Chapter 1 "Company Introduction, types and registration"

Question 1

What is company?

Answer 1

Company means an organization which is registered under company law.

Question 2

What is Company Law?

Answer 2

Company law includes:
•Repealed Companies Act 
 1913
•Repealed Companies 
 Ordinance 1984 and 2016
•Companies Act 2017

Question 3

Features/Characteristics of a company?

Answer 3

1- Separate legal status.
2- Shares & their characteristics.
3- Separation of ownership from management.
4- Limited Liability of Members/Shareholders.
5- Legal Obligations.
6- Liability to pay Tax.
7- Perpetual succession or perpetual existence.

Question 4

Consequences of separate legal Status?

Answer 4

1- Company can enter Into contracts with its own name.
2- A company owns its assets.
3- A company itself is liable for its debts.

Question 5

Characteristics of Share?

Answer 5

1- Shares have some rights.

2- Shares are transferable.

Question 6

Total Investment in a company is called?

Answer 6

Share capital

Question 7

To whom the concept of Limited liability of company applies?

Answer 7

On Shareholders, Company is fully liable

Question 8

Which laws governed the company?

Answer 8

1- Companies Act, 2017.
2- Memorandum of Association.
3- Articles of Association.

Question 9

What is body corporate or corporation?

Answer 9

It includes
1- A company incorporated under company law.
2-A company incorporated outside pakistan.
3- A body corporate declared as body corporate under relevant statue.
however following are not body corporate;
a) A co-operative society
b) Statutory body

Question 10

Write types of companies under companies Act 2017?

Answer 10

Types on the basis of Status;

1) Private company
2) Public company

Types on the basis of Liability;

1) Limited by shares
2) Limited by guarantee
3) Unlimited company

Other companies;

1) Holding and subsidiary company
2) Association not for profit

Question 11

Private company can be?

Answer 11

1) Single member company

2) Other then single member company

Question 12

Public company can be?

Answer 12

1) Listed Company

2) Unlisted Company

Question 13

Private company limits maximum numbers(50), Restricts rights & Prohibits invitation by its articles or memorandum?

Answer 13

By Articles

Question 14

If Shares are partly paid by member what is the liability of member and what kind of company is this?

Answer 14

Member is liable upto the unpaid amount and company is ‘‘Limited by shares’’

Question 15

Liability of members is limited by memorandum or articles?

Answer 15

By Memorendum

Question 16

Which words shall have to add to be add in name of public company and in name of company limited by guarantee?

Answer 16

World “limited” at end of public company name. and;

word “guarantee” in name of company limited by guarantee.

Question 17

What makes company a subsidiary of another (Holding) Company?

Answer 17

If;

a) Other company controls more then one half of its voting securities, either by itself or together with one or more of its subsidiary companies.
b) Other company controls its composition of board.

Question 18

Define Registrar?

Answer 18

Registrar means a registrar, an additional registrar, an additional joint registrar, a joint registrar, a deputy registrar, an assistant registrar or such other officer as may be designated be SECP, performing duties and functions under this Act.

Question 19

what are the powers and duties of registrar?

Answer 19

1- To register memorandum/Articles of company & issue certificate of incorporation.
2- To approve name of company and rectification.
3- To approve alteration of memorandum and articles.
4- To issue certificate of commencement of business.
5- To receive various notes or documents.
6- To extend time to hold AGM for companies other than listed.
7- To call officers of a company for the information and explanation.
8- To inspect books and records of a company and seize them if he believes it is necessary.

Question 20

Define the commission (SECP)?

Answer 20

The commission means the security and exchange commission of pakistan.

Question 21

Where are the Organization and offices of SECP? Also mention its powers?

Answer 21

Head is in Islamabad and it has 8 regional offices;
•1 in Islamabad
•4 in each province
•1 each in Multan,Faisalabad and sukkur

SECP has function to regulate:
1- All companies
2- Banking companies amd non banking finance companies.
3- insurance companies and Modaraba companies.

Question 22

What are the Powers and duties of Commission?

Answer 22

powers:
1- To register “Association not for profit”.
2- To allow certain words in name of company.
3- To confirm change in”Registered office” class of memorandum.
4- To approve prospectus for issue.
5- To extend to hold AGM for listed companies.
6- To approve lone to directors of a listed company.
7- To call general meetings if company makes default to hold them.
8- To listen appeal against decisions of Registrar.

Question 23

What are the Powers of court?

Answer 23

court has power to declare following as void;
•Election of directors
•General meeting or its proceedings
•Resolution to vary shareholder’s rights.

Question 24

Define resolution and write 1 difference between ordinary and special resolution?

Answer 24

Resolution is a decision reached by majority of members.
Ordinary resolution passed at general meeting by simple majority of votes of members, and Special resolution passed at GM by atleast 3/4th majority of members who ate entitled to vote

Question 25

write conditions/criteria for grant of license as associations not for profit?

Answer 25

1- It is to be formed as a public limited company for useful social objects.
2- It prohibits payment of dividend to its members.
3- It applies its profit and other income in promoting its objects.
4- Its objectives and activities are not against the law and national interests.
5- Its memorandum and articles shall be in accordance with specified form and approved by comission.

Question 26

Why the license of AOP revoke?

Answer 26

1- Failed to comply with terms and conditions.
2- Affairs are against public interest
3- Failed to file with registrar its financial statements or annual returns for two consecutive years.
4- if acted Against the law and national interest.
5- Members reduced below 3.
6- If;
- Conducted unlawful and fraudulent activities.
- Fails to maintain proper accounts or commits fraud.
- Refuses to act according to requirements of memorandum and
articles or companies act or direction of registrar & commission.
- not carrying its business and not in operation for 1 year.
7- it is just and equitable to revoke license.

Question 27

What commission shall do before revocation?

Answer 27

1- Notice.

2- Opportunity of being heard.

Question 28

What are the effects of revocation of license?

Answer 28

Company shall;
1- Stop all of its operations except recovery.
2- Not ask or receive donation from any source. and;
3- Within 90 days of revocation of license company shall transferred all assets to another company However company can retail reasonable expenses for winding up.

Question 28

What are the effects of revocation of license?

Answer 28

REQUIREMENTS:
Company shall;
1- Stop all of its operations except recovery.
2- Not ask or receive donation from any source. and;
3- Within 90 days of revocation of license company shall transferred all assets to another company However company can retail reasonable expenses for winding up.

REPORT TO REGISTRAR:
After above requirements company shall file a report to registrar within 15 days.

PROCEEDINGS FOR WINDING UP:
Within 30 days of acceptance of report board of directors shall start proceedings for winding up.

APPOINTMENT OF ADMINISTRATOR:
If company fails to meet on above requirements, Commission may appoint an administrator for manage affairs and initiate necessary proceedings for winding up.

RESTRICTIONS ON MEMBERS AND OFFICERS:
Members and officers or their family members not hold any office for 5 years.

Question 29

Who are required to register themselves as a company?

Answer 29

Every partnership or association of persons which consists of more than 20 persons and is form for the purpose of gain.
In case of non compliance;
- level 1 penalty will be imposed and
- person shall be personally liable for liabilities of business.

Question 30

What are the exceptions to be registered as a company?

Answer 30

Obligation to register as a company does not apply on following;
1- Partnership of lawyers, accountants.
2- AOP incorporated under any law in pakistan.
2- Joint family.\
4- Partnership of two or more joint families where total number of members do not exceed 20.

Question 31

What are the steps of registration?

Answer 31

1- APPLICATION FOR RESERVATION OF NAME:

• Promoters make application to registrar to reserve name of company. name is reserved for a period not exceeding 60 days.
• If regisrtrar refuses, appeal can be filled to commission within 30 days of refusal.
• In case of Incorrect information, reservation will be cancelled sn applicant will be liable to penalty.

2- APPLICATION TO REGISTRAR, AND CONDITIONS FOR REGISTRARTION:
An application is filled along with following documents;
-Memorandum
- Articles
- Declaration
- Address

3- APPROVAL OF MEMORANDUM BY REGISTRAR:
If registrar is satisfied he shall register the memorandum and other documents and shall issue certificate of incorporation.

Question 32

Refusal of registration and options available to subscribers?

Answer 32

GROUNDS OF REFUSAL:
Registrar may refus…….

OPTIONS AVAILABLE TO SUBSCRIBERS:
1- Remove deficiency.
2-File an appeal to commission within 30 days of refusal.

Question 33

Effect of registration of memorandum and articles?

Answer 33

1- Body corporate is formed.
2- Can perform all functions of incorporated company.
3- Shall have same status and registered office as mentioned in application.
4- Subscribers become members.
5- Proposed director in articles appointed as director.