Chapter 2

Question 1

What is the Memorandum of Association and what is its significance?

Answer 1

The Memorandum of Association is a fundamental document for any company.
It serves as the company’s constitution, defining its relationship with the outside world, its internal structure, and the scope of its operations.

Question 2

What are some of the key clauses typically found in a Memorandum of Association?

Answer 2

Memorandum of association includes name clause, registered
office clause, principal line of business clause, liability clause,
authorized capital clause (for companies limited by shares) and
undertaking or subscription clause.

It includes implied borrowing powers of
company and should be printed, signed and dated.

Question 3

What is the purpose of the Name Clause in the Memorandum of Association?

Answer 3

With words “Limited,” etc.

Question 4

What does the Registered Office Clause specify in the Memorandum?

Answer 4

Province or Islamabad.

Question 5

What is included in the Principal Line of Business Clause?

Answer 5

Match with the name.

The business in which company’s majority assets are held or which is the major revenue stream.
(whichever is higher)

Question 6

How does the Liability Clause define the extent of members’ liability?

Answer 6

Limited by share, or Limited by guarantee + Extent.

Question 7

What details are covered in the Authorized Capital Clause?

Answer 7

Authorized + Division + Subscribers.

Question 8

What does the Undertaking or Subscription Clause ensure regarding the formation of a company?

Answer 8

Undertaking to form a company.

Question 9

Which types of names require the approval of the Commission for a company?

Answer 9

Name showing patronage/connection with:
1. Head of State.
2. Federal Govt. or Provincial Govt.
3. Foreign Govt. or international organization.
4.Corporation set up under any Federal or Provincial law.
5. Modaraba management company.
6. Business requiring a license.

Question 10

What are the criteria for prohibited names under the Memorandum?

Answer 10

1. Identical.
2. Inappropriate.
3. Offends religious feelings.
4. Contains words prohibited by the Commission.

Question 11

What is the procedure to change the name of a company by itself?

Answer 11

–Reserve name.
–Special resolution.
–Apply to the Registrar.
–New Certificate.
–Old name with New name for 90 days (on every office/document).

Question 12

What is the process of change of name by Registrar?

Answer 12

1. Issues order after
   opportunity of hearing.
2. Company rectifies (within 30
   days), or Registrar selects and
   issues new Certificate

Question 13

Change of registered office but not registered office clause

Answer 13

Notify Registrar within 30 days of incorporation.
Notify change to Registrar within 15 days.
Also shift physical record (to new Registrar).

Question 14

What steps must be followed to change the Registered Office Clause?

Answer 14

1. Special Resolution.
2. Application to Commission. Commission makes an order (considering the interest of members/creditors).
3. A copy of the order to Company and Registrar.
4. Within 30 days of the order, file altered memorandum + order to Registrar. (Order void after 30 days, however, Commission may extend).
5. Registrar issues a certificate.
6. Transfer physical record.

Question 15

What happens if the order to change the Registered Office is not filed within 30 days?

Answer 15

The order becomes void unless extended by the Commission.

Question 16

What is the definition of a Principal Line of Business?

Answer 16

Business with substantial assets or revenue, whichever is higher.

Question 17

What steps are involved in changing the Principal Line of Business Clause?

Answer 17

1. Special Resolution.
2. Also change name, if necessary.
3. Within 30 days, file altered memorandum to Registrar.
4. Registrar issues certificate

Question 18

What are the steps taken if registrar wants to change name of a company?

Answer 18

Issues order after an opportunity of hearing.
Company rectifies (within 30 days), or Registrar selects and issues a new certificate.

Question 19

What are the requirements for a company to display its name?

Answer 19

1. COI at every place of business.
2. Name and incorporation number (in English & Urdu) outside the Registered Office and every place of business.
3. Name (in English & Urdu) on seal.
4. Name and other particulars on official documents.

Question 20

What are the general contents of the Articles of Association?

Answer 20

1. Business
2. Transfer/ Transmission of shares, and its Form
3. Alteration of capital
   Voting and other rights attached to different classes of shares, and other securities
4. Notice and Proceedings of General meetings
5. Voting of members
6. Proxy Instrument
7. Number of directors, their powers, and duties
8. Proceedings of directors’ meeting
9. Disqualification of directors and filling of vacancies
10. Minute books
11. Dividend and Reserves
12. Accounts
13. The seal
14. Indemnity
15. Winding up

Question 21

How can the Articles of Association be altered?

Answer 21

1. Special Resolution.
2. Approval of 3/4th of affected class (if necessary).
3. File altered articles within 30 days.

Question 22

When is it mandatory to register the Articles of Association?

Answer 22

1. Company limited by guarantee or unlimited company –> Required.
2. Company Limited by Shares –> Register Articles or Adopt Table A.
   (Table A applies if articles are not registered or silent on a content.)

Question 23

What is the role of Table A for companies limited by shares?

Answer 23

It applies if articles are not registered or silent on a content.

Question 24

What are the requirements for providing copies of the Memorandum and Articles to members?

Answer 24

To member within 14 days on payment of a fee.

Question 25

What is the effect of incorporation of a company?

Answer 25

1. MOA/AOA binding on the company and members.
2. Subscribers pay money within 30 days of incorporation; otherwise, allotment of shares is canceled, and names are removed.

Question 26

What is the binding effect of the Memorandum and Articles on the company and its members?

Answer 26

MOA/AOA binding on the company and members.

Question 27

What is the order of overriding documents in case studies?

Answer 27

Companies Act > Memorandum > Articles > Resolution.

Question 28

Why is the Commission’s approval required to change the Registered Office Clause?

Answer 28

Approval of Commission is required to change the Registered Office Clause.

Question 29

What restriction applies to private companies regarding the issuance of shares?

Answer 29

A private company cannot issue shares to the general public.