INCORPORATION OF COMPANIES

INCORPORATION OF COMPANIES

CHAPTER # 04

RECAP

IN LAST LECTURE WE HAVE DISCUSSED

COMPANY (ITS MEANING AND DEFINITION UNDER COMPANIES ORDINANCE 1984)

TYPES OF COMPANIES

DIFFERENCES BETWEEN PUBLIC AND PRIVATE COMPANIES

TODAY’S LECTURE

WE SHALL DISCUSS

INCORPORATION Meaning and explanation

OBLIGATION TO BE REGISTERED AS COMPANY (SECTION 14)

DOCUMENTS REQUIRED TO BE SUBMITTED FOR INCORPORATION

CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY AND VICE VERSA

CARRYING ON THE BUSINESS WITH LESS THAN MINIMUM NUMBER OF MEMBERS

EFFECT OF INCORPORATION

COMMENCEMENT OF BUSINESS UNDER SECTION 146

INCORPORATION

MEANING

INCORPORATION IS ACTUALLY GIVING LEGAL FORM TO AN ASSOCIATION BY REGISTERING IT

INCORPORATION IS THE PROCESS OF LEGALLY DECLARING A CORPORATE ENTITY SEPARATE FROM ITS MEMBERS

OBLIGATION TO BE REGISTERED AS A COMPANY

[SECTION 14] OF THE ORDINACE REQUIRES

ANY ASSOCIATION, PARTNERSHIP OR COMPANY COMPRISES OF MORE THEN TWENTY PERSONS

FORMED FOR PROFIT FOR ITSELF OR FOR THE MEMBERS

HAS AN OBLIGATION TO GET ITSELF REGISTERED AS A COMPANY UNDER COMPANIES ORDINANCE 1984

EXCEPTIONS

UNDER [SECTION 14(3)]

QUESTION

IN WHICH CASES THE PROVISIONS OF SECTION 14 SHALL NOT APPLY?

ANY SOCIETY, BODY OR ASSOCIATION, OTHER THAN A PARTNERSHIP, FORMED UNDER ANY OTHER PAKISTANI LAW

A PARTNERSHIP OF TWO OR MORE JOINT FAMILIES WHERE NUMBER OF TOTAL MEMBERS EXCLUDING MINORS DOES NOT EXCEED TWENTY

EXCEPTIONS CONTINUED…….


A PARTNERSHIP FORMED TO CARRY PRACTICE AS LAWYERS, ACCOUNTANTS OR ANY OTHER PROFESSION WHERE PRACTICE IS A LIMITED LIABILITY

A JOINT FAMILY CARRYING A JOINT BUSINESS

PENALTY


IF THE PROVISIONS OF SECTION 14 ARE NOT COMPLIED WITH ……..

EVERY MEMBER OF THE ASSOCIATION, PARTNER SHIP OR COMPANY SHALL BE LIABLE TO A FINE WHICH MAY EXTEND TO PRS. 5,000

ALSO BE PERSONALLY LIABLE FOR ALL THE LIABILITIES INCURRED IN SUCH BUSINESS

DOCUMENTS FOR INCORPORATION FOR PUBLIC COMPANYIN ORDER TO REGISTER A PUBLIC COMPANY, DOCUMENTS REQUIRED ARE,

1) FOUR COPIES OF MEMORANDUM & ARTICLE OF ASSOCIATION

signed by each subscriber in the presence of at least one witness

2) FORM 1, WHICH IS DECLARATION OF COMPLIANCE WITH THE REQUIREMENTS OF COMPANIES ORDINANCE 1984

signed by any of the following,i. Advocate of High or Supreme Court ii. Person named as director in Article of Association iii. Member of ICAP or ICMAP Practicing in Pakistan

3) COPY OF TREASURY CHALLAN

as evidence of payment of registration fee

4) FORM 27,

Contains list of persons consenting to act as directors

5) FORM 28,

Contains consent of person to act as directors and Chief Executive

DOCUMENTS FOR INCORPORATIONFOR PRIVATE COMPANY

IN ORDER TO REGISTER A PRIVATE COMPANY, DOCUMENTS REQUIRED ARE.

1) FOUR COPIES OF MEMORANDUM & ARTICLE OF ASSOCIATION

signed by each subscriber in the presence of at least one witness

2) FORM 1, WHICH IS DECLARATION OF COMPLIANCE WITH THE REQUIREMENTS OF COMPANIES ORDINANCE 1984

signed by any of the following,i. Advocate of High or Supreme Courtii. Person named as director in Article of Associationiii. Member of ICAP or ICAMAP practicing in Pakistan

3) FORM 29,

contains particulars of Directors, Chief Executive etc

4) COPY OF TREASURY CHALLAN

as proof of payment of registration fee

CARRYING A BUSINESS WITH LESS THAN MINIMUM NUMBER OF MEMBER

UNDER [SECTION 47]

IF PRIVATE COMPANY CARRIES ITS BUSINESS FOR SIX MONTHS

WITH MEMBERS LESS THAN 2 OR 3

THEN ON EXPIRY DATE OF PERIOD OF SIX MONTHS,

Every member shall be severally liable for the debts of the company contracted during that time may be sued without joining in the suit of any other member

CONVERSION OF STATUS OF COMPANIES

GENERALLY, FOLLOWING ARE THE TYPES OF CONVERSION OF COMPANIES:-

PRIVATE COMPANY INTO PUBLIC COMPANY;

PUBLIC COMPANY INTO PRIVATE COMPANY

CONVERSION OF PRIVATE COMPANY INTO PUBLIC

UNDER [SECTION 44]

NO PUBLIC COMPANY CAN CONVERT ITSELF INTO PRIVATE COMPANY EXCEPT

with the approval of Commission in writing and conditions imposed by commission


CONVERSION FROM PRIVATE COMPANY INTO PUBLIC COMPANY

Can only be done with the approval of Commission in writing and conditions imposed by commission.

SECTION 45 OF THE ORDINANCE PROVIDES THAT A PRIVATE COMPANY MAY CONVERT ITS STATUS INTO A PUBLIC COMPANY BY

Altering its articles of association The company shall file with the Registrar a Prospectus

or a statement in lieu of prospectus. No approval of any authority for the conversion of

status from a private company into public company is required.


PROCEDURE FOR THE CONVERSION OF STATUS OF COMPANY FROM PRIVATE COMPANY INTO PUBLIC COMPANY

FOLLOWING PROCEDURE IS REQUIRED FOR CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY:-

Step 1: The proposal for conversion of status of private

company into public company is firstly discussed and approved by the Board of Directors.

Step 2: 21 days notice accompanied with the proposed

special resolution is issued for convening the general meeting of shareholders of the company.


Step 3: Resolution for conversion of the status from Private Company into Public Company and alteration in Articles of Association is placed before the members which is carried as special resolution.

A special resolution is to be passed by the majority of not less than three-fourth, of such members entitled to vote as are present in person or by proxy at a general meeting.

There is significant difference in the Articles of both the types of companies.

Therefore; the Articles are required to be amended on change of the status, especially restrictive clauses applicable on a private company are to be deleted.

Step 4: The Company shall increase its directors and shareholders if they are less than the minimum number which are required for a public company.


Step 5: The company shall file the under-mentioned documents with the registrar concerned:-

I. Form - 26 within 15 days of passing of special resolution. II. Memorandum and Articles of Association. (Amended

copy) III. Prospectus or Statement in Lieu of Prospectus within 14

days of passing of special resolution. IV. Form – 3 (allotment of shares to new members / directors

in case, the new directors are not members of company) V. Form – 27 i.e. list of persons consenting to act as directors. VI. Form – 28 Consent to act as directors. VII. Form - 29 (in case of increase of directors, if the company

does not already have three directors required for a public company)

VIII. Bank challan evidencing the deposit of filing fee of the documents in any of the designated banks branches


Step 6: The registrar concerned shall issues a certificate regarding conversion of status of private company into public company and a filing certificate.

Step 7: The Company may obtain a certified copy of

Memorandum and Articles of Association on payment of copying fee of Rs. 500/- for the application submitted online and Rs. 1,000/- for the application submitted in the physical form.

Step 8: The name of the company with the changed

status i.e. without the word “private” shall be mentioned in all letterheads, bills, invoices, seal etc.

Copies of Memorandum and Articles of Association

are also recorded with the alteration.


PROCEDURE FOR THE CONVERSION OF STATUS OF COMPANY FROM PUBLIC COMPANY INTO PRIVATE COMPANY

FOLLOWING PROCEDURE IS REQUIRED FOR CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY:-

Step 1: The proposal for the conversion of status of a public company into private company is firstly discussed and approved by the Board of Directors.

Step 2: 21 days notice accompanied with the proposed

special resolution is issued for convening the general meeting of the shareholders of the company.


Step 3: Resolution for the conversion of status from Public Company into Private Company and alteration in Articles of Association is placed before the members, which is carried as special resolution.

There is significant difference in the Articles of both the types of companies.

Therefore; the Articles are required to be amended on change of the status; therefore the same must be amended to change the status especially the imposition of restrictions meant for a private company.


Step 4: Special Resolution on Form 26 along with

Bank challan evidencing the deposit of fee in any of the designated bank branches shall be filed with the registrar concerned within 15 days passing company.


Step 5: : Application shall be sent to the Commission within 60 days of the date of passing of the special resolution. Such application shall be accompanied with the following documents:-

I. Form 2. (prescribed under the Rules)II. Copy of Form 26 (Special Resolution). III. Copy of the Memorandum and Articles of Association

duly amended. IV. Certified copy of the existing Memorandum and

Articles of Association. V. Copy of latest audited Balance Sheet and Profit and Loss

Account. VI. Copy of minutes of the General Meeting. VII. Bank challan evidencing the deposit of fee in any of the

designated bank branches, on account of application fee (Form-2)

VIII. Affidavit that the contents of the application are true. IX. Application must be in duplicate and a copy is required to

be sent to the registrar concerned under Rule 32 of the Rules.


Step 6: The Commission gives approval for conversion of public company into private company through an Order.

Step 7: Certified copy of the order of the Commission is obtained by depositing the fee as per schedule given in Annexure A for each copy and the requisite court fee stamps.

Step 8: Certified copy of the order along with amended copy of the Memorandum and Articles of Association are filed with the registrar concerned with bank challan evidencing the deposit of filing fee in any of the designated branches

Step 9: The registrar shall issue certificate on conversion of

status of a public company into a private company and the filing certificate in respect of Special Resolution and Order of the Commission. The company may obtain a certified copy of the

Memorandum and Articles of Association on payment of copying fee


INCORPORATION HAS FOLLOWING EFFECTS ON THE EXISTENCE OF THE COMPANY.

A COMPNY BECOMES,

SEPARATE LEGAL ENTITY

ABILITY TO OWN PROPERTY

ABILITY TO INCUR ITS OWN LIABILITY

ABILITY TO SUE AND BE SUED

PERPETUAL SUCCESSION


SEC 16 (5)

…A BODY CORPORATE…EXERCISING ALL THE FUNCTIONS OF AN INCORPORATED COMPANY

of suing and being sued and having perpetual succession… .with power to hold land

SEPARATE LEGAL ENTITY

THE COMPANY IS A LEGAL PERSON [ARTIFICIAL] HAVING A DISTINCT ENTITY FROM ITS MEMBERS

CASES:

SALAMON V SALAMON

LEE V LEE’S AIR FARMING

HEW SOOK YING V HIW TIN HEE @ HEW HEE

PEOPLE’S INSURANCE CO (M) BHD

ABILITY TO OWN PROPERTY

A COMPANY CAN OWN PROPERTY IN ITS OWN NAME

CASES:

MACAURA V NORTHEN ASSURANCE CO LTD

ABDUL AZIZ B. ATAN

ABILITY TO INCUR ITS OWN LIABILITY

LIABILITY OF A COMPANY IS UNLIMITED

LIABILITY OF MEMBERS IS LIMITED, DEPENDS TO THE TYPE OF COMPANY I.E. LIMITED BY SHARES OR LIMITED BY GUARANTEE.

CASES

RE APPLICATION BY YEE YUT EE

SALAMON V SALAMON

ABILITY TO SUE AND BE SUED

A COMPANY CAN SUE AND BE SUED IN ITS OWN NAME

ANY WRONG DONE TO THE COMPANY, ONLY THE COMPANY CAN TAKE ACTION

CASE

FOSS V HARBOTTLE

PERPETUAL SUCCESSION

A COMPANY SHALL EXIST UNTIL PROPERLY WOUND UP OR STRUCK OFF FROM THE REGISTER.

IT’ S LIFE SPAN DOES NOT DEPEND ON THE LIFE OF ITS MEMBERS.

CASES:

REAL NEOL TEDMAN

ABD AZIZ ATAN

CONCLUSIVENESS OF CERTIFICATE OF INCORPORATION

UNDER [SECTION 33]

A CERTIFICATE GIVEN BY THE REGISTRAR IS THE PROOF OF THE INCORPORATION

THE ASSOCIATION IS A COMPANY AUTHORIZED TO BE REGISTERED AND DULY REGISTERED UNDER THIS ORDINANCE

COMMENCEMENT OF BUSINESS

UNDER [SECTION 146]

A PRIVATE COMPANY AND A COMPANY NOT HAVING ITS SHARE CAPITAL CAN COMMENCE BUSINESS

immediately after the date of its incorporation

A PUBLIC COMPANY CAN COMMENCE ITS BUSINESS AFTER,

i. shares have been allotted in cash not less than the minimum subscription

ii. every director has paid for the qualification shares in cash taken or contracted to be taken by him

iii. company has filed with a Registrar a statutory declaration signed by Chief executive or one of the directors and Secretary of the company

iv. company has filed prospectus or statement in lieu of prospectus with the Registrar

v. company has obtained Certificate of Commencement of Business from the Registrar

INCORPORATION OF COMPANIES

Documents

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