Chapter 1: Introduction to Company & Incorporation Flashcards
What are the Features of Company?
- Separate legal Status. (Artificial Person)
- Separation of ownership from management.
- Share Capital
- Limited Liability
- Perpetual Succession
- Constitutional Document
- Legal Obligation
- Liability to pay tax
What does ‘Doctrine of Corporate Personality ‘ means?
Doctrine of Corporate Personality is also called Separate Legal Status which means that:
1. Company own its own Assets
2. Company is itself liable for debts
3. Company can make contracts in his own Name
Explain the concept of ‘Limited Liability’ with Examples
Limited Liability means that ‘The liability of the owners of the company is limited to the amount of their investment in the company’
Examples:
°For Company limited by shares
The liability of members will be:
> The remaining amount unpaid on the shares.
°For Company limited by Guarantee having Share Capital.
The liability of members will be:
> The remaining amount unpaid on the shares. &
> The amount Guaranteed by the member.
°For Company limited by Guarantee Not having Share Capital.
The liability of members will be:
> The amount Guaranteed by the member.
Explain the concept of ‘Perpetual Succession’
Perpetual Succession means Continuous Existence.
It means that:
>When shareholders transfer their shares in the ownership of company to someone else.
> It doesn’t effect the legal status and legal existence of company
> Company continues to exists irrespective of the change in ownership.
Identify types of Company on the basis of Status and Liability..
Also identify other types of Company..
Types of Company:
1.On Basis of Shares
>Public Company
-Public listed Company
- Public Unlisted Company
>Private Company
-Single Member Company (SMC)
-Other than SMC
2. On Basis of Liability
> Limited by Shares
> Limited by Guarantee
> Unlimited Company
3. Other Types of Company
> Holding Company
> Subsidiary Company
> Association Not For Profit
Define Private Company.
Single Member Company (SMC):
SMC is a company that consists of a single member who is director.
Other Private Company:
Other Private Company means a company that RESTRICTS :
-No. of members to 50
(Joint shareholder are counted as 1 member)
-Right to transfer Share
-Invitation to general public
Explain procedure by which a Private Company can transfer its share to general public? (03 Marks)
If a Private Company wants to issue share to general public than it should converts itself into a public company.
To convert itself into a public company a private company should remove these restrictions from its articles:
-Restriction of limiting No. of members to 50
- Restriction of Right to transfer Share
-Ristriction of Invitation to general public
What is Public Company
Public Company means a company that DONOT RESTRICTS :
-No. of members to 50
(Joint shareholder are counted as 1 member)
-Right to transfer Share
-Invitation to general public
Explain the concept of listed and unlisted companies
Listed Company:
A company whose securities are listed on stock exchange and are traded on it
Unlisted Company:
A company whose securities are not listed on stock exchange.
Define Holding Company?
Holding Company means a company which:
>Holds the Composition of the Board; OR
> Exercise
or
controls
more
than one-half
of
its
voting
securities
either by
itself
or
together
with
one
or
more
of
its
subsidiary
companies.
Note: Composition
of
board
is
normally
controlled
by
another
company
if
it
can
appoint
or
remove
all
or
a
majority
of
directors.
Define Subsidiary Company?
In relation to Holding Company it means a company in which the Holding Company:
>Holds the Composition of the Board; OR
> Exercise
or
controls
more
than one-half
of
its
voting
securities
either by
itself
or
together
with
one
or
more
of
its
subsidiary
companies.
Note: Composition
of
board
is
normally
controlled
by
another
company
if
it
can
appoint
or
remove
all
or
a
majority
of
directors.
Define Foreign Company?
Foreign company means a company incorporated outside Pakistan, which:
> conducts any business activity in Pakistan, or
has a place of business or liaison office in Pakistan (whether itself or through agent, whether physically or electronically).
Define Public Sector Company.?
Public sector company means a company:
> Whose more than one-half voting securities are held by Govt. or any agency of Govt, or
Govt or any of its agency has power to appoint majority of its directors.
It also includes a public sector association not for profit, licensed by Commission.
However, nomination of directors by Commission on board of securities exchange or any other entity shall not make it a public sector company.
What is included in Company law?
Company law includes:
- repealed Companies Act 1913,
- repealed Companies Ordinance 1984 and 2016, and
- Companies Act 2017.
Define Body Corporate?
> Company incorporated under company law.
Incorporated outside Pakistan
Declared as body corporate under relevant statute.
NOT a BODY CORPORATE
> A co-operative society
> Any statutory body specifies by Federal Government.
