Memorandum of Association Presentation

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Memorandum of Association

M. SAQIB BHATTI

Advocate High [email protected]

03335193933

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Definition

The memorandum of association of a company,

often simply called the memorandum is thedocument that governs the relationship betweenthe companyand the outside world

Memorandum of Association is the constitution

of the Company and considered to be the maindocument without which no company exists.

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Importance

Constitution of the company

The incorporation of the company, is in fact theregistration of its Memorandum, as it containsconditions upon which alone the company is grantedcertificate of incorporation.

Main document which is required for forming a

company. Nature of a contract between the company and outside

world.

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Why MOA?

It is basically a statement that

the subscribers wish to form a company; have agreed to become members.

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CONTENTS/CLAUSES

1. NAME CLAUSE2. TYPE OF THE COMPANY

3. OBJECTIVE CLAUSE

4. REGISTERD OFFICE

5. AUTHORIS SHARE CAPITAL

6. SUBSCRIBERS

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1.NAME OF THE COMPANY

y Every name is allowed for a company except thefollowing; Identical name Deceptive Inappropriate name Names designed to exploit religious feelings.

www.secp.gov.pk (Source for searching the name)

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2.TYPES OF THE COMPANY

Public limited company

Private limited company Guarantee limited company

Unlimited company

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Public limited company

In this type of company the liability of the members islimited to the extent of their shares.

The company can invite public subscription.

Transfer of shares is not restricted.

The minimum number of members is seven, however noupper limit.

The company has to obtain certificate forcommencement of business before starting the business.

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Private limited company

In this type of company the liability of the members islimited to the extent of their shares.

The company cannot invite public subscription.

Transfer of shares is restricted.

The minimum number of members is two, howeverupper limit is fifty.

The company has not obtain certificate forcommencement of business before starting the business.

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Company limited by Guarantee

This type of company may have share capital or

may not have share capital If the company having share capital then the

liability is limited to the extent of their shares

if the company don't have any share capital then

the liability is limited to the extent the membershave undertaken to contribute at the time of

winding up.

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Unlimited company

In this type of company the liability of the

members is unlimited.

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NGOs

If the company is to be a non-profit making

company, the articles will contain a statementsaying that the profits shall not be distributed tothe members.

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3.Objective/statement of intention

Importance of objectives

Main Object Single Object Multiple Objects Incidental Objects

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y Company's objective clause limit its capacity to act;y Objects clause had to be widely drafted so as not to

restrict the board of directors in their day to day trading.y Companies Act 1989 the term "General Commercial

Company"was introduced which meant "any lawfulor legal trade or business."

y The Companies Act 2006 relaxed the rules even further,

removing the need for an objects clause at all.y Since 1 October 2009, The memorandum no longer

restricts what a company is permitted to do.

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Why Objective clause?

Objective clause and Doctrine of Ultra Vires. Directorspowers to act on behalf of the company;

Ultra vires means beyond powers i.e. any act done by thecompany beyond its legal powers and authority;

Any act done by the company which is neitherauthorized by its object nor by the Companies act thatacts is called ultra vires the powers and authority of the

company An act which is ultra vires the the company is void and

cannot bind the company Since the act is void it cannotbe ratified by the shareholders either.

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4.REGISTERD OFFICE

The province or the part of Pakistan not forming

the part of a province, where the registered officeof the Company is to be situated.

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5.AUTHORIS SHARE CAPITAL

The amount of share capital with which the

company proposes to be registered, and divisionof shares into fixed amount.

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6. SUBSCRIBERS

Subscribers are the persons who subscribe to the

Memorandum and Articles of Association.

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Registration of MOA

Procedure provided for the registration of MOA inCompanies Ordinance 1984. MOA to be filled with the registrar along with an undertaking

of Compliance of the Ordinance by a Director or authorizedperson.

Right of appeal where the registration is refused. (sec 30)

Effect of registration.The MOA when registered it bind the company and all of its

members as if they have signed it. (section 31 of Ordinance, 1984)

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Alteration of Memorandum

For alteration of Memorandum a special

resolution (passed by members) is required.

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Procedure of Alteration

Step 1.the alteration is to be discussed in BOD and approvedthrough a resolution.

Step 2.21 days notice along with the copy of proposed specialresolution is to be sent to the members. Step 3. resolution is passed in general meeting supported by

majority. Step 4. copy of the resolution is to be filled with the registrar within

15 days.

Step 5. NOCs are obtained from the creditors amount exceeding50,000/-

Step 6. Approval is accorded from the registrar. And therafter theregistrar concern issues filing certificate.

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Approval of alteration

According to Ordinance it is necessary to obtain

approval of the Commission of any alterationmade in the MOA.

Upon receiving an application for confirmationthe commission will send a notice to;

x Every debenture Holder

x Everyone whose interest will suffer

x To the creditor

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Articles of Association

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Definition of AOA

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The Articles of association of a company, oftensimply called the Articles is the document thatgoverns the relationship between the company

and its employees Articles of Association is a statutory documentwhich effectively governs company's relationswith the insiders.


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Importance of AOA

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Constitution of the company

The incorporation of the company, is infact theregistration of its Memorandum, and its Articles and the

certificate of incorporation is granted on the basis ofthese two documents.

Main document which is required for forming acompany.

Nature of a contract between the company and its

employees.


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CONTENTS/CLAUSES OF MOA

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The articles of Association of a company sets out the regulations of thecompany, therefore it may adopt all or any of the regulationscontained in Table A of the First Schedule.

The Table A of the first schedule has the regulations covering thefollowing areas:

1. Business clause as to when the business is going to start,

2. The transfer of shares,

3. Alteration in share capital

4. Rules regarding General meetings


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6. Procedure for voting

7. Powers and duties of directors

8. Proceedings of directors

9. The qualification and dis-qualification ofdirectors

10.Accounts

11. Winding up


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Registration of AOA

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Procedure provided for the registration of AOAin Companies Ordinance 1984.


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OTHERREQUIRMENTS

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The AOA shall be:

Printed

Divided into paragraphs,

It must be numbered Signed by each subscriber


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Effects of AOA

The AOA have certain legal effects to the memberand the company:

Binding on members in relation to the company.

Binding on company in relation to members. Binding on members inter se(in their relation to

one another).

Not binding on company in relation to outsider.

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Alteration of AOA

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The AOA of a company may be altered butsubject to the provisions of:

Companies Ordinance

Conditions contained in the MOA


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Procedure of Alteration

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Step 1.the alteration is to be discussed in BOD andapproved through a resolution.

Step 2.days notice along with the copy of proposedspecial resolution is to be sent to the members.

Step 3. resolution is passed in general meetingsupported by majority. Step 4. copy of the resolution is to be filled with the

registrar within 15 days. Step 5. Approval is accorded from the registrar. And

thereafter the registrar concern issues filing certificate.


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Approval of alteration

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According to Ordinance it is necessary to obtainapproval of the Commission of any alterationmade in the AOA.

Upon receiving an application for confirmationthe commission will send a notice to;

x Every class of members who are effected by suchalteration.


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Securities and Exchange

Commission of Pakistan


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Establishment of SECP

The Securities and Exchange Commission of Pakistan(SECP) was set up in pursuance of the Securities and

Exchange Commission of Pakistan Act, 1997. This Actinstitutionalized certain policy decisions relating to theconstitution and structure, powers, and functions of theSECP, thereby giving it administrative authority andfinancial independence in carrying out its regulatory and

statutory responsibilities.

The SECP became operational in January 1999.


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Mission of the SECP

To develop a fair, efficient and transparentregulatory framework, based on internationallegal standards and best practices, for theprotection of investors and mitigation of systemic risk aimed at fostering growth of a

robust corporate sector and broad based capitalmarket in Pakistan.


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Scope of SECP

It was initially concerned with the regulation of corporate sector and capital market. Over time, its

mandate has expanded to include supervision andregulation of insurance companies, non-banking financecompanies and private pensions. The SECP has also beenentrusted with oversight of various external serviceproviders to the corporate and financial sectors,

including chartered accountants, credit rating agencies,corporate secretaries, brokers, surveyors etc. Thechallenge for the SECP has amplified manifold with itsincreased mandate.


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Organization/Division

In accordance with the approved plan, the workof the Commission has been distributed amongst

its six divisions, each of which divided intoDepartments and Wings for effectiveadministration. The Departments are headed byExecutive Directors, with oversight by

commissioners. Presently the Commissioncomprises of the following Divisons.


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SECURITIES MARKET DIVISION

COMPANY LAW DIVISION

SPECIALIZED COMPANIES DIVISION

FINANCE & ADMIN DIVISION

HR & TRAINING DIVISION INSURANCE DIVISION


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COMPANY LAWDIVISION

The Company Law Division (CLD) is entrustedwith wide array of responsibilities that

encompass regulation, monitoring andenforcement of laws.

It also undertakes strict monitoring andvigilance of the corporate sector with a view to

promoting transparency, accountability andgood corporate governance practices, therebyprotecting the interests of investors.


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SECURITIES MARKET DIVISION

The Securities Market Division (SMD) is responsible formonitoring, regulating and developing the securitiesmarket.

The SMD regulates the primary and secondary marketsas well as market intermediaries through registration,surveillance, investigation, enforcement and rulemaking, with the objective of protecting investorinterest.

The SMD also processes and grants approvals toprospectuses for public offering of both debt and equitysecurities.


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SPECIALIZEDCOMPANY DIVISION

The Specialized Companies Division (SCD) isprimarily responsible for regulating and

monitoring insurance companies, NBFCs,modarabas.

The core objective of the Division is to provide aconducive regulatory environment to foster

growth in the system and protect the interests ofshareholders, depositors and policyholdersunder the relevant laws.


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FINANCE & ADMIN DIVISION

It is responsible for directing and controlling theareas of accounting, facilitating overalloperations of the SECP and ensuring its smoothfunctioning.


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HR & TRAINING DIVISION

It is responsible for various activities thatinclude manpower planning, recruitment,selection and capacity building of the SECPsemployees.


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INSURANCE DIVISION

The Insurance Division (ID) regulates andmonitors the insurance sector and administersthe relevant insurance laws.


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LEGALDEPARTMENT

It operates under the direct guidance of theChairman and is mandated to manage the legalaffairs of SECP and provide impartial legaladvice to each operational.


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Services provided by the SECP

LAWS & POLICIES

CORPORATE LAWS

POLICIES NOTIFICATIONS

CIRCULARS

REGISTRATION

MONITORING & COMPLIANCE

ENFORCEMENT

WINDING UP

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Prospectus

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Definition

Prospectus is a document, containing theadvertisement for invitation of subscriptionfrom the public.

It is a legal document that institution andbusiness use to describe the securities they areoffering for participants and buyers.

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Importance of Prospectus

It provides the investor with materialinformation about mutual funds, stocks of thecompany, bond issued by the company andother investments made by the company.

It also tells the investor about the financialposition of the company, the biography of theofficers, directors, the CEO and other key information which an investor required before

making the investment.

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Matters to be stated in Prospectus

Following matters and reports are to be set outin a prospectus:-

The contents of MOA and AOA

The name, addresses, description and occupationof the signatories to the MOA and number ofshares subscribed by them.

The number and values of shares.

Description of business to be undertaken.

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Any provision in the AOA as to remuneration ofdirectors.

The names, occupation and description of

directors. The time and date of the opening of subscription.

The financial statement of the company.

The profit and loss statement of the company.

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Approval, issue and registration of

Prospectus

The prospectus of every company shall not beissued, circulated, or published unless priorapproval of SECP, and for the purposes of

obtaining permission from SECP the companymust required to submit the prospectus sixtydays prior to subscription.

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Penalty for wrongly issuance of

Prospectus

If a prospectus is issued in contravention of theOrdinance, the company and every person, shall

be punishable with fine which may be extended

to five thousand rupees.

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Terms in prospectus cannot be

changed

A company shall not, very the terms of thecontract specified in the prospectus, exceptprior approval form the SECP.

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Civil Liability for mis-statement in

prospectus

If a prospectus invites persons to subscribe forshares or debentures of a company, and thepersons purchase such shares or debentures

while relying on the faith of the prospectus,

thereafter he sustain loss or damage thenfollowing persons are liable for the loss: Every person who is director of the company when the

prospectus was issued Every person who is named in the prospectus

Every person who is a promoter of the company Every person who has given consent in the issuance ofthe prospectus

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Exemption from civil-liability

Following persons are exempted from the CivilLiability:- Any person who is a director and he withdrew his

consent before the issue of the prospectus, The prospectus was issued without his authority and

consent

The prospectus was issued without his knowledge andconsent

That after the issue of prospectus, but before theallotment he withdrew his consent.

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Criminal liability for misstatement

If a prospectus includes any untrue statementevery person who signed or authorized the issueof the prospectus shall be punishable:

With imprisonment for a term of two years With fine which may extent to ten thousand

With both

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Newspaper advertisement of

Prospectus

Every prospectus for the public subscriptionshall be published in the newspaperadvertisement.

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Contents of Prospectus

Name of the company Address of Registered office Main business

Capital of the company Existing paid up share capital New paid up share capital Capital to be raised

Sponsors and directors

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Associate and Subsidiary/ Holding Companies

Financial information and operational results

Management i.e. Chief Executive, Directors,

Company Secretary, Chief Accountant etc. Feasibility Report

Plans and Future prospects.

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Detailed process of Public

Subscription

Approval by BOD Application for obtaining permission for Public

Subscription from SECP. When the permission is granted by the SECP the stock

exchange concerned is contacted for providing the datefor subscription and the bankers are contracted for thepurpose.

The approval remain valid for 60 days. After the above process the Prospectus is published in at

least two dailies one English and other Urdu newspaper,circulated in the province in which the stock exchange islisted, exists.

Memorandum of Association Presentation

Documents

Transcript of Memorandum of Association Presentation