Corporate law-report

1

Submitted To:

Sir M. Ali Shah

Submitted by:

FAIZA ISMAIL (14874)

MAIMOONA SHAIKH (14876)

ATIF RAZA (14656)

ZEHRA NADEEM (14261)

2015

TOPICS:

SHARE CAPITAL

ARTICLES OF

ASSOCIATION

MEMORANDUM OF

ASSOCIATION

[ CORPORATE LAW INTERVIEW REPORT] A comprehensive and in-depth analysis of corporate world questions and their solution in compliance with Company Ordinance 1984

Corporate Law – Interview Report –

Submitted To: Sir M. Ali Shah

Submitted By: Faiza Ismail (14874)

Maimoona Shaikh (14876)

ATIF RAZA (14656)


Semester: Fall 2015

CORPORATE LAW INTERVIEW REPORT 2

Law201-A | 2

Contents

EXECUTIVE SUMMARY ........................................................................................................................3

Corporate law interview questions answers .........................................................................................5

ANALYSIS: ........................................................................................................................................ 11


Law201-A | Letter of Transmittal 3

Letter of Transmittal

December 12th , 2015

Sir M. Ali Shah

Lecturer Corporate Law

Institute of Business Management

Dear Sir,

Presented is our term report on N.Y. Law Associate’s Consultant Nadeem Yaseen. The project

involves a comprehensive and in-depth analysis of corporate world questions and their answers

in compliance with Company Ordinance 1984. It is prepared according to the guidelines

provided during the semester.

We would like to thank you for providing the guidelines & suggestions which enabled us to

complete this report as our final project. We have worked vigorously on this project to bring you

the accurate and reliable results.

Sincerely,

Faiza Ismail (14874)

Maimoona Shaikh (14876)

ATIF RAZA (14656)



Law201-A | 4

EXECUTIVE SUMMARY

This report gives an insight of practical world happenings related to corporate law, more

specifically; about the laws related to Alterations in the Memorandum of Association, Articles

of associations and alterations in the share capital of a company.

All the above information has been extracted after a detailed conversation and interview with

Mr. Nadeem Yaseen who is a Corporate Tax Consultant and runs his own firm by the name of

N.Y. Law Associates.

Mr. Yaseenhelped us clarify our concepts regarding conversion of private limited company into

a Public limited company, registration of companies, meaning of share capital, alterations in

Memorandum due to alterations in share capital, difference between consolidation of shares

and stock-split, and also mentioned a few laws that were practiced prior to Companies

Ordinance 1984 and the new policies regarding the issuance of share capital. He also shared his

experience about a few cases that he has come across in his career up till now which helped us

understand the practical applications of laws in further department


Law201-A | Nadeem Yaseen Qureshi 5

INTRODUCTION:

An interview with

Nadeem Yaseen Qureshi Corporate Tax Consultant N.Y.Law Associates Address: Suite B-7, Ali Centre Block 13-C, Gulshan-e-Iqbal, Karachi.

Mr. Nadeem Yaseen is a Junior Tax Consultant. He assists the senior consultant and provides

advice and guidance to clients throughout the year in order to make sure that clients are taking

full advantage of tax laws while remaining within their legal boundaries. He is involved in

computations to calculate tax liability.

He has previously worked at Kausar Fecto & Co. Chartered Accountants. Mr. Nadeem Yaseen

has also been a member of Subhani Law Associates since April 10,2015. The website of

Subhani Law Associates is as follows:

www.subhanilaw.com

A formidable legal mind, a Junior Tax Consultant with extensive knowledge and experience of

corporate tax liabilities, Mr Yaseen has done ACMA (Associate Cost and Management

Accountancy), FPA , CFA , LLB (The Bacccheularation in Law) , LLM (The Masters in Law) and

PGD (MS&A),

Mr. Yaseen has completed his Secondary and Higher Secondary education from Cadet

College Sanghar which is a military high school , located in Sanghar District, Sindh, Pakistan.

Cadet College Sanghar is affiliated with the Board of Intermediate and Secondary Education

Mirpurkhas and is governed by its regulations of examinations.

Mr.Yaseen helped us in understanding the analytical skills that he learned as a Tax Consultant

by giving us corporate world examples of ChenOne and PTCL.

With special thanks to Nadeem Yaseen Qureshi for his valuable time. He can be

followed on Twitter . His contact details are as follows:

Ph: 021-34822893

http://www.subhanilaw.com/


Law201-A | 6

Email: [email protected]

Overview:

In our comprehensive interview with our Tax Consultant Mr. Yaseen , we covered the

topic of Memorandum and Article of Association , Doctrine of Ultra-Vire, and Share

Capital , in which he further elaborated Paid-up Capital .

He also explained us the procedural cost and Capital Reserves requirements for the

registration of a company.

Share Capital, also termed as “Equity Financing” , is the fund raised by a company

through the issuance of common or preferential shares to individuals / institutional

investors for the growth and expansion of the company

Memorandum of Association is a document that contains all the fundamental

information which are required for the incorporation of the company. It is sub-ordinate to

The Company Act which cannot be amended retrospectively.

Articles of Association is a document containing all the rules and regulations that

governs the company. It is sub-ordinate to the memorandum of association which can

be amended retrospectively.

Interview Focus: The main objective of Corporate Law Term Project , based on interview , was to

Have a better and in-depth understanding of law rule and compilation of

regulations that need to be followed in the corporate world.

Examine and understand the objectives, the structure and the detailed

information of the share capital , memorandum of association and article of

association

To provide a detailed conceptual framework on the assigned topics


Law201-A | Interview Aim: 7

Interview Aim: The appropriate provision of legal services in any jurisdiction requires a thorough understanding of the

legal problems that lawyers experience, their responses to these problems and the outcomes they

achieve. The Aim was to have a better understanding of those queries and their solution

Interview Questions: Q1. If a private limited company wishes to convert itself in to public company and list its shares

on the stock exchange then what are the changes it need to make in its MOA?Q2.if a company

wishes to alter its share capital then does it require altering its MOA. What is the process?

Q3.can you give us an example of a case that you come across that is ultra-vires

Q4. Why a company would wants to consolidate its shares?

Q5. Explain the circumstances in which fully paid-up and partly paid-up stocks are issued

Q6. How can a company increase its authorized share capital from 500 million to 1 billion Is

stock splitting a better option than increasing share capital

Q7. Distribution of bonus share increases the share capital while stock splitting splits the

authorized share capital. Can you please give us the example of your recent case related to

bonus issue and stock split

Q8. We have to merge 3 companies of same line of business to bring in synergy

Q9. What is the share capital and how alteration in share capital in share capital is done?

Q10. If I have not registered my company with the registrar of companies then what is the

mechanism to pay the taxes concerned on the revenue earned through it.

Q11. I have registered the private limited company

a) What will be the whole procedural cost

b) Minimum capital requirements to register

c) Q12. Can you give us the example of any class of ultra-vire?


Law201-A | Question & Answers Session 8

Question & Answers Session

Q1. If a private limited company wishes to convert itself in to public company and list its

shares on the stock exchange then what are the changes it need to make in its MOA?

Answer: first of all as far as memorandum of association is concerned any change in capital is

required to be mentioned in its starting clauses however in the last clause where the no of

shares are declared, there would be no change so answer is both things are possible , changes

have to made in memorandum of association and in schedule there would be no change.

Q2. If a company wishes to alter its share capital then does it require altering its MOA. What

is the process?

Answer: In case of MOA as we earlier mentioned change in share capital is required to be

mentioned and as far as the procedure is concerned, it is same if the company is existing

company this has to be presented in annual general meeting and its issues also has to be given

in AGM. Then procedure has to be adopted as far as the articles are concerned. If approval is

there then memorandum of association has to be altered.

Q3. Can you give us an example of a case that you come across that is ultra-vires

Answer: as far as company law is concerned, I didn’t come across any case of ultra-vires. But in

the case of taxation, there are many cases which I have dealt with

Q4. Why a company would wants to consolidate its shares?

Answer: It depends upon the management policies, if company intends to monopolize the

market then shares have to be capitalized, if the management of the company intends to be

concentrated in management side then the consolidation of its shares are necessary. Thirdly if

company want to enhance the market price of the share then it can consolidate it shares

Q5. Explain the circumstances in which fully paid-up and partly paid-up stocks are issued

Answer: from the promulgation of companies ordinance 1984, the partly paid-up stocks are not

issued in Pakistan, every share has to be issued in lump sum against it nominal price value of

share the fully paid up shares are issued while in the other parts of world like England USA and

in Pakistan prior to 1984, the partly paid-up shares were issued which were consist of



application money then the no of installments and then the final call this is the procedure of

partly paid-up capital

Q6. How can a company increase its authorized share capital from 500 million to 1 billion Is

stock splitting a better option than increasing share capital

Answer: It all depends, splitting of shares is termed as issuing of right shares and the objectives

of management and company is to be considered if they consider that prices of share goes

down so that people can also purchase the shares then stock splitting is the better option in

this vary case the market capitalization is never reduced it would remain same however if

management intends to go over the management control over the shares then stock splitting

would not be effected in case of increasing the share capital, the market price is reduced which

ultimately reduce the earning per share and share capital increased and voting rights of the

shares are also affected.

Q7. Distribution of bonus share increases the share capital while stock splitting splits the

authorized share capital. Can you please give us the example of your recent case related to

bonus issue and stock split

Answer: No I don’t have such case in my career

Q8. We have to merge 3 companies of same line of business to bring in synergy

We have to options for that

1) By amalgamation of U/s 282L of companies Act 1984

2) By transferring all the assets and liabilities to the surviving company and winding up the

other two companies

a) Which one is better and profitable option

b) What is the procedure of amalgamation of a private limited or NBC

c) Instead of above given options, can we apply to registrar of companies to strike off

the name of the two companies as defunct company?

Answer: as far as amalgamation is concerned it basic purpose to eradicate competition and

increase the monopoly of the companies a. second objective is to reduce the cost which lies the

efficiency of existing companies thus option A is better

Q9. What is the share capital and how alteration in share capital in share capital is done?

Answer: share capital is the certification of share holding in the company by the share holder

and it also covers the extent of liability which is limited and it is according to extent of what he



paid against it certificate and share capital is actual capital which is required to initiate company

which has two basic parts . One is authorized capital and second one is paid-up capital. It is

altered by memorandum of association and procedure laid down in articles of association in

which it is defined in the company that how alteration is governed in case of reduction or

increase in the number of shares and that how it can be done by majority of shareholders and

its percentage which is clearly defined in its article of association

Q10. If I have not registered my company with the registrar of companies then what is the

mechanism to pay the taxes concerned on the revenue earned through it.

Answer: if a company is not registered with the registrar of companies then there would be no

change to pay taxes as far as income taxes and sales taxes are concerned. Before 2001 there

was the concept of registered firm as well as unregistered firm. Registered firm are those firms

which are registered with the registrar of the firms and they have paid super taxes on their

income and as well as he unregistered were required to pay normal taxes and there was the

huge difference between the super taxes and normal taxes however from 2001 in income tax

ordinance there was no difference between a registered firm or unregistered firm they both

have to pay the taxes. The only difference between those firms are that the firm which is

registered with the registrar of the firms can file a suit to the firm in the normal court of law

while those who are not registered they have the difficulty in resolving their disputes through

the court of law

Q11. I have registered the private limited company

d) What will be the whole procedural cost

e) Minimum capital requirements to register

Answer: As far as the procedural cost is concerned it depends on the firm which is going to

register it which may starts from 50000 to 500000 it depends on the paid-up capital or

authorized capital of the company as there is a schedule available on SECP according to which

the authorized capital like a particular range then you would have to pay the cost in the

schedule defined by the SECP if the capital is more than the limit then the cost will definitely

increases if you have started the company with one million of authorized capital then the

amount would definitely reduced by around 6000 and the other service charges will vary with

the company

The minimum capital of the firm will vary according to the authorized capital of 100000 to

1000000 there is the minimum capital requirement schedule fees is 6750 to 7500 that is

minimum so if the company is registered with SECP then they have to follow the above

described payment system


Law201-A | ANALYSIS: 11

Q12. Can you give us the example of any class of ultra-vire?

Answer: the renowned Case is CHENONE Pakistan limited which deals with the two sections of

income tax ordinance 2001 according to which in section 176 which deals with audits have to

be done by the tax authorities of any case and section 214c which authorizes FBR as the agency

which can select any case through ballet of any tax payer that ground the goes around the audit

the difference between two types of audits one is according to section 177 in which the

commissioner of FBR can select the case for audits . while in the case of section 214c the FBR

itself will select the case through ballet the basic difference is and which is addressed by the

high court was that FBR selection of cases through ballet and as far as commissioner is

concerned who can conduct the audit while the selection of cases for audit rest with FBR

however procedures adopted for audits would depend upon the commissioners the basic issue

associated with the case in which it was decided that commissioner can also select cases for

audit and FBR also select cases through ballet the citation of this case is 106tax109 201 to

ptd1815 2013 of PTCL this case was decided on 10-5-2012 by Lahore high court ( CHENONE

stores versus federal board of revenue through the rite petition having no 393

ANALYSIS:

Basically our interview with Mr Nadeem Yaseen was very interactive and interesting. We have

asked him several questions about share capital, articles of association and memorandum of

association

First of all we acquired about the conversion of private limited company to public limited

company and what are the changes the private company has to do like the changes that it need

to make which he answered as first of all as far as memorandum of association is concerned

any change in capital is required to be mentioned in its starting clauses , however; in the last

clause where the number of shares are declared, there would be no change so answer is both

things are possible , changes have to made in memorandum of association and in schedule

there would be no change thus these all requirements are necessary for the private company to

be converted into public limited company. Second question that we asked was that if a

company wishes to alter its share capital then does it require to alter its Memorandum of

Association. What is the process? Which he answered as In case of Memorandum Of

Association change in share capital is required to be mentioned and as far as the procedure is

concerned, it is same if the company is existing company this has to be presented in Annual



General Meeting and its issues also have to be given in Annual General Meeting. Then

procedure has to be adopted as far as the articles are concerned. If approval is there then

Memorandum Of Association has to be altered. Thus, increase or decrease in the authorized

share capital of a firm is permitted in its articles of association. Another question that we asked

was about the example of a case of ultra vires which he did not come across in his career

related to the company but in spite of that he deals in taxation cases of ultra-vires

Then we came on the topics related to the share capital and our first question from him was

about the concept of share capital and its alteration in which he described that share capital is

the certification of share holding in the company by the share holder and it also covers the

extent of liability which is limited and it is according to extent of what he paid against it

certificate and share capital is actual capital which is required to initiate company which has

two basic parts . One is authorized capital and second one is paid-up capital. It is altered by

memorandum of association and procedure laid down in articles of association in which it is

defined in the company that how alteration is governed in case of reduction or increase in the

number of shares and that how it can be done by majority of shareholders and its percentage

which is clearly defined in its article of association. Then we asked about consolidation of the

share by the company which he answered as It depends upon the management policies, if

company intends to monopolize the market then shares have to be capitalized, if the

management of the company intends to be concentrated in management side then the

consolidation of its shares are necessary. Thirdly if company want to enhance the market price

of the share then it can consolidate it shares. Thus we can say that the share consolidation

reduces the number of shares outstanding and increase the price per share proportionally.

Then we asked about the circumstances in which fully paid up and partly paid-up stocks are

issued which he answered that from the promulgation of companies ordinance 1984, the partly

paid-up stocks are not issued in Pakistan anymore, every share has to be issued in lump sum

against its nominal price value of share the fully paid up shares are issued while in the other

parts of world like England USA and in Pakistan prior to 1984, the partly paid-up shares were

issued which consisted of application money, then the number of installments and then the

final call; this was the procedure of partly paid-up capital. After this, we raised the question like

How can a company increase its authorized share capital from 500 million to 1 billion. Is stock

splitting a better option than increasing share capital?. He gave the explanation that It all

depends, splitting of shares is termed as issuing of right shares and the objectives of

management and company are to be considered. If they aim that the prices of shares go down

so that more public can purchase the shares then stock splitting is the better option.In this very

case the market capitalization is not reduced, it would remain same. However, if management

intends to gain control over the shares then stock splitting would not be effective in case of



increasing the share capital, the market price is reduced which ultimately reduce the earning

per share and share capital increases and voting rights of the shares are also affected. The

benefits of increasing the authorized capital which increases the ability to raise capital by

issuing capital stock under the transaction described above ,or other financing transactions and

we have the shares of common stock available to pursue business expansion opportunities , if

any.

We then gave him a scenario and asked him which of the two options would he recommend to

go along with in his opinion. The case was:

We have to merge three companies in same line of Business, to bring in synergy.. We have two options for that:

1. By amalgamation u/s.282L of the Companies Act, 1984. 2. By transferring all the assets and liabilities to the surviving company and winding

up the other two companies

He said that the better option would be amalgamation U/s 282L of companies Act 1984

because its basic purpose is to eradicate competition and increase the monopoly of the

companies and second objective is to reduce the cost and eliminate inefficiency in the existing

companies.

As he is an expert in taxes, we asked him that If we have not registered our company with the

registrar of companies then what is the mechanism to pay the taxes concerned on the revenue

earned through it. Then he answered that if a company is not registered with the registrar of

companies then there would be no change to pay taxes as far as income taxes and sales taxes

are concerned. Before 2001 there was the concept of registered firm as well as unregistered

firm. Registered firm are those firms which are registered with the registrar of the firms and

they have paid super taxes on their income and as well as he unregistered were required to pay

normal taxes and there was the huge difference between the super taxes and normal taxes

however from 2001 in income tax ordinance there was no difference between a registered firm

or unregistered firm they both have to pay the taxes. The only difference between those firms

are that the firm which is registered with the registrar of the firms can file a suit to the firm in

the normal court of law while those who are not registered they have the difficulty in resolving

their disputes through the court of law. Then we asked him about the procedural cost and

minimum capital requirements of registering the private limited company and in response he

answered that As far as the procedural cost is concerned it depends on the firm which is going

to register itself. It may start from 50000 to 500000. It depends on the paid-up capital or

authorized capital of the company as there is a schedule available on SECP according to which

the authorized capital like a particular range then you would have to pay the cost in the



schedule defined by the SECP if the capital is more than the limit then the cost will definitely

increase if you have started the company with one million of authorized capital then the

amount would definitely be reduced by around 6000 and the other service charges will vary

with the company.The minimum capital of the firm will vary according to the authorized capital

of Rs.100000 to Rs.1000000 there the minimum capital requirement schedule fees is Rs.6750

to Rs.7500 that is minimum so if the company is registered with SECP then they have to follow

the above described payment system . Finally, he described a case related to ultra-vires related

to taxes segment which is about Chen-one which deals with the two sections of income tax

ordinance 2001 according to which in section 176 which deals with audits have to be done by

the tax authorities of any case and section 214c which authorizes FBR as the agency which can

select any case through ballet of any tax payer that ground the goes around the audit the

difference between two types of audits one is according to section 177 in which the

commissioner of FBR can select the case for audits, while in the case of section 214c the FBR

itself will select the case through ballet the basic difference is and which is addressed by the

high court was that FBR selection of cases through ballet and as far as commissioner is

concerned who can conduct the audit while the selection of cases for audit rests with FBR

however, procedures adopted for audits would depend upon the commissioners the basic issue

associated with the case in which it was decided that commissioner can also select cases for

audit and FBR also select cases through ballet the citation of this case is 106tax109 201 to

ptd1815 2013 of PTCL this case was decided on 10-5-2012 by Lahore high court ( CHENONE

stores versus federal board of revenue through the rite petition having no 393

We can say that these questions and answers gave us an in-depth understanding of the concept

of share capital, memorandum of association and articles of association practically.

Corporate law-report

Law

Transcript of Corporate law-report