Company law

Question 1

company

Answer 1

artificial legal person

Question 2

company registeration requirement

Answer 2

A business consisting of more than 20 persons is obligated to
be registered as a company

Question 3

minimum no of members/shareholders

Answer 3

Private company (other than SMC) has minimum two members and maximum 50 members
while public company has minimum three members.

Question 4

smc (single member company)

Answer 4

It is a company which consists of a single member who is also the director of the company.

Question 5

Revocation (cancellation) of license

Answer 5

where license of a company is revoked, any member/officer of this company cannot hold office for 5 years in new company where assets of this company are transferred.

Question 6

company law

Answer 6

repealed company act’s 1913, 1984, 2016 and (current) company act 2017

Question 7

Simple Resolution

Answer 7

more than 50% of the votes entitled to vote.( present in person or video call or proxy)

Question 8

special resolution

Answer 8

not less than three-fourths (75%) of members of the company entitled to vote and notice is to be given not less than 21 days before specifying intention of special reslolution

Question 9

Directors

Answer 9

Only natural persons shall be directors of a company.every director has got one vote in decision making. It
means when appointed as a director, every director is an equal director and there is no difference in their
authority

Question 10

minimum no of directors

Answer 10

Single member company :One
Other private company :Two
Public unlisted company :Three
Public listed company :Seven

Question 11

Directors appointment

Answer 11

First directors are named in incorporation document and they
hold office until first AGM. Term of subsequent elected directors
is three years.
The existing directors of a company shall fix the number of subsequent directors to be elected in the general meeting by voting before 35 days (not after 35 days) of AGM.
members having atleast 10% voting power can appeal to render the elections of directors invalid not later than 30 days of electons.

Question 12

director’s qualification

Answer 12

The company may fix any conditions to become the director including minimum no of shares or educational qualification.

Question 13

contesting the elections of directors

Answer 13

Any member (including retiring director) who seeks to contest the election of directors shall file the notice of his
intention to the company, at least 14 days before the date of meeting.
Company shall transmit such notice to members before 7 days of AGM.
In case of a listed company, it shall also be published in at least one issue of a daily newspaper in
English and Urdu language having wide circulation.

Question 14

Casual vacancy

Answer 14

Any casual vacancy on the board of a listed company shall be filled up by the directors at the earliest but not later than 90 days from the date of vacancy. There is no time limit specified in Companies Act for other companies.
If the number of directors of the company is equal or above the minimum number of directors required for that
company, even after the casual vacancy, such directors may not fill in the casual vacancy and complete the term
without filling such vacancy.

Question 15

powers of directors by passing a resolution

Answer 15

issue shares, debentures
make investments
make loans, acquisition or disposal of fixed assets declare interim dividend, write off bad debts, advances and receivables;
 to write off inventories

Question 16

quorom of directors meeting

Answer 16

for listed company quorom shall not be less than one-third of their number or four, whichever is greater .Quorum for other than listed company shall be as provided in the articles.

Question 17

no of BOD meeting

Answer 17

The board of a public company shall meet at least once in each quarter of a year.
No limit (min or max) for private companies.

Question 18

minutes of BOD meetings

Answer 18

A copy of the draft minutes of meeting of board shall be furnished to every director within 14 days of the date of
meeting.

Question 19

Records of company

Answer 19

The records must be kept at the registered office of the company simultaneously in physical and electronic form and it shall be preserved for at least ten years in physical form and permanently in electronic form

Question 20

Alternate director

Answer 20

Alternate director can only be appointed by BOD if current director is outside Pakistan for more than 90 days.

Question 21

CEO and term of ceo

Answer 21

Any person ineligible to be a director cannot be a chief executive. A CEO can already be a director as well. If not alreadya director , He shall be entitled to all the rights and privileges, and subject to all liabilities, of being
a director.
The term of first chief executive term continues to the first AGM. The term for subsequent chief executive is three years. The chief executive holds the office unless the successor is appointed.

Question 22

CEO appointment

Answer 22

The name of first chief executive shall be determined by subscribers of memorandum. Subsequent CEO are appointed by directors within 14 days of the election of the directors. The chief executive is deemed to be a director in law.
The chief executive is deemed to be top person of management in audit. A CEO reports to the board of director.
A chief executive can be removed by special resolution, 3/4th of
directors.

Question 23

Chairman

Answer 23

A listed company shall also have a chairman of the board who
must be a non-executive director and BOD must elect him within 14 days from date of election of directors. The board shall clearly define the respective roles and responsibilities of chairman . Chairman shall hold office for 3 years.

Question 24

Role of Chairman

Answer 24

The chairman shall be responsible for leadership of board and ensure that the board plays an effective role in fulfilling its responsibilities. The annual financial statements shall contain a review report by the chairman on the overall performance of board

Question 25

Secretary

Answer 25

A public company must have a company secretary. The company secretary is responsible for advising the board on compliance of corporate laws and for maintenance of relevant records and registers.

Question 26

Meetings

Answer 26

Directors : 1 : meeting of BOD (all directors attend)
2 : meeting of committee of directors (selected directors attend) eg :audit committee, human resource committee
Members : 1 : General meetings :(statutory meeting (only public companies), annual general meeting (atleast once in a calendar year other than SMC) & extra ordinary general
meeting) which all members attend
2 : class meetings ( members of specified class attend eg : meeting of ordinary/preference shareholders)

Question 27

Attending general meetings by directors

Answer 27

General meetings are chaired by the chairman of the board of directors (If chairman is not present within 15 minutes of holding meeting, , any one of the directors present may be elected to be chairman.
If none of the directors is present or is unwilling to act as chairman, the members present shall choose one of their member to be the chairman.)
Directors also attend general meetings. However, the directors do not have a right to vote at a general meeting unless they are also a member of the company. They can, then, vote at the meeting as a member.

Question 28

Statutory meeting (meeting of members)

Answer 28

once in a lifetime of a company to be held after 1 month of incorporation and within 6 months.

Question 29

AGM

Answer 29

Every company (other than single member company) shall hold an AGM within 16 months from the date of its incorporation and thereafter once in every calendar year within a period of 120 days following the close of its
financial year. In case of listed company time can be extend to not more than 30 days by commission or registrar.
The notice of an AGM shall be sent to the members and every person who is entitled to receive notice of general meetings at least 21 days before the date of meeting. In case of listed company : such notice shall be sent to the Commission and also be published in English and Urdu languages at least in one
issue each of a daily newspaper.
AGM is called on the order of directors and not of the members

Question 30

EGM (Extra-ordinary general meeting)

Answer 30

All general meetings of a company, other than the AGM and the statutory meeting, shall be called EGM. The board may at any time call an EGM to consider any matter which requires the approval of the company in a general meeting

Question 31

EGM on request of members

Answer 31

The board shall call an EGM, at the requisition made by the members
having 10% voting power or 10% of total members. The requisition shall state the objects of the meeting, be signed by the requisitionists and deposited at the registered office of the company.
If the board does not call EGM within 21 days from the date of the requisition being so deposited , the requisitionists, may themselves call the meeting, but in either case any meeting so called
shall be held within 90 days from the date of the deposit of the requisition.
The notice of EGM is required to be sent to the member’s at least 21 days before the date of the meeting

Question 32

Meeting by Commission

Answer 32

If any person makes default in holding a meeting of the company called by the Commission or in complying with any directions of the Commission, shall be liable to a penalty of level 3 on the standard scale.

Question 33

Voting in General meetings

Answer 33

Every member shall have votes ‘proportionate to the paid up value of shares (not equal).
At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded, be decided
on a show of hands.

Question 34

Minimum quorum requirement

Answer 34

1 : Listed company :10 members present personally or through video link representing at least 25% voting power (own or proxy).
2 : Other company having share capital : 2 members present personally or through video link representing at least 25% voting power (own or proxy).
3 : Company not having share capital : As provided in the articles.

Question 35

Financial year

Answer 35

financial year” means the period in respect of which any
financial statement of the company , are laid before in general meeting, whether that period is a year or not.

Question 36

Keeping books at place other than registered office

Answer 36

books of account may be kept at any place other than registered office as the board may decide and where such a decision is taken, the company shall file with the registrar a notice in writing giving the full address of that other place within 7 days of the decision.

Question 37

Inspection of books of accounts

Answer 37

The books of account shall be open for inspection by any director during business hours.
Members do not have absolute right to inspect books of accounts. However, the Companies Act, or the directors or the general meeting may authorize member(s) to inspect books of accounts.

Question 38

Audit

Answer 38

The requirement of audit shall not apply to a private company having the paid up capital not exceeding Rs. 1 million or such higher amount of paid up capital as may be notified by the Commission.
In this case , the financial statements shall
also be accompanied by an affidavit executed by those who signed the financial statement

Question 39

authentication of F/S (SMC)

Answer 39

The financial statements of a single member company shall be signed by one director.

Question 40

authentication of F/S

Answer 40

The financial statements must be approved by the board of the company and signed on behalf of the board by the chief executive and at least one director of the company, and in case of a listed company also by the chief
financial officer.
IF When the chief executive is for the time being not available in Pakistan, then the financial statements may be
signed by at least two directors.

Question 41

listed entity F/S

Answer 41

Every listed company shall prepare the quarterly financial statements within the period of:
 30 days of the close of first and third quarters of its year of accounts; and
 60 days of the close of its second quarter of its year of accounts

Question 42

Directors report

Answer 42

The board shall prepare a directors’ report for each financial year of the company other than a private company,
not being a subsidiary of public company, having the paid up capital not exceeding Rs. 3 million.

Question 43

memorandum of association/articles of association’

Answer 43

a ‘memorandum of association’ - a legal statement signed by all initial shareholders or guarantors agreeing to form the company. ‘articles of association’ - written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary.