1.

Introduction
1.1.1. Company
A company is an association or collection of individuals, whether natural
persons, legal persons, or a mixture of both. Company members share a common purpose
and unite in order to focus their various talents and organize their collectively available
skills or resources to achieve specific, declared goals.
Companies take various forms such as:

Voluntary associations which may include nonprofit organization

A group of soldiers
Business entities with an aim of gaining a profit
Financial entities and banks

1.1.2. Types of Companies

Companies registered under companies ordinance, 1984 can be classified into
Following categories by virtue of articles of association
Types of companies registered in Pakistan on the basis of articles of association

Private Limited Company

Public Limited Company
Single Member Company

1.1.3. Private Limited Company

A type of company that offers limited liability or legal protection for its shareholders
but that places certain restrictions on its ownership. These restrictions are defined in the
company's bylaws or regulations and are meant to prevent any hostile takeover attempt.
The major ownership restrictions are:

shareholders cannot sell or transfer their shares without offering them first to
other shareholders for purchase
shareholders cannot offer their shares to the general public over a stock
exchange, and
the number of shareholders cannot exceed a fixed figure (Commonly 50)

1.1.4. Public Limited Company

A company other than a company registered as private limited company is called public
limited company. A company whose securities are traded on a stock exchange and can be
bought and sold by anyone. Public companies are strictly regulated, and are required by law
to publish their complete and true financial position so that investors can determine the true
worth of its stock (shares). Also called publicly held company.
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Companies ordinance defined certain conditions for public limited companies which are as
under:

A company registered as public limited company does not impose any

restrictions on the number of members that the company can have
A Public company is a company which does not impose any restriction on the
right of transfer of its shares
Public company does not impose any restriction on the invitation to general
public to subscribe for its shares and pay any amount in respect of that
subscription

1.1.5. Single Member Company

A single member company can be defined as a company with only one
member, also referred to as the shareholder. A company may be formed as a
single member company or may become a single member company
following a share transfer whereby the number of shareholders is
reduced to one.
A Single Member Company is therefore no different from any other private
limited company other than the fact that the entire issued share capital is held or owned
by one single/sole person i.e the single member hence, the designation "single member
company".

2. Stages of Formation
Companies remain the most favored form of business organizations in Pakistan
especially for medium and large-scale business enterprises. Legal regime for establishment
and regulation of companies in Pakistan is given in the Companies Ordinance, 1984.
Whereas the function of administration of these companies is vested in the Securities and
Exchange Commission of Pakistan and the Registrar of Companies appointed by the Securities
and Exchange Commission of Pakistan for a Province of Pakistan where such company is to be
registered.
Securities and Exchange Commission of Pakistan (SECP) established under the
Securities and Exchange Commission of Pakistan Act 1997 was operationalized as a body
Corporate on 1st January 1999. SECP replaced Corporate Law Authority, the former
corporate regulatory body. It has been vested with adequate operational, administrative and
financial autonomy.

The SECPs head office is at the Federal Capital, Islamabad and it has eight
regional offices (Company Registration Offices), one at Federal Capital, four at provincial
capitals and three in other major cities i.e. Multan, Faisalabad and Sukkur.
Stages for the formation of a Company are as follows:
1) Search for the Company Name Availability
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2)
3)
4)
5)

Application for the Available Name

Preparation of Documents
Documents to be filled along with application
Certificate of Incorporation

2.1.1. Search for the Company Name Availability

For the facilitation of general public and promoters desirous of forming a
company, the Securities and Exchange Commission of Pakistan has provided a name
facility on e-Services portal at

search

https://eservices.secp.gov.pk/eServices/NameSearch.jsp
Any person can check the availability of a proposed company name i.e., whether the
company name is available for registration or otherwise by simply searching the desired name
through the facility, before actually applying for a company name.
According to section 37

The proposed company name shall not be identical or have close resemblance with any
other company in the index
The proposed name should not be inappropriate, deceptive, or designed to exploit or
offend the religion of the people

Following guidelines must be kept in mind to avoid applying for identical names:

A name is not distinguishable by the presence of absence of words such as The, AL,
New, and Modern.
A word in the plural form will be regarded as being identical to a word in singular form
and vice versa e.g. industry and industries would be regardes as being identical

On acceptance of application, the name is reserved for a period of 90 days, further

extendable up to the same period on receipt of fresh application.
There are two methods for the submission of application for seeking confirmation of
availability of name
1) THROUGH ELECTRONIC MODE/ ONLINE
eServices by Securities and Exchange Commission of Pakistan (the
Commission) has enabled the promoters of a company to seek company name
availability online, using the eServices Portal, without visiting the Company
Registration Office (CRO). Application fee for the availability of name through
online is Rs. 200/- only, cheaper than through offline, which is Rs.500/-.

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2) MANUAL SUBMISSION OF APPLICATION

For this purpose, application can be made on a plain paper addressed to
the registrar concerned. A specimen of application for seeking availability of
name is appended below.
The application fee for the availability of name is Rs. 500/- for each
proposed name. The fee can be paid in the designated branches of MCB Bank
Limited through Challan Form which is available Free of Cost at the
Facilitation Counters of the CROs and branches of MCB Bank Limited

2.1.2. Application for the Available Name

After drafting of main object of the proposed company, need to fill e-Form
(Application for reservation of Name) with registrar of Companies for name availability. The
applicant needs to give 6 proposed names in preference/priority along with their meaning and
significance of each word.

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2.1.3. Preparation of Documents

The following documents to be prepared for registration of Private Limited
Company
1) Memorandum of Association (MOA)
2) Article of Association (AOA)
3) Prospectus

2.1.4. Documents to be filled along with Application

1) Copy of NIC
Copy of National Identity Card (copy of passport in case of foreigner) of
each subscriber and witness to the memorandum and articles of association.
2) Printed Copies of MOA and AOA
Four printed copies of Memorandum and Article of Association duly
signed by each subscriber in the presence of one witness.
3) Statutory Declaration
Statutory declaration that all the requirements in respect of registration of
the company have been complied with.
This declaration is signed by a director or officer of the company named
in the Article of Association.
Officer may be:
An advocate entitled for High Court or Supreme Court; or
A charted accountant or cost and management accountant practicing in
Pakistan
4) List of Directors
Promoters have to send a list of the names of directors, occupation and
addresses along with their declaration to the register that they are ready to take
the qualification shares. But private company is not required to send such list

2.1.5. Certificate of Incorporation

If the registrar is satisfied that;

All the legal formalities have been completed with;

The company is being formed for lawful purpose; and
Its objects stated in the memorandum are appropriate and sufficient

He will issue a certificate of incorporation which is conclusive evidence that all the
requirements of the Ordinance in respect of registration have been compiled with. The

certificate of incorporation provides evidence that the company is incorporated under the
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Companies Ordinance 1984. It enables a company to carry on business activities within the
ambit of its Memorandum and not beyond that.

3. Legal Documents of Company

The document is necessary for the incorporation of Joint Stock Company is
known as Legal Documents. These are as follow
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus

3.1.1. Memorandum of Association

A document that regulates a company's external activities and must be
drawn up on the formation of a registered or incorporated company. As the
company's charter it (together with the company's articles of association) forms
the company's constitution.
The memorandum of association gives the company's name, names of its
members (shareholders) and number of shares held by them, and location of its
registered office. It also states the company's (1) objectives, (2) amount of
authorized share capital, (3) whether liability of its members is limited by
shares or by guaranty, and (4) what type of contracts the company is allowed
to enter into. Almost all of its provisions (except those mandated by corporate
legislation) can be altered by the company's members by following the
prescribed procedures. The memorandum is a public document and may be
inspected by anyone, usually at the public office where it is lodged.

3.1.2. Articles of Association

The internal rule book that every incorporated organization must have and work by. It
forms a part of the constitution of an organization.
The articles of association are a contract (1) between the members (stockholders,
subscribers) and the organization and (2) among the members themselves. It sets out the rights
and duties of directors and stockholders individually and in meetings. Certain
statutory
clauses (such as those dealing with allotment, transfer, and forfeiture of shares) must be
included; the other clauses are chosen by the stockholders to make up the bylaws of the
organization.
A court, however, may declare a clause ultra vires if it is deemed unfair, unlawful, or
unreasonable. A copy of the articles is lodged with the appropriate authority such as the registrar
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of companies. Articles are public documents and may be inspected by anyone (usually on
payment of a fee) either at the premises of the organization and/or at the registrar's office.
Lenders to the organization take special interest in its provisions that impose a ceiling on the
borrowings beyond which the organization's management must get shareholders' approval before
taking on more debt. The usual American term is articles of incorporation.

3.1.3. Prospectus
A prospectus, in finance, is a disclosure document that describes a financial security
for potential buyers. It commonly provides investors with material information about mutual
funds, stocks, bonds and other investments, such as a description of the company's business,
financial statements, biographies of officers and directors, detailed information about their
compensation, any litigation that is taking place, a list of material properties and any other
material information. In the context of an individual securities offering, such as an initial public
offering, a prospectus is distributed by underwriters or brokerages to potential investors.
There are two types of prospectuses for stocks and bonds: preliminary and final. The
preliminary prospectus is the first offering document provided by a securities issuer and includes
most of the details of the business and transaction in question. Some lettering on the front cover is
printed in red, which results in the use of the nickname "red herring" for this document. The final
prospectus is printed after the deal has been made effective and can be offered for sale, and
supersedes the preliminary prospectus. It contains finalized background information including
such details as the exact number of shares/certificates issued and the precise offering price.

In the case of mutual funds, which, apart from their initial share offering, continuously
offer shares for sale to the public, the prospectus used is a final prospectus. A fund prospectus
contains details on its objectives, investment strategies, risks, performance, distribution policy,
fees and expenses, and fund management.

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