of the person to such shares.

SPECIAL PROVISIONS AS TO DEBENTURES 113-120
A Issue of Debentures 113-63

• A company may issue different kinds of debentures having different classes, rights and privileges
as may be specified.
• Debenture holder and share holders have a right to obtain the copy of trust deed securing the
issue of debentures.
B Payment of certain debts out of assets subject to floating charge in priority to claims under the charge. 118-64
Where either a receiver is appointed on behalf of the debenture holders
• and possession is taken by or on behalf of these debenture holders of any property being the security
backing the debentures,
• then, if the company is not at the time in course of being wound up,
o the debts which in every winding up are provided as preferential payments to be paid in
priority to all other debts under the Act,
▪ shall be paid forthwith out of any assets coming to the hands of the receiver in
priority to any claim for principal or interest in respect of the debentures.
C Powers and liabilities of trustee 6119-65

(1) The trustee nominated or appointed under the trust-deed for securing an issue of debentures shall, if so
empowered by such deed, have the right to sue for all redemption monies and interest in the following cases,
namely: -
(a) where the issuer of the debentures as mortgagor binds himself to repay the debenture loan or pay the
accrued interest thereon on the due date;
(b) where the mortgaged property is wholly or partially destroyed or the security is rendered insufficient
the trustee has given the issuer a reasonable opportunity of providing further security adequate
to render the whole security sufficient and the issuer has failed to do so;
(c) where the trustee is deprived of the whole or part of the security; and
(d) where the trustee is entitled to take possession of the mortgaged property and the issuer fails to deliver
the same to him
(2) Where a suit is brought under clause (a) or clause (b) above the Court may at its discretion stay the suit and all
proceedings therein until the trustee has exhausted all his available remedies against the mortgaged property.
(3) The trustee or any person acting on his behalf shall, if so authorised by the trust-deed, sell without intervention
of the Court, the mortgaged property or any part thereof in default of payment according to re-payment
schedule of any redemption amount or in the payment of any accrued interest on the due date by the issuer.
(4) Any provision contained in a trust deed for securing an issue of debentures, or in any contract, shall be void in
exempting a trustee thereof from, or indemnifying him against, liability for breach of trust, where he fails to
show the degree of care and diligence required of him as trustee.
• Provided that this shall not invalidate any benefit given--
on the agreement thereto of a majority of not less than three-fourths in value of the debenture-
holders present and voting in person or, where proxies are permitted, by proxy, at a meeting
summoned for the purpose.

D Issue of securities and redeemable capital not based on interest 120-66
1) A company may
• by public offer issue or,
• upon terms and conditions contained in an agreement in writing, issue to one or more scheduled
banks, financial institutions
• any instrument in the nature of redeemable capital
• in any or several forms
• in consideration of any funds, moneys or accommodations received or to be received by the company,
whether in cash or in specie or against any promise, guarantee, undertaking or indemnity issued to or
in favour of or for the benefit of the company.
2) The agreement referred above for redeemable capital may provide for additional conditions as follows:-
• mode and basis of repayment by the company of the amount invested in redeemable capital within
a certain period of time;
• arrangement for sharing of profit and loss;
• creation of a special reserve called the "participation reserves by the company in the manner provided
in the agreement for the issue of participatory redeemable capital in which all providers of such
capital shall participate for interim and final adjustment on the maturity date in accordance with the
terms and conditions of such agreements; and
• in case of net loss on participatory redeemable capital on the date of maturity, the right of holders to
convert the outstanding, balance of such capital or part thereof as provided in the agreement into
ordinary shares of the company at the break-up price calculated in the prescribed manner.
3) The terms and conditions for the issue of instruments or certificates of redeemable capital and
the rights of their holders shall not be challenged or questioned by the company or any of its
shareholders unless repugnant to any provision of this Act or any other law or the memorandum
or articles or any resolution of the general meeting or directors of the company or any other
document.
4) The provision of this Act relating to the creation, issue, increase or decrease of the capital shall
not apply to the redeemable capital.

NON-BANKING FINANCE COMPANIES
PROVISIONS AS TO ESTABLISHMENT AND REGULATION OF NON-BANKING FINANCE COMPANIES
282A-282M
A NBFC includes
a) Non-banking finance companies (NBFCs) which include companies licensed by the Commission to carry
out any one or more of the following forms of business, namely.-
(i) Investment Finance Services;
(ii) Leasing;
(iii) Housing Finance Services;
(iv) Venture Capital Investment;
(v) Discounting Services;
(vi) Investment Advisory Services;
(vii) Asset Management Services,
(viii) any other form of business which the Federal Government may, by notification in the official
Gazette specify from time to time; and
b) such other company or class of companies as the Federal Government may, by notification in the official
Gazette specify .
B Incorporation of NBFC and Related Matters

a) A NBFC shall not be incorporated without prior approval of the Commission.
b) NBFC shall not carry on business unless it holds a licence issued in that behalf by the Commission; and
c) Any such licence may be issued subject to such conditions as the Commission may deem fit to impose.
d) A NBFC shall not commence or carry on business unless it has such minimum equity as may be prescribed
by the Commission.
e) Any entity notified by the Federal Government shall not operate without prior registration with the
Commission.
f) the Commission is satisfied that it is necessary and expedient so to do –
• in the public interest; or
• to prevent the affairs of any NBFC being conducted in a manner detrimental to the interests of
shareholders or
• persons whose interests are likely to be affected or in a manner prejudicial to the interests of the
NBFC or
• to secure the proper management of any NBFC generally,
o issue directions to NBFCs generally or to any NBFC in particular to do or desist from doing
such acts as the Commission may deem fit.
C Power to remove
a) Where the Commission is satisfied that –
• continued association of any chairman or director or chief executive or any other officer of a NBFC is or is
likely to be detrimental to the interests of NBFC or
• the public interest so demands; or
• to prevent the affairs of a NBFC being conducted in a manner detrimental or in a manner prejudicial to the
interests of NBFC or
• to secure a proper management of the NBFC
the Commission may, for reasons to be recorded in writing, by order, remove from office, with effect from
such date as may be specified in the order

D Procedure for amalgamation of NBFCs
a) A scheme containing the terms of such amalgamation has been placed in draft before the shareholders of
each of the NBFC concerned separately, and
b) Approved by a resolution passed by a majority in number representing two thirds in value of the
shareholders of each of the said NBFCs, present either in person or by proxy at a meeting called for the
purpose.
c) Notice of every such meeting to every shareholder of each of the NBFC and shall also be published at least
once a week for three consecutive weeks in not less than two newspapers which circulate in the locality or
localities where the registered offices of the NBFCs concerned are situated, one of such newspapers being
in a language commonly understood in the locality or localities.
d) Any shareholder, who has voted against the scheme, of amalgamation at the meeting or has given notice
in writing at or prior to the meeting to the NBFC concerned or the presiding officer of the meeting that he
dissents from the scheme of amalgamation, shall be entitled, in the event of the scheme being sanctioned
by the Commission to claim from the NBFC concerned, in respect of the shares held by him in that NBFC,
their value as determined by the Commission when sanctioning the scheme and such determination by the
Commission as to the value of the shares to be paid to dissenting shareholder shall be final for all purposes.
e) If the scheme of amalgamation is approved by the requisite majority of shareholders, it shall be submitted
to the Commission for sanction and shall, if sanctioned by the Commission by an order in writing passed in
this behalf be binding on the NBFCs concerned and also on all the shareholders thereof.
f) Where a scheme of amalgamation is sanctioned by the Commission, the remaining or resulting entity shall
transmit a copy of the order sanctioning the scheme to the registrar before whom the NBFC concerned
have been registered and the registrar shall, on receipt of any such order, strike off the name of the NBFC
which by reason of the amalgamation will cease to function.
g) On the sanctioning of scheme of amalgamation by the Commission, the property of the amalgamated NBFC
shall, by virtue of the order of sanction, be transferred to and vest in, and the liabilities of the said NBFC
shall, by virtue of the said order be transferred to and become the liabilities of the NBFC which under the
scheme of amalgamation is to acquire the business of the amalgamated NBFC.
E Power to supersede Board of Directors
a) Where the Commission is satisfied that the association of the Board of Directors of any NBFC is likely to be
detrimental to the interest of the NBFC or its shareholders or is otherwise undesirable; or for of the
reasons it is necessary so to do, the Commission may, for reason to be recorded in writing, by order,
supersede the Board of Directors of a NBFC for a period not exceeding 3 years with effect from such date
and for such period as may be specified in the order.
b) All powers and duties of the Board of Directors; shall, during the period of supersession, be exercised and
performed by such person as the Commission may from time to time appoint in this behalf.

Allotment
A. Application for, and allotment of, shares and debentures 67-67

1) Nominal value (i.e. face value) of shares and debentures shall be approved / specified by SECP
2) Commission may specify the application form which may include certain declaration or verification and
such form shall become a part of prospectus
3) Application for shares and debentures against prospectus shall be irrevocable. All certificates, statements
and declarations made by the applicant shall be binding on him
4) Whoever contravenes the provisions or makes an incorrect statement, declaration or verification in the
application for allotment of shares, shall be liable to a penalty of level 2 on the standard scale.
B. Repayment of money received for shares not allotted 71-68
1) The company shall refund the money in the case of the unaccepted or unsuccessful applications with 15
days of the decision of allotment.
2) When refund is not made within the specified time then the directors shall be liable to repay the amount
with surcharge @ 2.5% for every month or a part thereof after 15th day of such decision. In addition
Penalty level 3.
C. Allotment of shares and other securities to be dealt in on securities exchange 72-69

1) Where a prospectus issued stateds that
• the application has been or will be made for permission for the shares or other securities
offered thereby to be dealt in on the securities exchange,
• any allotment made shall be void
o if the permission has not been applied for before the seventh day after the first
issue of the prospectus or
o if the permission has not been granted before the expiration of 21 days from the
date of the closing of the subscription lists or such longer period not exceeding
forty-two days, within the said twenty-one days.
2) Where the permission has not been applied for or has not been granted, the company shall forthwith
repay within 8 days without surcharge all money received from applicants.
3) When refund is not made within the specified time then the directors shall be liable to repay the amount
with surcharge @ 2% for every month or a part thereof after 8th day. In addition, Penalty level 3.
4) All moneys received as aforesaid shall be deposited and kept in a separate bank account in a scheduled
bank so long as the company may become liable to repay. the company and every officer of the company
who authorises or permits the default shall be liable to a penalty of level 2 on the standard scale

D. Return of Allotment 73-70
• Return shall contain the following information:

o Number and nominal amount of shares allotted to each allottee, the amount paid on each share
and other particulars prescribed.
o submit along with the return of allotment, a report from its auditor or from a practicing
chartered accountant or a cost and management accountant not necessarily being the auditor, to
the effect that the amount of consideration has been received in full by the company and shares
have been issued
o If the allottee is a financial institution then the return of allotment may be filed by the allottee if
the same is not filed by the company. In this case the financial institution shall be entitled to
recover from the company any cost in respect of filing of return of allotment.
o in the case of shares otherwise than in cash, submit along with the return of allotment, a copy of
the document evidencing the transfer of non-cash asset to the company, or a copy of the
contract for technical and other services, intellectual property or other consideration, along with
copy of the valuation report.
o In case of bonus shares, a copy of the resolution authorizing the issue of bonus shares along with
the number and nominal amount of allotment.
o In the case of issue at discount the following shall be attached with the return:
✓ A copy of the resolution passed in general meeting for discount
✓ In case where the maximum rate of discount exceeds ten per cent, a copy of the order
of the Commission permitting the issue at the higher percentage.
• Return of Allotment is required to be filed to the Registrar within 45 days from the date of allotment.
However, the Registrar has power to extend the said time limit.
• No return of allotment shall be required to be filed for the shares taken by the subscribers to the
memorandum on the formation of the company.
• Penalty Level 1

Matter Related to Shares and Securities
A. Time limit for issuance of certificates of shares and debentures 74-71
• Every company shall complete and have ready certificates of shares and securities
o within 30 days after the allotment and
o ensure delivery of the certificates to the person entitled thereto at his registered address.
• Penalty level 1
B. Issuance of shares in book-entry form 72
• After the commencement of this Act

o Every existing company shall be required to replace its physical shares with book-entry form
✓ within a period not exceeding four years.
✓ extension period for another two years, if notified by the Commission
C. Duplicate Certificate 75-73
• A company shall issue duplicate certificate of shares or securities within 30 days of the application if:
o A certificate is lost or destroyed; or
o A certificate is defaced, mutilated or torn and is surrendered to the company.
Before issuing a duplicate certificate the company may make an inquiry as it may consider necessary. The company
may charge from the member actual expense on such inquiry and a further amount not exceeding the prescribed
amount.
If the company is unable to issue duplicate certificates, it shall notify this fact with reason within 20 days of the
application.
• Penalty level 1
• If a company with intent to defraud, issues a duplicate certificate thereof,
o the company shall be punishable with fine which may extend to one hundred thousand
rupees and
o every officer of the company who is in default shall be punishable with imprisonment for
a term which may extend to one hundred and eighty days, or with fine which may extend
to fifty thousand rupees, or with both.
D. Difference bwt TRANSFER and TRANSMISSION
• Transfer is voluntary but the transmission is the result of operation of law

• Transfer is normally for an adequate consideration but in transmission question of adequate
consideration does not arise.
• Transfer deed is lodged for the transfer while for transmission proof of entitlement is lodged with the
company.
Stamp duty is required to be paid in the case of transfer but in the case of transmission no stamp duty is required.

E. Transfer of shares and debentures 76,77,78,78A-74 75,77,80
• A company shall not register a transfer of certificates unless proper instrument of transfer duly stamped
and signed by the transferor and the transferee has been delivered to the company along with the scrip.
• Application of transfer can be made either by the transferor or the transferee and the company shall
complete the transfer within 15 days of application and register the name of transferee in its register of
members and ensure delivery of the certificates to the transferee at his registered address.
• In case of conversion of physical shares and other transferable securities into book-entry form,
o the company shall,
✓ within 10 days after an application is made for the registration of the transfer of any
shares or other securities to a central depository,
▪ register such transfer in the name of the central depository.
• Where a transfer deed is lost, destroyed or mutilated before its lodgment, the company may
o on an application made by the transferee and
o bearing the stamp required by an instrument of transfer and
o the transferee proves to the satisfaction of the board that the transfer deed duly executed has
been lost, destroyed or mutilated and
o indemnity has been submitted, if demanded by the company
✓ register the transfer of shares or other securities
• A register of transfers of shares and other securities shall be maintained at the reg office of the copy
which shall be open for inspection for the members.
• Penalty level 2.
• Refusal of transfer by Directors
o The directors shall not refuse to transfer the certificates unless the transfer deed is defective or
invalid.
o In this case the company shall notify the defect within 15 days (5 days in case of CDC) to the
transferee who can remove the defect and relodge the transfer with the company.
o If the company refuses to register a transfer the company shall indicate its refusal with reason
thru a notice of refusal within 15 days. Penalty Level 2
• Appeal against refusal of transfer:

o An aggrieved person may file an appeal within 60 days to SECP if defect in the transfer deed is
not indicated or the transfer of certificates is refused to be registered by the company.
o SECP may require the company to disclose the reason for such refusal and after providing
reasonable opportunity to the concerned parties and conducting an enquiry SECP shall make an
order:
✓ That the transfer or transmission shall be registered and in this case the company shall
proceed accordingly within 15 days of the receipt of the order.
✓ That the company’s point of view is correct and the transfer or transmission shall not be
registered.

F. Restriction on transfer of shares by the members of a private company 76
• How a member of Private Company can sell its shares

1) A member of a private company desirous of selling any shares held by him, shall intimate to the
board of his intention through a notice.
2) Within 10 days fn receipt of such notice, the board shall, offer those shares for sale to the
members in proportion to their existing shareholding
3) If the whole or any part of the shares offered is declined or is not taken, the board may offer such
shares to the other members in proportion to their shareholding.
4) If all the members decline to accept the offer or if any shares are left over, the shares may be sold
to any other person as determined by the member, who initiated the offer.
• A private company may transfer or sell its shares in accordance with its articles of association and
agreement among the shareholders, if any, entered into prior to the commencement of this Act
subject to the condition that such agreement will be valid only if it is filed with the registrar within
90 days of the commencement of this Act.
• The letter of offer for sale specifying the number of shares to which the member is entitled, price
per share and specifying the time limit, within which the offer, if not accepted, be deemed as
declined, shall be dispatched to the members through registered post or courier or through
electronic mode.
G. Transfer to nominee or successor-in-interest 79,80-78,79
• A member can nominate one or more persons who will acquire the interest in the specified shares in the
event of member’s death.
• The company shall facilitate the transfer of shares to the legal heirs of the deceased subject to succession
to be determined under the Islamic law of inheritance and in case of a non-Muslim members, as per their
respective law
• Nomination can be made to spouse, father, mother, brother, sister, son or daughter including a step or
adopted child.
• This nomination may be subject to specified contingencies and may be changed by the shareholder in
writing during his lifetime.
• The right of the member to dispose off the certificates in the lifetime of the member shall remain intact.
The nomination shall be effective on death of the member.
• When a shareholder or debenture holder dies the shares or debentures shall be transferred to his lawful
nominee or successor-in-interest subject to the following conditions:
o An application by nominee or successor is made to the company
o Documents in support of nomination or lawful award of property are produced; and
H. Premium on issue of shares 83-81
• A company is authorized to issue shares at premium.

• In case of public issue, premium is required to be approved thru prospectus by Commission and Stock
Exchange.
• Amount of premium is required to be transferred to an account ‘share premium account’ which may be
applied by the company for the following purposes:
o Writing off preliminary expenses.
o Writing off expenses of issue of shares or debentures and commission or discount on issue of
shares or debentures.

o Payment of premium on redemption of redeemable preference shares or debentures
o Issue of bonus shares.
I. Shares Issued at Discount 84-82
• A company is authorized to issue shares at discount subject to the following:

o The issue of shares at a discount must be
✓ approved in a general meeting by special resolution specifying the maximum rate of
discount and
✓ must be sanctioned by SECP.
• In case of listed companies discount shall only be allowed if the market price is lower than the par value
of the shares for a continuous period of past 90 trading days immediately preceding the date of
announcement by the board.
• The approval of the Commission shall not be required by a listed company for issuing shares at a
discount if the discounted price is not less than 90% of the par value
• Commission shall not sanction the resolution for the issue at discount if the offer price per share in the
resolution is less than:
o in case of listed companies, 90% percent of volume weighted average daily closing price of shares
for ninety days prior to the announcement of discount issue; or
o in case of other than listed companies, the breakup value per share based on assets (revalued
not later than 3 years) or per share value based on discounted cash flow
✓ The calculations must be certified by the statutory auditor.
• In case of listed companies, directors and sponsors of listed companies shall be required to subscribe their
portion of proposed issue,
o at volume weighted average daily closing price of shares for ninety days,
o prior to the announcement of discount issue.
• Can be issued only after 3 year of company’s entitlement to commence business.
• Shares at discount must be issued within 60 days after the sanction by Commission or extended time as
may be allowed.
• Prospectus issued must contain particulars of discount
• Issue of shares at a discount shall not be deemed to be reduction of capital
• Every statement of financial position subsequent to the issue of shares at discount shall contain
unamortized balance of discount.
• The SECP while considering the applications for issue of shares at a discount will consider the following:
o Discount shall be allowed only if the financial projections establish that injection of the fresh
capital will result in enough profits enabling the company to amortize the discount within a
period of 5 years.
o A company in the financial sector cannot issue shares at discount
o The person applying for the sanction by SECP shall submit certain particulars including certified
copy of resolution and underwriting contract, a copy of financial projections, audited annual
accounts of the last 3 years etc.
• Penalty Level 3

J. Further issue of capital – Right Issue 86,87,94-83
• When further shares are to be issued,

o such shares must be offered to the existing members
o in proportion to the existing shares held by each member.
• For this purpose a prescribed circular duly signed by atleast two directors or any authorized officer of the
company shall be sent to each member through registered post or courier or through electronic mode to all the
existing members, ensuring that it reaches the members before the commencement of period for the
acceptance of offer. This is also called right issue.
• Circular for offer
o The circular shall contain latest statement of accounts, necessity for issue of further capital and
material information about affairs of the company.
o A singed copy of the circular shall be filed with the Registrar simultaneously it is sent to the members.
o The circular shall state the number of shares offered and specify a date not being less than 15 days
and not exceeding 30 days from the date of the offer by which the offer shall be deemed to be
declined if not accepted or in case of listed company a member may also renounce his right in favour
of any other person.
o If the whole or any part of the shares offered to the existing members is declined or is not renounced
in favour of any other person i.e. not subscribed then the directors may allot and issue such shares in
a manner as they deem fit with in
✓ 30 days of the close of offer or
✓ 30 days extended time with the approval of the Commission.
• Exceptions
o A public company may issue further capital without issue of right shares
✓ by passing special resolution and
✓ with the permission of the Federal Government.
• A public company with the approval of SECP may reserve a certain % of further issue for its employees under
‘Employees Stock Option Scheme’.
• A public company with the approval of Commission may issue further capital on the basis of a special
resolution either for cash or for a consideration other than cash.
o The value of non-cash asset, service, intellectual property shall be determined by a valuer
registered by the Commission.
• Where loan has been obtained from any Government by a public sector company, and
o if that Government considers it necessary in the public interest even if the conversion option
is not initially the part of the agreement, it may by order,
✓ direct that such loan or any part thereof shall be converted into shares in that
company,
✓ on such terms and conditions considering the financial position of the comp and
interest rate and other matters as appear to the Government to be just and
reasonable in the circumstances.
▪ The authorized capital shall be deemed to have been increased for the
purpose of issuance of shares in pursuance of the above.
▪ A notice for the increase in the authorized capital as above shall be filed
with the registrar along with the prescribed fee for capital increase.
▪ If notice is not filed by the company the government may file the notice
on behalf of the company and recover the amount from the company.
o Penalty level 2

K. Alteration of share capital 92,93-85
• Who: A company limited by shares,

• How:
o If authorized by its Articles and
o Approved by special resolution in general meeting,
o may alter the conditions of its Memorandum.
• What:
o Increase its share capital i.e. authorized capital
o Consolidate and divide its share capital into shares of a larger amount than its existing shares.
o A notice to the Registrar within 15 days of the consolidation and division of shares into a larger
amount.
o Sub-divide its shares into smaller amount.
o Cancel full or any portion of unsubscribed share capital i.e authorized capital.
• Notice is required to be filed to the Registrar within 15 days from the date of general meeting.
• If an increase in the authorized capital is necessary for the purpose of issuance of shares to a financial
institution in pursuance of an agreement then the authorized capital shall be deemed to have been
increased. i.e GM is not required in this matter.
• The new shares shall carry the same rights as are given to existing shares.
L.Prohibition of purchase of own shares - Sec 95-86,87
• A company other than a listed company cannot purchase its own shares.
• However, a company can redeem any of its redeemable security.
• However, a subsidiary company shall not be barred from:
o acting as a trustee unless its holding company is beneficially interested under the trust; and
o dealing in shares of its holding company where the subsidiary is involved in the business of
brokerage. However, in this case the subsidiary company shall not exercise the voting rights
attached to such shares.
• A listed company can purchase its own shares subject to certain conditions Sec-88.
• A public company limited by shares and a private company which is subsidiary of a public company are
prohibited from giving any financial assistance to any person by means of loan, guarantee or security for
the purchase of its own shares or the shares of its holding company.
• Penalty level 1
• Exception to Sec-95:
a) A company can give loan etc. for purchase of its own shares or the shares of its holding company
if it is part of service contract, to the following:
o Full time employees excluding directors; and
o Chief Executive of the company who was not a director of the company before his appointment
as such.
b) the provision by a company of money in accordance with any scheme approved by company
through special resolution, and amount will be used to purchase or subscribe the shares held in
trust by the company for the benefit of its employees.
• Penalty level 2

M. Listed Company can purchase its own shares - Sec 95A-88
• As per this section a listed company to purchase its own shares;

o The board shall recommend to the members purchase of the shares and shall clearly specify:
✓ the number of shares proposed to be purchased,
✓ purpose of the purchase i.e. cancellation or holding the shares as treasury shares,
✓ the purchase price,
✓ period within which the purchase shall be made,
✓ source of funds,
✓ justification for the purchase and
✓ effect on the financial position of the company.
o The above decision to recommend the purchase of own share shall be communicated to
Commission and SE immediately on the conclusion of the meeting of BOD.
o Special resolution is required specifying the maximum number of shares, maximum price and
the time frame within which the purchase is to be made.
o The company shall have the prescribed debt-equity ratio and current ratio
✓ Debt-equity ratio 75:25
✓ Current ratio 1:1
o The purchase of shares shall be made either through a tender offer or through the
securities exchange as may be specified.
o The company may dispose of the treasury shares in a manner as may be specified
o The purchase of shares shall always be made in cash and shall be out of the distributable
profits or reserves specifically maintained for the purpose which may be applied for the
issue of bonus shares
o The voting rights of these shares shall remain suspended
o No cash dividend shall be paid and no other distribution, whether in cash or otherwise of the
company‘s assets, including any distribution of assets to members on a winding up shall be made
to the company in respect of these shares
o Bonus shares can be issued
o Payment can be done on redemption.
o A separate register for the said purchase shall be maintained containing the following particulars:
✓ Number of shares purchased
✓ Consideration paid
✓ Mode of purchase; and
✓ The date of cancellation of shares.
✓ number of bonus shares issued in respect of treasury shares; and
✓ number and amount of treasury shares redeemed, if redeemable.
Penalty of level 3 on the standard scale and shall also be individually and severally liable for any or all losses or
damages arising out of such contravention.

N. Reduction of share capital i.e. paid up capital 96,97,98,99,100,101,102,103,104,105,106,107-
89,90,91,92,93,94,95,96,97
• WHO:
o A company limited by shares and
o a company limited by guarantee having share capital may reduce its paid up share capital.
• HOW
o Cancel any paid up capital which is lost or unrepresented by available assets; or
o Pay-off any paid up capital which is in excess of the needs of the company
o For the above purpose of reduction of paid up capital the following are required:
✓ The company is authorized by its Articles to reduce its paid up capital
✓ Special resolution for reducing share capital is required; and
✓ Confirmation by the Court on petition is required.
• Confirmation by the Court: If reduction of capital involves payment to shareholders then any creditor
may object to the proposed reduction and for this purpose, the Court shall settle a list of creditors so
entitled to object.
o The court may publish notices to fix a time limit for the creditors to enter into the list of
creditors. The company shall:
o Obtain consent from its creditors; or
o Discharge the liability of the objecting creditors; or
o Secure payment of their debt or claim
• The court may require the company to publish the reasons for reduction of capital and other information
with a view to give proper information to the public.
• If the Court is satisfied (specially with reference to the creditors) then it may confirm the reduction of paid
up capital by an order on such terms and conditions as it thinks fit.
• The registrar on the filing with him of a certified copy of order of the Court confirming the
reduction of the share capital of the company, shall register the same and shall take effect on such
registration and not before.
• The registrar shall certify under his hand the registration of the order and his certificate shall be
conclusive evidence that all the requirements of law has been complied with and share capital of
the company is such as stated in the order.
• If any officer of the company willfully conceals the name of any creditor or misrepresents the nature or
amount of the claim, he shall be punishable with imprisonment up to one year or with fine or both.
• The company shall add to its name the words ‘and reduced’ as the last words thereof until such date as
the Court may fix and those words shall be deemed to be part of the name until that date.
• However, where the reduction does not involve payment to shareholders the Court may dispense with
the requirement of the addition of the words ‘and reduced’.
• Registration of confirmation order and minutes: A certified copy of the confirmation order by the Court
and minutes of special resolution are required to be filed to the Registrar who shall register the same,
issue a certificate to this effect and then the reduction of capital shall become final.
• Notice of the registration shall be published by the company in such manner as the court may direct.
• Minutes of special resolution shall become part of the Memorandum of the company.

Contracts by agents of company in which company is undisclosed principal 225-214
1) Not applicable on a private company which is not the subsidiary of the public company.
2) Every officer or other agent of a company,
• who enters into a contract for or on behalf of the company in which contract the company is an
undisclosed principal shall,
o at the time of entering into the contract, make a memorandum in writing of the terms of
contract, and specify therein the person with whom it has been made.
o Forthwith deliver the memorandum aforesaid to the company and
o send copies to the directors and
o such memorandum shall be filed in the office of the company and laid before the directors
at their next meeting.
3) In case of default in complying:
• The contract shall be void at the option of the company
• Such officer or agent shall be fined at Penalty level 1.
Liability for undesired activities of the shareholders 215

• A member of a company shall act in good faith while exercising its powers as a shareholder at the
general meetings and shall not conduct themselves in a manner that is considered disruptive to
proceedings of the meeting.
• Without prejudice to his rights under this Act, a member of the company shall not exert influence
or approach the management directly for decisions which may lead to create hurdle in the smooth
functioning of management.
• Penalty level 1
Securities and deposits, etc 226-217

No company, and no officer or agent of a company, shall receive or utilise any money received as security or deposit,
except in accordance with a contract in writing; and all moneys so received shall be kept or deposited by the
company or the officer or agent concerned, as the case may be, in a special account with a scheduled bank
Penalty of level 1 on the standard scale and shall also be liable to pay the loss suffered by the depositor of security,
on account of such contravention
Employees’ provident funds and securities 227-218

1) All moneys or securities deposited with a company by its employees in pursuance of their contracts of
service with the company shall be kept or deposited by the company within fifteen days from the date of
deposit in a special account to be opened by the company for the purpose in a scheduled bank or in the
National Saving Schemes, and no portion thereof shall be utilized by the company.
2) Where a provident fund has been constituted by a company all moneys contributed to such funds, whether
by the company or by the employees, or received or accruing by way of interest, profit or otherwise shall
either
a) be deposited
• in a National Savings Scheme
• in a special account to be opened by the company for the purpose in a scheduled bank
• where the company itself is a scheduled bank, in a special account to be opened by the
company for the purpose either in itself or in any other scheduled bank; or
b) be invested in Government securities; or

c) in bonds, redeemable capital, debt securities or instruments issued by Pakistan Water and Power
Development Authority and in listed securities.

3) Where a trust has been created by a company with respect to any provident fund
• the company shall be bound to collect the contributions of the employees concerned and pay such
contributions as well as its own contributions
• to the trustees
• within fifteen days from the date of collection, and
o thereupon, the obligations laid on the company shall devolve on the trustees and shall
be discharged by them instead of the company.
Penalty of level 1 on the standard scale and shall also be liable to pay the loss suffered by the the employee, on
account of such contravention
INVESTIGATION AND RELATED MATTERS
Investigation of affairs of company on application by members or report by registrar 263, 264, 265,267,268,269-
256,257,260,261, 262
1) The commission after giving an opportunity of being heard may appoint inspector to investigate
• on the application of , supported by evidence and security provided,
o members holding not less than one-tenth of the total voting powers, in the case of a
company having a share capital,
o of not less than one-tenth in number of the persons entered on the company’s register
of members, in the case of a company not having a share capital.
• on the report f the registrar.
2) The Commission may also appoint inspector to after giving an opportunity of being heard if
• the company, by a resolution in general meeting, or
• the Court, by order,
o declares that the affairs of the company ought to be investigated by an inspector appointed
by the Commission and
o report there on if in the opinion of the Commission there are circumstances suggesting
i. that the business of the company is being or has been conducted with intent to defraud
ii. that persons concerned in the formation of the company or the management of its
affairs have in connection therewith been guilty of fraud, misfeasance, breach of trust or
other misconduct
iii. that the affairs of the company have been so conducted or managed as to deprive the
members thereof of a reasonable return
iv. that the member of the company have not been given all the information with respect
to its affairs which they might reasonably expect
v. that any shares of the company have been allotted for inadequate consideration
vi. that the financial position of the company is such as to endanger its solvency.
3) The commission may also order to investigate in to the affairs of the associated company if considered
necessary.
4) It Shall be the duty of the officers of the company to facilitate and provide all the necessary information
and support as required by the investigator.
5) The inspector if directed by the Commission make a inspection report and Commission shall send the
report to the company with such direction as it may deem fit.

Power of commission to initiate action against the management 271-264
If from the inspector’s report commission is of the view that:
1. the business of the company is being or has been conducted with intent to defraud
2. the person concerned in the formation of the company or the management of its affairs have in
connection therewith been guilty of fraud, misfeasance, breach of trust or have been carrying on
unauthorized business
3. the affairs of the company have been so conducted or managed as to deprive the shareholders thereof of
a reasonable return
4. that the members of the company have not been given all the information
5. any shares of the company have been allotted for inadequate consideration
6. the affairs of the company are not being managed in accordance with sound business principles
7. the financial position of the company is such as to endanger its solvency
the Commission may apply to the Court and the Court may, after taking such evidence and giving an opportunity of
being heard as it may consider necessary, by an order
1. remove from office any director including the chief executive

2. direct that the directors of the company shall carry out such changes in the management or in the
accounting policies
3. direct the company to call a meeting of its members to consider such matters
4. direct that any existing contract which is to the detriment shall be annulled or modified

Other Topics
A. Certification of Shariah compliant companies and Shariah compliant securities 451
1. No company shall claim that it is a Shariah compliant company unless it has been declared Shariah compliant in
such form and manner as may be specified.
2. No person shall claim that a security, whether listed or not, is Shariah compliant unless it has been declared
Shariah compliant in such form and manner as may be specified.
3. For the purposes of sub-section (1) and (2), no company shall appoint or engage any person for Shariah
compliance, Shariah advisory, or Shariah audit unless that person meets the fit and proper criteria and fulfills such
terms and conditions as may be specified:
4. Penalty level 3
B. Conversion of status of unlimited company as limited company 48-109

1. An unlimited company may be converted into a limited company
• with prior approval of the Commission in writing and
• by passing a special resolution
o amending its memorandum and articles of association in such a manner that they
include the provisions relating to a company limited by shares in the articles and
complying with all the requirements as may be specified.
2. If the Commission on application is satisfied that the company is entitled to be so converted, such
conversion shall be allowed by an order in writing.
3. Duly certified copy of the order by an authorised officer of the Commission shall be forwarded to the company
and to the registrar within seven days from the date of the order
4. The company shall—

• as on the date of the alteration, cease to be a limited company; and
• file with the registrar a copy of the memorandum and articles of association as altered along with the special
resolution.
5. Penalty level 2
C. Conversion of status of limited company as unlimited company 48-109
1. If a company, being limited by shares, alters its memorandum and articles in such a manner that they
include the provisions which constitute it a unlimited company, the company shall—
• as on the date of the alteration, cease to be a company limited by shares; and
• file with the registrar a copy of the memorandum and articles of association as altered along with
the special resolution.
D. Conversion of a company limited by guarantee to a company limited by shares 49

1. An unlimited company may be converted into a limited company
• with prior approval of the Commission in writing and
• by passing a special resolution
o amending its memorandum and articles of association in such a manner that they
include the provisions relating to a company limited by shares in the articles and
complying with all the requirements as may be specified.
2. If the Commission on application is satisfied that the company is entitled to be so converted, such
conversion shall be allowed by an order in writing.

3. Duly certified copy of the order by an authorised officer of the Commission shall be forwarded to the company
and to the registrar within seven days from the date of the order
E. Conversion of a limited company into Company limited by guarantee 49

1. If a company, being limited by shares, alters its memorandum and articles in such a manner that they
include the provisions which constitute it a company limited by guarantee, the company shall—
• as on the date of the alteration, cease to be a company limited by shares; and
• file with the registrar a copy of the memorandum and articles of association as altered along with
the special resolution.
F. Issue of certificate and effects of conversion 50-41

1. The registrar upon registration of the memorandum and articles of association as altered by the
company, shall issue a certificate to that effect.
2. The conversion of status of a company shall not affect—
• any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the
company before conversion and such debts, liabilities, obligations and contracts may be enforced
in the manner as if such registration had not been done; and
• any rights or obligations of the company or any legal proceedings by or against the company and
any legal proceedings that might have been continued or commenced against the company
before conversion may be continued or commenced upon its conversion.
G. Method of contracting 201-210

A contract or other enforceable obligation may be entered into by a company as follows:
• an obligation which, if entered into by a natural person, will, by law, be required to be by deed or
otherwise in writing, may be entered into on behalf of the company in writing signed under the
name of the company by a director, attorney or any other person duly authorised by the board
and may affix common seal of the company;
• an obligation which, if entered into by a natural person, is not, by law, required to be in writing,
may be entered into on behalf of the company in writing or orally by a person acting under the
company‘s express or implied authority.
All contracts made as above shall be effectual in law and shall bind the company and its successors and all
other parties thereto, their heirs, or legal representatives as the case may be
H. Company to have official seal for use abroad. 203-213

1. A company that has a common seal may have an official seal for use outside Pakistan.
2. The official seal must be a facsimile of the company‘s common seal, with the addition on its face of the
name of every territory where it is to be used.
3. The official seal when duly affixed to a document has the same effect as the company‘s common seal.
4. A company having such an official seal may, by writing under its common seal, authorise any person
appointed for the purpose in any territory not situate in Pakistan to affix the same to any deed or other
document to which the company is party in that territory.
5. The authority of any such agent shall, as between the company and any person dealing with the agent,
continue during the period, if any, mentioned in the instrument conferring the authority, or if no period
is mentioned therein, then until notice of the revocation or determination of the agent‘s authority has
been given to the person dealing with him.
6. The person affixing any such official seal shall, by writing under his hand, on the deed or other document
to which the seal is affixed, certify the date and place of affixing the same.
7. A deed or other document to which an official seal is duly affixed shall bind the company as if it had
been sealed with the common seal of the company.

I. Related party transactions. 208
1. A company may enter into any contract or arrangement with a related party only in accordance with the
policy approved by the board, subject to such conditions as may be specified, with respect to—
• sale, purchase or supply of any goods or materials;
• selling or otherwise disposing of, or buying, property of any kind;
• leasing of property of any kind;
• availing or rendering of any services;
• appointment of any agent for purchase or sale of goods, materials, services or property; and
• such related party‘s appointment to any office or place of profit in the company, its subsidiary company or
associated company:
Provided that where majority of the directors are interested in any of the above transactions, the matter
shall be placed before the general meeting for approval as special resolution:
Provided also that nothing in this sub-section shall apply to any transactions entered into by the company
in its ordinary course of business on an arm‘s length basis.
Office of Profit means
• where such office is held by a director, if the director holding it receives from the company anything
by way of remuneration over and above the remuneration to which he is entitled as director, by
way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
• where such office is held by an individual other than a director or by any firm, private company
or other body corporate, if the individual, firm, private company or body corporate holding it
receives from the company anything by way of remuneration, salary, fee, commission, perquisites,
any rent-free accommodation, or otherwise.
Related Party means:
• a director or his relative:

• a key managerial personnel or his relative;
• a firm, in which a director, manager or his relative is a partner;
• a private company in which a director or manager is a member or director;
• a public company in which a director or manager is a director or holds alongwith his relatives, any shares of
its paid up share capital;
• any body corporate whose chief executive or manager is accustomed to act in accordance with the advice,
directions or instructions of a director or manager;
• any person on whose advice, directions or instructions a director or manager is accustomed to act:
• any company which is—
o a holding, subsidiary or an associated company of such company; or
o a subsidiary of a holding company to which it is also a subsidiary
2. Every contract or arrangement stated in point 1 entered into shall be referred to in the board‘s report to the
shareholders along-with the justification for entering into such contract or arrangement.
3. Where any contract or arrangement is entered into by a director or any other employee, without
obtaining the consent of the board or approval by a special resolution in the general meeting under sub-
section (1) and if it is not ratified by the board or, as the case may be, by the shareholders at a meeting
within ninety days from the date on which such contract or arrangement was entered into,
• such contract or arrangement shall be voidable at the option of the board and if the contract or
arrangement is with a related party to any director, or is authorised by any other director, the

directors concerned shall indemnify the company against any loss incurred by it.
4. Any director or any other employee of a company, who had entered into or authorised the contract or
arrangement in violation of the provisions of this section shall be liable—
• in case of listed company, be punishable with imprisonment for a term which may extend to three
years or with fine which shall not be less than five million rupees, or with both; and
• in case of any other company, to a penalty of level 2 on the standard scale.

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COMPANIES ACT, 2017

Summarized and Compiled By

Facilitator - Xohaib Yakoob Surmawala Page 1

Level Limit of penalty Per day penalty during which the

1 Upto Rs.25,000 Upto Rs.500

Obligation to register 14-9

How and who can form a Public Company 15-14

• Any 3 or more persons

How and who can a Private Company15-14

• Any 2 or more persons

How and who can a Single Company15-14.

Facilitator - Xohaib Yakoob Surmawala Page 2

Nature of the Liability Company formed 15-14.

• Company limited by share

Facilitator - Xohaib Yakoob Surmawala Page 3

Facilitator - Xohaib Yakoob Surmawala Page 4

6. If registration is refused 30-16

Facilitator - Xohaib Yakoob Surmawala Page 5

9. Less than Minimum Number of Members 47-15

11. Documents for incorporation by Single Member Company

Facilitator - Xohaib Yakoob Surmawala Page 6

4) If any company starts its business operations or exercises borrowing powers in

Facilitator - Xohaib Yakoob Surmawala Page 7

 Contents of Memorandum 16,17,18-27,28,29

Facilitator - Xohaib Yakoob Surmawala Page 8

B Printing, signature etc. of Memorandum 19-4,30,31

C Name of the Company 39,40,143,144-12,13,22,23

• Publication of name by a Company

Facilitator - Xohaib Yakoob Surmawala Page 9

D Alteration of Memorandum 21,22,23,24,25,34-32,33,34,35

• A company may alter its principal line of business or registered office by

Facilitator - Xohaib Yakoob Surmawala Page 10

• Effects of Alteration of Memorandum

Facilitator - Xohaib Yakoob Surmawala Page 11

• Share capital including right

B Articles that can be adopted 26-36

• Company Limited by shares----------------------------Table A

C Printing, signature etc of the Articles same as Memorandum 27-37

D Alteration of Articles 28,35,40-38,39,36

• How to alter articles?

Facilitator - Xohaib Yakoob Surmawala Page 12

Facilitator - Xohaib Yakoob Surmawala Page 13

A. Minimum Number of Directors 174-154,155

Number of Directorship 155

• Maximum number of directorship not more than in 7 companies;

• First director 176-157

Facilitator - Xohaib Yakoob Surmawala Page 14

C. Retirement and terms of office of Director 177,180-158,161

• First director shall retire--------------------------------On the date of First AGM.

Facilitator - Xohaib Yakoob Surmawala Page 15

D (I). Manner of selection of independent directors and maintenance of databank of independent

Facilitator - Xohaib Yakoob Surmawala Page 16

Facilitator - Xohaib Yakoob Surmawala Page 17

F. Invalid Election of Directors 179-160

• Members having 10% or more voting power

G. Removal of Directors 181-163

• First director, a director filling casual vacancy or an elected director by

H. Certain provisions not to apply to Directors representing Special Interest 183-165

Facilitator - Xohaib Yakoob Surmawala Page 18

• No person shall be appointed or nominated as director or CE or described as such or proposed director or

J. Acts of Director 185-168

• All the act of director before: