Chapter 2

Question 1

title

Answer 1

content

Question 2

Memorandum of Association (MOA)

Answer 2

The MOA is a legal document that defines the company’s constitution and includes essential clauses like the company’s name, registered office, principal line of business, liability clause, authorized share capital, and undertakings by subscribers. It sets out the scope and limits of the company’s activities.

Question 3

Different types of company names and suffixes

Answer 3

Public Company: ‘Limited’; Private Company: ‘(Private) Limited’; Single Member Company: ‘(SMC-Private) Limited’; Guarantee Limited Company: ‘(Guarantee) Limited’; Unlimited Company: ‘Unlimited’

Question 4

Registered Office Clause

Answer 4

It must specify the province or part of Pakistan where the registered office will be situated. It does not need to be the same as the company’s head office.

Question 5

Principal Line of Business

Answer 5

The principal line of business refers to the main business activity in which a company holds substantial assets or earns significant revenue. It should align with the company’s name and must comply with legal requirements.

Question 6

Liability Clause

Answer 6

Company Limited by Shares: ‘Liability of the Members is limited’; Company Limited by Guarantee: Liability is limited, with an additional sentence clarifying members’ liabilities if the company is wound up; Unlimited Company: ‘Liability of the Members is unlimited’

Question 7

Authorized Share Capital Clause

Answer 7

It states the amount of share capital with which the company proposes to be registered and the division of this capital into shares of a fixed amount. Every subscriber must take at least one share.

Question 8

Undertaking/Subscription Clause

Answer 8

Subscribers must provide their names, addresses, and other required details, agree to take a specified number of shares, and sign the MOA in the presence of a witness who also provides their particulars.

Question 9

Printing and Signing the MOA & AOA

Answer 9

The MOA and AOA must be printed, numbered in paragraphs, dated, and signed by each subscriber in the presence of a witness who provides specific details. Companies must supply copies of these documents upon request.

Question 10

Restrictions on Names

Answer 10

Names cannot contain prohibited words or expressions, be deceptive, or offend religious sentiments; Names cannot be identical or nearly resemble those of existing companies; Certain names require prior approval from SECP, e.g., those suggesting government or foreign patronage.

Question 11

Application for Reservation of a Name

Answer 11

A person can apply to the registrar using a specified form and fee. Reservation is valid for a maximum of 60 days. If false information is provided, the reservation can be canceled, and penalties may apply.

Question 12

Change & Rectification of Name

Answer 12

A company may change its name by special resolution and approval from the registrar. If the registrar directs a name change, the company must comply within 30 days, or a penalty may be imposed.

Question 13

Publication of Name

Answer 13

A company’s name and incorporation number must be displayed outside every office. The company must also provide a certified copy of its certificate of incorporation and include its contact details on all documents.

Question 14

Registered Office Clause

Answer 14

It specifies the address for receiving communications. Changes to the registered office require notification to the registrar within 15 days, and if moving to another province or territory, SECP approval is necessary.

Question 15

Articles of Association (AOA)

Answer 15

The AOA governs day-to-day operations and must be consistent with the MOA. It can be adopted from Table A (default provisions) or customized. AOA must include details on shares, meetings, directors, and more.

Question 16

Table A

Answer 16

Table A provides default provisions for companies that do not register their own AOA. Companies can adopt Table A in full or modify it as needed. If Table A is not adopted, it does not apply.

Question 17

Alteration of Articles of Association

Answer 17

A company can alter its AOA by special resolution. Changes must be filed with the registrar within 30 days. Alterations affecting member rights require a 3/4 majority vote.

Question 18

General Provisions as to Memorandum and Articles

Answer 18

The Companies Act overrides any conflicting provisions in the MOA, AOA, or any other agreements. Such conflicting provisions are deemed void.

Question 19

Copies of Memorandum and Articles

Answer 19

Each company must send copies of the MOA and AOA to every member upon request, within 14 days and on payment of a fixed fee. Alterations must be included in copies issued after the change.

Question 20

Effect of MOA and AOA

Answer 20

Upon registration, MOA and AOA bind the company and its members as if they have signed them. All moneys payable by a subscriber for shares are debts due from them, payable as specified by SECP.

Question 21

Form Requirements for MOA & AOA

Answer 21

Company Limited by Shares: AOA - Table A; MOA - Table B; Company Limited by Guarantee without Share Capital: AOA & MOA - Table C; Company Limited by Guarantee with Share Capital: AOA & MOA - Table D; Unlimited Company with Share Capital: AOA & MOA - Table E; Company Licensed under Section 42 (Non-profit): AOA & MOA - Table F

Question 22

Principal Line of Business (Existing Companies)

Answer 22

For existing companies (registered before Companies Act, 2017), the existing MOA’s object clause is treated as the principal line of business, which continues as long as it aligns with the updated legal framework.

Question 23

Additional Sentence in Liability Clause for Guarantee Companies

Answer 23

An additional sentence clarifies the extent of members’ liabilities in the event of the company being wound up, specifying the maximum amount each member may be required to contribute.

Question 24

Borrowing Powers in MOA & AOA

Answer 24

The MOA and AOA are deemed to include the implied power to enter into arrangements for obtaining loans, advances, or other forms of credit, and issuing non-interest-based securities from banks, financial institutions, or the public.

Question 25

SECP Approval Considerations

Answer 25

SECP considers whether the circumstances for alteration are valid, whether adequate disclosure has been made to creditors and members, and may impose terms and conditions on the approval.

Question 26

Consequences of Not Publishing Company Name

Answer 26

Failure to display the company name and incorporation number can result in penalties for the company and its officers. An officer issuing or authorizing documents without the company’s name may be personally liable for any related debts if not paid by the company.

Question 27

Effect of Name Change

Answer 27

The change of name does not affect the company’s rights and obligations. Legal proceedings can continue under the new name, and the company must continue to mention the former name for 90 days.