Registration of a Company Flashcards
Question 1: What is the core requirement of Section 9 of the Companies Act, 2017?
Concepts:
Registration Requirement: Any association, partnership, or entity with more than 20 members and formed for profit must register as a company.
Penalty for Non-Compliance: Violation of this requirement constitutes an offense punishable by a fine and personal liability for business liabilities.
Mnemonic: “R.P.P.” (Registration, Penalty, Profit)
What are the key exceptions to the requirement of registering as a company under Section 9?
Concepts:
Societies/Bodies Incorporated Under Other Laws: Entities formed and incorporated under other relevant laws in Pakistan.
Joint Family Businesses: Businesses carried on by a joint family.
Partnerships of Joint Families: Partnerships of two or more joint families with a total of 20 or fewer adult members.
Professional Partnerships: Partnerships of professionals (lawyers, accountants, etc.) where practice as a limited liability company is not permitted by law.
Mnemonic: “S.J.J.P.” (Societies, Joint Families, Joint Families, Professional Partnerships)
What are the potential consequences of operating a business in violation of Section 9?
Concepts:
Fines: Imposition of fines.
Personal Liability: Individual members become personally liable for all business liabilities.
Mnemonic: “F.P.L.” (Fines, Personal Liability)
What are the different types of companies that can be formed under the Companies Act, 2017?
Concepts:
Public Company: Requires at least three subscribers to the memorandum of association.
Private Company: Can be formed by two or more persons.
Single Member Company: Can be formed by a single individual.
Mnemonic: “P.P.S.” (Public, Private, Single)
What are the key requirements for forming a company under the Companies Act, 2017?
Concepts:
Memorandum of Association: Subscribers must sign a memorandum of association.
Compliance with Registration Requirements: Adherence to the registration requirements outlined in the Act.
Mnemonic: “M.C.” (Memorandum, Compliance)
How is the transfer of shares handled in the case of a single member company?
Concepts:
Nominee Appointment: The sole member must nominate a person to manage the company’s affairs and transfer shares to legal heirs upon the member’s death.
Succession Laws: Share transfer follows Islamic inheritance law for Muslims and respective laws for non-Muslims.
Conversion to Private Company: If multiple legal heirs inherit shares, the company must convert to a private company.
Mnemonic: “N.S.C.” (Nominee, Succession, Conversion)
What are the different types of companies based on their liability structure?
Concepts:
Company Limited by Shares: Liability of members is limited to the unpaid amount on their shares.
Company Limited by Guarantee: Members’ liability is limited to the amount they guarantee to contribute in case of the company’s winding up.
Unlimited Company: Members have unlimited liability for the company’s debts.
Mnemonic: “S.G.U.” (Shares, Guarantee, Unlimited)
What are the key steps involved in the process of incorporating a company?
Concepts:
Name Availability Check: Obtaining approval for the company’s name from the Registrar of Companies.
Document Preparation: Preparing the Memorandum and Articles of Association, along with supporting documents.
Application Filing: Submitting the required documents and an application form to the Registrar.
Certificate of Incorporation: Receiving the Certificate of Incorporation from the Registrar upon successful review and approval.
Mnemonic: “N.D.A.C.” (Name, Documents, Application, Certificate)
Why is obtaining approval for the company’s name an important first step?
Concept: Ensuring the chosen name is unique and does not conflict with existing company names.
What is the significance of the Memorandum and Articles of Association in the incorporation process?
Foundational Documents: They serve as the company’s foundational legal documents.
Outlining Objectives and Rules: They outline the company’s objectives, structure, and internal rules and regulations.
Mnemonic: “F.O.R.” (Foundational, Objectives, Rules)
What happens after the Registrar receives the application for incorporation?
The Registrar reviews the submitted documents and, upon being satisfied with their compliance, issues a Certificate of Incorporation.
What are the key documents that must be filed with the Registrar for company incorporation?
Concepts:
Declaration of Compliance: A declaration confirming adherence to all requirements of the Companies Act, 2017.
Memorandum of Association: The company’s foundational document, signed and witnessed by all subscribers.
Articles of Association: (Optional for companies limited by shares) Internal rules and regulations of the company, signed and witnessed by subscribers.
Correspondence Address: A designated address for communication until the registered office is established.
Mnemonic: “D.M.A.C.” (Declaration, Memorandum, Articles, Correspondence)
What happens if the Registrar finds any deficiencies or errors in the submitted documents?
Concepts:
Request for Revisions: The Registrar may request the company to file revised documents or rectify the identified deficiencies within a specified timeframe.
Mnemonic: “R.R.R.” (Registrar, Request, Revisions)
What are the consequences if the applicant fails to address the deficiencies identified by the Registrar?
Concept: The Registrar may refuse to register the company.
Mnemonic: “R.R.R.” (Registrar, Refusal, Registration)
What recourse is available to the applicants if the Registrar refuses to register the company?
Concepts:
Appeal to the SECP: The subscribers can appeal the Registrar’s decision to the Securities and Exchange Commission of Pakistan (SECP) within 30 days.
Finality of SECP Order: The SECP’s decision on the appeal is considered final and cannot be challenged in court.
Mnemonic: “A.F.” (Appeal, Final)
What is the final step in the registration process if all requirements are met?
Concept: The Registrar will register the memorandum and other documents if satisfied that all legal requirements have been fulfilled.
Mnemonic: “R.R.D.” (Registrar, Registers, Documents)
What is the significance of the Certificate of Incorporation?
Concepts:
Official Recognition: It serves as official proof that the company has been legally incorporated.
Legal Entity Status: It establishes the company as a separate legal entity.
What key information is typically included in a Certificate of Incorporation?
Concepts:
Company Name and Registration Number: Unique identifiers for the company.
Date of Incorporation: The official date the company was incorporated.
Company Type: Whether it’s a public, private, or single-member company.
Liability Status: Whether it’s limited by shares, limited by guarantee, or unlimited.
Mnemonic: “N.D.T.L.” (Name, Date, Type, Liability)
How is the authenticity of a Certificate of Incorporation verified?
Concepts:
Registrar’s Signature/Seal: The certificate must be signed by the Registrar or authenticated with the Registrar’s official seal.
What legal weight does a Certificate of Incorporation carry?
It serves as conclusive evidence that the company has been duly registered under the Companies Act, 2017, and that all registration requirements have been met.
What are the key legal consequences of a company’s registration under Section 18 of the Companies Act, 2017?
Legal Personhood: The company becomes a separate legal entity with rights and obligations distinct from its members.
Perpetual Succession: The company can continue to exist indefinitely, unaffected by changes in its membership.
Status and Registered Office: The company’s legal status and registered office are officially established.
Shareholder Status: In share capital companies, subscribers to the memorandum become initial shareholders.
Initial Directors: Persons named as directors in the articles of association are deemed appointed to their positions.
Mnemonic: “L.P.S.S.I.” (Legal Personhood, Perpetual Succession, Status, Shareholders, Initial Directors)
How does company registration impact the liability of its members?
Concept: The extent of member liability depends on the company’s liability type (limited by shares, limited by guarantee, or unlimited).
Mnemonic: “M.L.” (Member Liability)
What powers and privileges does a registered company acquire?
The company gains the capacity to exercise all the functions of an incorporated entity, such as entering into contracts, owning property, and engaging in business activities.
