Corporate law

Corporate law/joint stock company law:

Def: the set of rules and regulations/sections and subsections regarding the
creation of the joint stock company. The arrangement of annual General
meetings, The issuance of new shares as well as additional shares rights and
powers of the board of directors as well as the members of the company and
the winding up of a company under the company ordinance 1984 of
Pakistan.
History of company law in Pakistan
1 The concept of company was developed in the 2nd half of 19th century
(1850 onwards).
2 Different laws were developed during this era
3 The first act was passed in the British India in 1850 for the
registration of joint stock cos
4 Another act for the registration of joint stock co\s in the UK in 1884
5 A complete and basic act of 1913 was developed.
6 A company law commission was appointed by the Pakistani govt in
1959
7 The submitted their report to the govt in 1960.
8 Its contents was made publically available in 1972
9 The title of the report was the company law commission of Pakistan
10 At least in 1984 Pakistan has developed its own complete law for their
cos in the form of company ordinance 1984

Constituents of the company ordinance 1984

It consist of 514 sections and 8 schedules
The 514 sections have been divided into 16 parts and are as follows.
1) Preliminary
2) Jurisdiction of the court
3) Corporate law authority
4) In corporation of the company and their matters
5) Prospectus. Allotments. Issue and transfer of shares and debentures
6) Share capital
7) Registration of mortgages etc
8) Management and administration
9) Arbitration. arrangements and constitutions
10)

Prevention of mismanagement

11)

Winding up

12)

Application of ordinance of cos formed and registered under

any previous act.

13)

Winding up of unregistered cos

14)

Companies established outside Pakistan

15)

Registration offices and fees etc

16)

General

Eight schedules:
1. regulation of a Cos ltd by shares
memorandum of association
article of association

2. Matters to be specified by prospectus. rules and regulations

3. Form and context of annual return report.
4. balance sheet and profit and lost account of listed cos
5. balance sheet and profit and lost account of non-listed companies
6. Fees to be paid to the registrar. Authority. And federal Govt
7. The detail of enactment (to give a practical shape)
8. Amendments
PROCEDURE FOR FORMING A COMPANY
1 Promotion stage:
The idea of forming a company must be conceived by a person who is called
promoter
He is expert in forming a company work
He is to prepare necessary documents in order to get incorporation certificate
from the registrar of joint stock cos
There are two types of promoters
1 Professional promoter
When starting a company so they contact with professional promotee
because they are experts in company creation and charges
fees/commission
2 General promoter
Minimum 7 members combine and want to start a business and submit
there application to the registrar called general promoter

Promoters duties or promoters characteristics:

a. Idea for business
b. Investigation (raw material. Demand )
c. Selection of first directors (90% of promoters are BODs)
d. Selection of legal advisor (lawyer) auditors and banks like
investment bank
Three main function of investment bank is
1. Underwriting facility
The facilities extended by the investment bankers to the issue of
securities, assuring them that they will get an expected amount to be
paid by the purchaser of the securities.
Two types of underwriting facilities we have. i.e.
a. Best offer
Here the underwriting firms take the commission they try their
level best to flowed the company shares and also advertise
Here Risk is beared by company
b. Firm commitment.
Here the underwriter makes full payments and purchase all the
sharesRisk is totally beared by underwriting i.e. investment
bank
2. Investment advices
It simply means to provide advices to banks, govt etc and also to

the small businesses.

3. Mergers and acquisition
The process in which one of the combining companies looses its
separate identity and the assets and liabilities of the loosing company
become a part of the surviving company- mergers
Acquisition: cant loose its separate legal identity and take the liabilities and
assets of the company in their sharing amount.
1 Promote all the necessary documents (prospectus,
memorandum)
2 Submition of the documents
3 To meet all the preliminary expenses
4 To collect the share capital
Incorporation stage
To get the certificate of incorporation from the registrar of joint stock
company. The promoters must submit the following necessary documents to
the registrar.
1. memorandum of association
2. articles of association
3. notice of the address of the head office
4. list of directors
5. consents in writing of directors
6. directors contract to purchase qualification shares(directors have to
purchase)

7. statutory declaration of legal documents of incorporation

* Here are two more steps involve in case of public ltd company i.e.
Raising of share Capital (public)
After the incorporation of a public company, the director will file a copy of
prospectus with the registrar, to offer investors, that they shall submit their
application along with the application money with the company bankers.
Certificate of commencement of business (public)
This certificate will be issued by registrar, if the following documents are
submitted to him.
I. Declaration by the company that the minimum subscription as per
prospectus has been received in cash
II. Declaration by the company that all the directors have taken up their
qualification shares and paid for them.
III.Declaration by the company that all legal requirements to the
commencement of business have been fulfilled.
Private company
Members 2-10
Cannot issue share to public
Cannot trade in stock exchange

Public company
7-
Raising of share capital
Easily trade in stock exchange

Basic legal documents

a) Memorandum of association (companys charter)
It is the basic document on which the whole superstructure of the
company is based. It is also called the constituents of the co. it is primary
document it the company formation. It is for the external management of
the company.
Contents of memorandum of association.
1 In case of public ltd co the names of the co with the word limited
as the last word of the name while the private ltd with the name of
the private ltd co as the last word of the name.
2 The province where the registered office of the co is to be situated.
3 The objects of the co and their extensions
4 The liabilities of the members is limited
5 The amount of the shares capital and the no of shares with which
the company is to be registered.
Form of memorandum of association
1 It must be printed
2 Must be divided into paragraphs and consecutively numbered
3 Signed by each subscriber (who must give his full address and
occupation) in the presence of atleast one witness who must
attest the signature.
Memorandum of association consist of 6 clauses
1. name clause

2. situation clause
3. object clause (objectives of company)
4. liability clause (limited up to their investment)
5. capital clause
6. subscription clause (integral part of capital clause)
Let us know brief abt types of capital.
Authorized capital: nominal or registered capital with which company is
registered with registrar.
Issued capital: amount of shares actually issued.
Subscribed capital: actually apply by public for shares.
Paid up capital: shares actually purchased (in accounting it is called as
Realization of cash)
Procedure for alteration of objects
The following procedure must be followed otherwise alteration
become void.
1 A special resolution is passed by giving a notice to all
persons who are interested in alteration.
2 An application is filled with the SECP for confirmation of
change.
3 The SECP must check the objections of creditors and be
satisfied that their consent is obtained.
4 After that the SECP will confirm the change if it deems fit.
5 With in 90 days from the date of order of SECP , a certified
copy of the order of the court along with the printed copy of
memorandum must be submitted with the registrar of
SECP

6 Registrar will then issue a certificate of registration, which

will be a proof of alteration in objects.
Doctrine of ultra-vires: An act performed but not authorized by the object
clause of memorandum of association or by statute is called ultra-vires
(unlawful activities)
1 Ultra-vires the memorandum: the act which ultra-vires the
memorandum, the memorandum become void.
2 Ultra-vires the articles: the act which ultra-vires the articles , the
article become void
3 Ultra-vires directors: the act which is beyond the capacity of board of
directors, such acts may be breach of articles so the Co in annual
general meeting may ratify such an unauthorized act of directors by
passing an ordinary resolution.
Procedure for change of name.
A company at many times during the course of its business may change
its name by fulfilling the following conditions.
1 A special resolution is passed
2 Approval of registrar is obtained in witting with respect to change in
name.
3 The registrar enters the new name in register and shall issue a
certificate of incorporation in the changed name.
4 Where the co has unintentionally registered a name similar to that of
an existing name, it can be changed only with the sanction of the
registrar.

b) Article of association.
It is also known as supplementary or secondary document of the co. It
is used for the internal matters/management of the company. Articles of
association must be signed by each subscriber.
Contents of articles of association
3 Amount of share capital issued and transmission of shares
4 Rights of shareholders regarding voting, dividend and return of capital
5 Rules regarding issue of shares and debentures.
6 Procedures as well as regulations on making calls on shares
7 Manners of transfers of shares
8 Rules regarding appointment of directors, managing agent, secretary
and treasurers etc
9 Number , qualification, power and liabilities of directors
10 Convening and conduct of meetings with respect to quorum , poll,
proxy , resolution etc
11 Rules regarding the forfeiture of shares
12 Rules regarding the winding up of shares
13 Matters relating the winding up of the Co.
14 Declaration of dividend.(responsibility of Board of directors )
Difference b/w Transfer of shares and transmission of shares
Transfer of share: when the person is mentally sound and sale out his
shares (dispose off).
Transmission of shares: it is the process of transfer of shares to legal

successor (next to kin) or representative of the deceased person

(shareholder) by the operation of law in case of death, insolvency or
lunacy (unsound mind).
Note: forfeiter- to possessed someone else assets.
Quorum- number of person for conducting meeting, its 1/3 of
directors.

Memorandum of association
Memorandum is a fundamental

Article of association
Article is a supplementary document.

document.
The memorandum lay down the objects
of the company.
Memorandum indicates the scope of
affairs of company.
Memorandum is the dominant
instrument.

Article lay down the manner in which the

object is to be fulfilled.
Article indicates how the business is to be
carried out.

If any part of article conflict with it,

such part of article is to be deemed as

void.

If memorandum is silent on a point.

If memorandum is clear on a point.

Article explains that point.

Then there is no need that the article

supplements that memorandum.

Procedure for alteration of article of association

The following procedure must be followed while altering the articles.
A. Instruct the companys legal advisor to draft the alterations together
with a notice to the members of Extra Ordinary General Meeting
(EOGM).
B. When the company is listed on the stock exchange the draft of
alteration must be sent to the stock exchange for approval.
C. After the approval of stock exchange, call a members of directors for
the approval of alterations and the fix a date for (EOGM)
D. Notice of alteration must be sent together with alteration of articles
atleast 21days before the meetings to the members.
E. With in 15days of EOGM, file with the registrar a copy of special
resolution passed in the meeting.
F. Send a copy of special resolution together with amended copy of

articles of association for approval to stock exchange.

G. Amend all unissued copies of the companys article.
Note. EOGM- a meeting of shareholders in case of sudden change or
emergency.
Draft-a legal written document must be prepared by companys legal adviser
(lawyer)
c) Prospectus (public ltd company only)
Prospectus is a document that includes notice or advertisement inviting
public for subscription or purchasing and shares or debentures of a company
or inviting deposits from the public.
Contents of prospectus
I.The contents of memorandum with the name, address, occupation and
description of the person whos names (their in memorandum) , the
nature and the extent of interests of the shareholders in the profit and
property of the Company.
II.

Description of business to be undertaken

III.

Description regarding remuneration of the directors or chief

executive officer
IV.

The names, address, occupation and description of the

important office bearers of the company.

V.

Where shares are offered to the public for subscription,

information regarding minimum subscription, preliminary expenses

payable and underwriting commission payable etc.
VI.

The date and time of opening and closing subscription list

VII.

The names of the underwriters and directors opinion about them

that their resources are sufficient to fulfill their obligation

VIII.

The names, addresses, description and occupation of the

company vendors and the amount paid or payable to them.

IX.

The estimated amount of preliminary expenses paid or payable

by the company
X.

Any amount paid to the promoters in previous two years.

XI.

The names and addresses of auditors and legal advisors.

XII.

The right of voting of meeting and dividend attached to shares.

XIII.

The length of time during which the business of the company

has been carried on.

XIV.

A reasonable time and place for the inspection of balance sheet

and income statement.

XV.

A summery in column from the earnings of the company for

each 3 financial years.

XVI.

Pending legal proceedings to which the Company is a party.

Liabilities arising from mis-statement in a prospectus

1. civil liability
he who is the director at the time of issue of prospectus, he who
has authorized the issue of prospectus, he who is the promoters of
the company , shall be liable to pay compensation to all those
person who has subscribed to the shares and suffered from misstatement.
2. criminal liability
Where a prospectus includes any untrue statement, every person
who signed or authorized the issue of prospectus shall be

punishable with imprisonment which may extend to 2years or with

a fine which may extend to RS 10000 or with both.
Statement in lieu (instead of) prospectus.
A company having a share-capital which does not issue a
prospectus, so that has been delivered to the registrar for
registration a statement in lieu of prospectus signed by every
person who s name their in as a director atleast 3days before the
first allotment.
Jurisdiction of the company courts
It is provided that court having jurisdictions under the company ordinance
1984, shall be the high court, having jurisdiction at a place at which the
registered office of the company is situated , the central govt may empower
any district court to exercise all or any of the jurisdictions.
Company Benches
There shall be benches in each high court , one or more benches , each to be
known as company bench , to be constituted by the chief justice of high court,
to exercise the jurisdictions under the company ordinance 1984.
Procedure of the company court
i. All matters coming before court under the company ordinance shall be
disposed off (solved) and the judgment pronounced as soon as possible
but not later then 90days form the date of the presentation of the petition
to the court except in extra ordinary circumstances, the court shall hear
the case from day to day.

ii. The hearing of the matters shall not be adjourned except for sufficient
cause or for more then 14days at one time or for 30days at all.
Corporate Law Authority (secp)
It is constituted under section 11 of the company ordinance 1984. The federal
Govt is empowered to constitute the CLA. The authority must consist such
number of members not being less then 3 to be appointed by the Govt, one of
the member is to be appointed as chairman of the authority by the federal
Govt.
Power and functions of Authority (company law authority)
1 Issues orders and instructions to all persons and officers in the execution of
ordinance.
2 Confirm alteration to memorandum
3 Extend time for filing documents with the registrar.
4 Grant license and allowing an association to enjoy all the rights of a
limited company with out using the word limited
5 Allow a public company to convert it self into a private Company.
6

For special reasons allow a prospectus to be issued more then 30days

before the subscription list is due to open.

7 Specify the form of application for r subscription to shares or debentures.

8 Permit a company to with hold or delay payment of dividend in certain
cases.
9 Allow extending of time for holding annual general meeting and filing a
document by the listed company up to 90days.
Share certificate
It is a document issued under the common seal of the company and

contains
1 Name and address of the holders
2 Name of shares held by them
3 Their distinctive numbers
4 Paid of amount.
Register of members
It contains:
a) The name, father/husbands name, address, nationality and occupation
b) Statement of shares held by each member, their distinctive numbers,
paid up amount.
c) The date at which any person was entered as a member of the CO.
d) The date at which any person was ceased to be a member and reasons
of ceasing.
Rights of members.
1. Inspect register of members and debenture holders.
2. In case of public ltd company, they will receive a statutory report.
3. have copies of memorandum and articles on payment of fee
4. receive share certificate with in prescribed time
5. transfers of shares
6. Receive minutes of the proceedings of general meeting.
7. Remove directors.
8. Receive copies of annual accounts.
9. Appoint auditors at general meeting.
10.Inspect auditors report at general meeting.
11.Resolve by special resolution that the company ay be wound up by the
court.

12.Resolve by special resolution that the company may be wound up

voluntarily.
13.Appoint and fix remuneration of liquidators.
14.attend meetings and vote at meeting
15.Approved dividend as recommended by the directors.
16.Have a share in the capital of a company.
Liabilities of share holders.
Where a company is limited by shares, the liability of shareholders is
limited to amount, if any unpaid on shares held by him. This liability is
continuous as long as anything remains unpaid on shares.
Commission on issue of shares.
It shall be lawful for a company to pay commission to any person in
consideration of his subscribing either absolutely or unconditionally for
any shares in the company if:
1. The payment of the commission is authorized by article of
association.
2. The commission paid should not exceed the rate fixed by the
authority.
3. The amount and rate must be disclosed in prospectus, if issued by
the Co.
4. Where a prospectus is not issued, the amount and rate must be
disclosed in a statement in lien of a prospectus.
5. The number of shares for which the persons have agreed to
subscribe absolutely for a commission is disclosed in a specified
manner.

Premium on issue of shares

Where a company issues shares on premium, the values of premiums
shall be transferred to an account called the share premium
account. This account may be applied by the company as under.
1 In writing-off the preliminary expenses of a Co.
2 In writing-off the expenses of commission and discount on
issue of shares and debentures.
3 To pay premium on redeemable preference shares or
debentures.
4 In paying up un-issued shares of the company as fully bonus
shares.
Issue of shares at a discount
It shall be lawful for a company to issue shares at discount if:
1 It must be authorized by a resolution passed at general
meeting and sanctioned by the authority.
2 The resolution must specify the maximum rate of discount
not exceed than 10% or higher rate fixed by the authority.
3 Not less then any year must at the date of issue have elapsed
since that date on which the company was entitled to
commence its business.
4 The shares are to be issued at a discount must be issued with
in 60days after the date on which the issue is sanctioned by
the authority.
Capital structure
The combination of debt and equity financing in the capital of a

company is called capital structure.

While a particular amount of money with which the business is
started is share capital.
Kinds of preference share
1. simple preference share
They are usually entitled to receive fixed dividend before any
dividend is pairs on the ordinary shares. If there are no profits in the year
then there is no dividend for the simple preference shares
2. cumulative preference share
if in any year the profits are not enough, their right to dividend does
not lapse, but carried so that when the company makes the profits in the
subsequent year it must first pay off the arrears of dividend before paying
dividend to other kind of shareholders.
3. cumulative participating preference share
these share holders is not only entitled to receive arrears of dividend
but are entitled to share with the ordinary shareholders , the balance of
profit in some proportions after the right of ordinary share holders have
been met.
4. redeemable preference shares
normally shares of company are not redeemable they can be redeemed
only when the company goes into liquidation however, the law in section
85 of the ordinance 1984 has provided for the redemption of redeemable
preference shares during the lifetime of the company.
5. deferred/mgt share/founder shares
These shares are normally issued to the company promoters or

founders of the company or the underwriter of the share capital, these

shares receive no dividend until the dividend on all other classes of
shares has paid in full.
Company directors
Directors includes any person occupying a position of a director, the position of
a director by whatever name called every private company must not less then
two directors and every public company not less then 7 directors .
Directors having power to issue shares.
First directors are appointed by promoters
A company cant make loan to its directors.
Directors as an agent
The director may make contracts as agent of the company if the contract made
by a director ultra-vires his power made with a member is only voidable but if
made with an outsider who had no notice of the wants of his power, it is binding
on the company.
Director as trusty
Directors are trustee regarding the power conferred on them by the articles
and the capital under their control. They are not persons in the employment of the
company. They are trustee for the company and not for the individual share
holders they are not trustee for third party who have made contract with the
company they are also trustee for the company in respect of their power of
approving transfer of shares, issuing and allotment of shares as well as making
calls and forfeiting of shares.

Eligibility of a person to become a director

A person is appointed as a director if he:
is a major share holder
is of sound minded
is a member of a company
has not been convicted by court of law
is a solvent person
is a natural person
Power of directors
1.

To make calls on share holders in respect of money unpaid on their shares.

2.

To issue shares.

3.

To issue debentures.

4.

To borrow money otherwise then on debentures.

5.

To invest the funds of the company.

6.

To make loans.

7.

To approve annual, semiannual, or periodical accounts as are required to be

circulated to the members.

8.

To incur capital expenditure exceeding Rupees 2 lac on any single item or

dispose off a fixed asset of value exceeding rupees 1 lac.

Companies Ordinance
The Companies Ordinance 1984
Types of business organization
Sole Trader
Partnership
Company
WHAT IS A COMPANY ?
DEFINITION:
A Company is an association of persons united for a common purpose. According to the
Companies Ordinance, 1984, Company means a company formed and registered under
the Companies Ordinance.
Kinds of Companies
Companies formed under the Companies Ordinance, 1984 are of three kinds, namely:
(a) Companies limited by Shares
(b) Companies limited by Guarantee
(c) Unlimited Companies
Company limited by Shares
A Company in which the liability of the members is limited to the nominal value of the
shares (s.16).
When the liability of the Company is limited by shares it means that no member can be
called upon to pay more than the nominal amount of his shares
Company limited by Guarantee

A company in which the liability of the members is limited to the amount which each has
undertaken, by the Memorandum of Association, to contribute to the assets of the
company in the event of a winding-up (s.17)
Statutory Companies
The Companies which are incorporated by a special act of legislative or under an
ordinance are named as statutory companies. For Instance, State Bank of Pakistan,
National Bank of Pakistan, PICIC (Pakistan Industrial & Credit Investment Corporation),
Pakistan Steel etc. The companies under the special act of legislative have been mostly
invested with special powers. They also enjoy special rights and privileges which are
not available to companies incorporated under the companies ordinance 1984.
Registered Companies
A company which is formed and registered under the companies ordinance 1984 is
known as a registered company. The companies ordinance provides registration of
following four(04) types of companies. Company limited by shares
Company limited by guarantee
An unlimited company
Association not for profit
Company Limited by shares
It is the company which keeps the liability of its members limited up to the value of the
shares purchased by them. It is essential for such companies to use the word Limited at
the end their names. Functional Division of Companies
Private Companies
Public Companies

 Company Limited by shares

Private Companies A private company is an association of minimum two and
maximum fifty share holders. It restricts the rights of its members to transfer their shares
in the company. It also prohibits any invitation to the public to subscribe to its share or
debentures. Public Companies
A public company must have at least seven share holders, but there is no limit to the
maximum number. Public company issues a prospectus for inviting people to purchase its
shares. The shares of a public company are freely sold and purchased in the stock market.
Company Limited by guarantee
It is the company in which the liability of its members is limited up to the amounts
guaranteed by each member at the time of winding up the company. This type of
company is formed mostly for taking non business operations such as clubs and
charitable institutions, the examples are stock exchanges, arts councils, ICAP or ICMA
etc.
An Unlimited Company
An Unlimited company is registered without any limit on the liability of their members
Every member of the company is liable to the full extent of his personal asset for all
the debt of a company while he was a member.
The unlimited company, due to great risk do not exist in Pakistan.
Association Not for Profit.
It is registered under section 42 of the companies ordinance without the addition of the
word Limited to its name, it is registered with limited liability. The association
enjoys all the privileges and obligations of a limited company.
It is formed for promoting commerce, arts, science, religion, charity or any other
object.

 The Federal Government grants license to the association that is capable of being
formed as a company.
CLASSIFICATION ON THE BASIS OF OWNERSHIP
Holding Company
Subsidiary Company
Holding Company
A company is said to be the holding company of the other, if it owns or holds more than
50% of the share capital of the other company, or it has control of more than 50% of its
directors.
Subsidiary Company
A company is said to be the subsidiary of the other company when one of the following
conditions are fulfilled.
(I)

Formation of Board of Directors is controlled by another company.

(II)

The other company controls more than half of the voting rights of this
company.

(III)

The other company owns more than 50% share capital of this company.

STEPS REQUIRED IN REGISTRATION OF A COMPANY

Getting Promoters Together: Those who form the company are known as promoters
who must get together to work out the skeleton of the company.
Appointment of Advisor: Promoters appoint legal advisors who under the guidance and
instructions of promoters, prepare memorandum and articles of association, prospectus,
and deal with the office of the registrar of the company.
STEPS REQUIRED IN REGISTRATION OF A COMPANY

Preparation of company documents: The companies ordnance requires preparation of

following documents before the company applies for registration
1. Memorandum of Association
2. Article of association
3. Prospectus

STEPS REQUIRED IN REGISTRATION OF A COMPANY

Submitting application with the registrar: An application for registration is submitted
along with the registration fee through the registrar of the company with attachment of
following documents
1. Memorandum of Association
2. Articles of association
3. Prospectus
4. List of names and addresses of directors
5. Signed statement of directors or the secretary that all the required legal formalities
have been completed.
6. Address of the registered office of the company.
STEPS REQUIRED IN REGISTRATION OF A COMPANY
Declaration of qualifying shares: All the directors, have to submit a declaration certificate
that they have taken up qualifying shares and have paid up the money Issuance of
Registration Certificate: On the issuance of registration certificate by registrar, private
company can start its business immediately, while public company cannot until it gets
another certificate known as Commencement Certificate.

Publication of Prospectus: On the receipt of the registration certificate the company

issues prospectus which is an invitation to the public to buy shares of the company.
Commencement Certificate: After raising capital through prospectus, the company
applies for the commencement certificate. After obtaining this certificate the public can
start its actual operation
BASIC LEGAL DOCUMENTATION
Memorandum of Association
Articles of Association
Prospectus
Memorandum of Association
It is a document issued by a company for the guidance of general public
it is known as the charter of the company which explains to the public name,
address, capital, objectives and liability of the company.
It defines its limitation and powers and guides shareholders and creditors of the
company. It is divided in to five clauses

Memorandum of Association
CLAUSES OF MEMORANDUM
Name Clause
A company may adopt any name but it should not resemble the name of any other
company and should not contain the words like king, queen, govt. bodies, UNO etc. The
name should not be objectionable in the opinion of the government. The word limited
must follow the name of the company in case of Public company, while (private)
limited must follow with the name of company in case of Private company

Domicile (Situation) Clause

Every company must have a registered office, a memorandum must mention the name of
the province and exact address where the company has its registered office
Objective Clause
A company must specifically, expressly and clearly mention its objectives for which it
has been formed.
Capital Clause
This clause mention the authorize capital of the company, the companys subscribed,
called up, and paid up capital should not exceed it.
Liability Clause
This clause shows that the liability of the share holders of the company is limited to the
amount invested by them.
Articles of Association
It is a document explaining rules and regulations regarding the internal affairs of the
company, according to companys ordinance 1984, every company registered by shares
must prepare and file articles of association with the registrar of the companies.
If a company does not prepare and file its own articles then Table A of the companys
ordinance would apply for a private company articles of association are not binding.
Articles of Association
CONTENTS OF ARTICLES
Amount of share capital issued, transmission of share
Rights of share holder regarding voting, dividend, return of capital
Rules regarding issue of shares and debentures
Procedures as well as regulations in respect of making calls on shares
Manner of transfer of shares
Rules regarding appointment of directors, managing directors, agents, secretaries,

treasures
Number, qualification, remuneration, powers and liabilities of directors
Declaration of dividends
Convening and conduct of meetings with reference to notice, forum, polls, proxy,
resolutions etc
Rules regarding the forfeiture and surrender of shares
Matters relating account and audit
Rules regarding winding up of a company
Prospectus
It is an invitation, advertisement or circular asking people to invest and subscribe in
the share capital or debenture of the company.
For a private company prospectus is not required, even for a public company it is not
compulsory.
If a public company does not want to issue prospectus, it must, then file a statement in
lieu of prospectus with the registrar.
The prospectus must be signed by at least two directors.
In prospectus the detail description regarding the establishment of the company, its
characteristics and its estimated future is given.

STATEMENT IN LIEU OF PROSPECTUS

According to company ordinance, if a public company is not issuing a prospectus on
its formation, it then must file a statement in lieu of prospectus with the registrar of the
company three days before the allotment of shares of debentures
Must be signed by each director and include all the information that should be given in
the prospectus.
MANAGEMENT OF THE COMPANY

Shareholders
Directors
Chief Executive
COMPANY MEETINGS
A public company is required to call a meeting with shareholders with certain agenda to
be discussed there and to get their vote on important affairs.

Statutory Meeting
It is the first meeting of the members of a public limited company. Statutory meeting
must be held at least after three month and before six months since the registration of the
company.
Statutory Meeting
Notice of the meeting: a notice of the statutory meeting to the shareholders must be
issued at least 21 days before the meeting.
Issue of Report: statutory report must also be issued at last 21 days before the meeting
is held, and it must be signed by at least three directors, one being the chief executive.
Nature of proceedings of the Meeting: in the meeting following proceedings take
place: a. name, address, nationality, profession of all members (shareholders). b. the
member present at the meeting have the right to discuss any matter relating to the
formation of the company or arising out of the statutory report.
Annual General Meeting
Every public company must hold a general meeting of its members within eighteen

months from the date of formation and within fifteen months every year after first
meeting.
Annual General Meeting
Notice of the meeting: a notice of the annual general meeting to the shareholders must
be issued at least 21 days before the meeting.
Nature of proceedings of the Meeting: in the meeting following proceedings take
place: a. consideration and adoption of the audited annual accounts. b. declaration of the
dividends. c. the election and appointment of the directors.
Extra-Ordinary General Meeting
All general meetings of a company other than annual general meeting and statutory
meeting are known as extraordinary general meeting.
It is conducted when an annual general meeting is not due under the law but pressing
affairs have come up to be discussed with the shareholders.
The meeting can be called:
a. by directors to consider any matter which they think it necessary.
b. by directors on the requisition of the shareholders representing not less than one-tenth
of the voting power.
c. by the requisiteness if the directors do not proceed within 21 days of calling the
meeting.

Labour Law Pakistan

The Constitution of Pakistan contains a range of provisions with regards to labour rights
found in Part II: Fundamental Rights and Principles of Policy
.
Article 11 of the Constitution prohibits all forms of slavery, forced labour and child
labour;
Article 17 provides for a fundamental right to exercise the freedom of association and
the right to form unions;
Article 18 proscribes the right of its citizens to enter upon any lawful profession or
occupation and to conduct any lawful trade or business;
Article 25 lays down the right to equality before the law and prohibition of
discrimination on the grounds of sex alone;
Article 37(e) makes provision for securing just and humane conditions of work,
ensuring that children and women are not employed in vocations unsuited to their age or
sex, and for maternity benefits for women in employment.
Labour Legislation
Pakistans labour laws trace their origination to legislation inherited from India at the time
of partition of the Indo-Pak subcontinent. The laws have evolved through a continuous
process of trial to meet the socio-economic conditions, state of industrial development,
population and labour force explosion, growth of trade unions, level of literacy,
Governments commitment to development and social welfare. To meet the above named
objectives, the government of the Islamic Republic of Pakistan has introduced a number
of labour policies, since its independence to mirror the shifts in governance from martial
law to democratic governance.
Under the Constitution labour is regarded as a concurrent subject, which means that it is
the responsibility of both the Federal and Provincial Governments. However, for the sake
of uniformity, laws are enacted by the Federal Government, stipulating that Provincial

Governments may make rules and regulations of their own according to the conditions
prevailing in or for the specific requirements of the Provinces. The total labour force of
Pakistan is comprised of approximately 37.15 million people, with 47% within the
agriculture sector, 10.50% in the manufacturing & mining sector and remaining 42.50%
in various other professions.
Contract of Employment
While Article 18 of the Constitution affords every citizen with the right to enter upon any
lawful profession or occupation, and to conduct any lawful trade or business, the
Industrial and Commercial Employment (Standing Orders) Ordinance was enacted in
1968 to address the relationship between employer and employee and the contract of
employment. The Ordinance applies to all industrial and commercial establishments
throughout the country employing 20 or more workers and provides for security of
employment. In the case of workers in other establishments, domestic servants, farm
workers or casual labour engaged by contractors, their labour contracts are generally
unwritten and can be enforced through the courts on the basis of oral evidence or past
practice.
Every employer in an industrial or commercial establishment is required to issue a formal
appointment letter at the time of employment of each worker. The obligatory contents of
each labour contract, if written, are confined to the main terms and conditions of
employment, namely nature and tenure of appointment, pay allowances and other fringe
benefits admissible, terms and conditions of appointment.
Termination of the Contract
The services of a permanent worker cannot be terminated for any reason other than
misconduct unless one months notice or wages in lieu thereof has been furnished by the
employer or by the worker if he or she so chooses to leave his or her service. One
months wages are calculated on the basis of the average wage earned during the last

three months of service. Other categories of workers are not entitled to notice or pay in
lieu of notice.
All terminations of service in any form must be documented in writing stating the reasons
for such an act. If a worker is aggrieved by an order of termination he or she may proceed
under Section 46 of the Industrial Relations Ordinance 2002, aimed at regulating the
labourmanagement relations in the country, and bring his or her grievance to the attention
of his or her employer, in writing, either him or herself, through the shop steward or
through his or her trade union within three months of the occurrence of the cause of
action. Forms of termination have been described as removed, retrenched, discharged or
dismissed from service. To safeguard against any colorful exercise of power,
victimization or unfair labour practices, the Labour Courts have been given powers to
examine and intervene to find out whether there has been a violation of the principles of
natural justice and whether any action by the employer was bonafide or unjust.
Working Time and Rest Time
* Working hours
Under the Factories Act, 1934 no adult employee, defined as a worker who has completed
his or her 18th year of age, can be required or permitted to work in any establishment in
excess of nine hours a day and 48 hours a week. Similarly, no young person, under the
age of 18, can be required or permitted to work in excess of seven hours a day and 42
hours a week. The Factories Act, which governs the conditions of work of industrial
labour, applies to factories, employing ten or more workers. The Provincial Governments
are further empowered to extend the provisions of the Act, to even five workers.
Where the factory is a seasonal one, an adult worker shall work no more than fifty hours
in any week and no more than ten hours in any day. A seasonal factory, per section 4 of
the Factories Act is that which is exclusively engaged in one or more of the following
manufacturing processes, namely, cotton ginning, cotton or cotton jute pressing, the
manufacture of coffee, indigo, rubber, sugar or tea. However, if such adult worker in a

factory is engaged in work, which for technical reasons must be continuous throughout
the day, the adult worker may work no more than fifty-six hours in any week.
Section 8 of the West Pakistan Shops and Establishments Ordinance, 1969 likewise,
restricts weekly work hours at 48 hours. The Shops and Establishments Ordinance
regulates persons employed in shops and commercial establishments, who are neither
covered by the Factories Act nor by the Mines Act. The Ordinance is exclusive in the
whole of Pakistan except for the Federally Administered Tribal Areas. Section 22-B of
the Mines Act, 1923 also fixes weekly hours of work for workers at 48 hours or 8 hours
each day, with the limitation of spread-over 12 hours and interval for rest for one hour
every six hours. Section 22-C further limits the spreadover to 8 hours for work done
below ground level.
In factories, the periods and hours of work for all classes of workers in each shift must be
notified and posted in a prominent place in the principal language in the industrial or
commercial establishment. The law further provides that no worker shall be required to
work continuously for more than six hours, unless he or she has had an interval for rest or
meals of at least one hour. During Ramadan (fasting month), special reduced working
hours are observed in manufacturing, commercial and service organizations.
* Paid Leave
As provided in the Factories Act, 1934, every worker who has completed a period of
twelve months continuous service in a factory shall be allowed, during the subsequent
period of twelve months, holidays for a period of fourteen consecutive days. If a worker
fails in any one such period of twelve months to take the whole of the holidays allowed to
him or her, any holidays not taken by him or her shall be added to the holidays allotted to
him or her in the succeeding period of twelve months. A worker shall be deemed to have
completed a period of twelve months continuous service in a factory notwithstanding any
interruption in service during those twelve months brought about by sickness, accident or
authorized leave not exceeding ninety days in the aggregate for all three, or by a lock-out,
or by a strike which is not an illegal strike, or by intermittent periods of involuntary

unemployment not exceeding thirty days in the aggregate; and authorized leave shall be
deemed not to include any weekly holiday allowed under section 35 which occurs at
beginning or end of an interruption brought about by the leave.
* Maternity Leave and Maternity Protection
While article 37 of the Constitution makes reference to maternity benefits for women in
employment, there are two central enactments, one federal and the other provincial
providing maternity benefits to women employed in certain occupations. The Maternity
Benefit Ordinance, 1958 stipulates that upon the completion of four months employment
or qualifying period, a worker may have up to six weeks prenatal and postnatal leave
during which she is paid a salary drawn on the basis of her last pay. The Ordinance is
applicable to all industrial and commercial establishments employing women excluding
the tribal areas. It also places restrictions on the dismissal of the woman during her
maternity leave. Similarly, the Mines Maternity Benefit Act, 1941 is applicable to women
employed in the mines in Pakistan.
* Other Leave Entitlements
In addition to the 14 days of annual leave with pay, the Factories Act, 1934 provides that
every worker is entitled to 10 days casual leave with full pay and further 16 days sick or
medical leave on half pay. Casual leave is granted upon contingent situations such as
sudden illness or any other urgent purpose. It should be obtained on prior application
unless the urgency prevents the making of such application. As a customary practice,
causal leave is approved in most cases. Sick leave, on the other hand, may be availed of
on support of a medical certificate. Management should not refuse the leave asked for if it
is supported by a medical certificate.
In addition to the leave entitlements, workers enjoy festival holidays as declared by the
Federal Government. The Provincial Government under section 49 of the Factories Act,
1934, states all festival holidays, approximately 13 or as further declared, in the Official
Gazette. Additionally, every worker is entitled to enjoy all such holidays with pay on all
days declared and notified by the Provincial Government. If however, a worker is

required to work on any festival holiday, one day's additional compensatory holiday with
full pay and a substitute holiday shall be awarded. Under agreements made with the
Collective Bargaining Agent, employees who proceed on pilgrimage i.e., Hajj, Umra,
Ziarat, are granted special leave up to 60 days.
Minimum Age and Protection of Young Workers
Article 11(3) of Pakistans Constitution expressly prohibits the employment of children
below the age of fourteen years in any factory, mine or other hazardous employment. In
addition, the Constitution makes it a Principle of Policy of the State of Pakistan to protect
the child, to remove illiteracy and provide free and compulsory education within the
minimum possible period and to make provision for securing just and human conditions
of work, ensuring that children and women are not employed in vocations unsuited to
their age or sex.
The Factories Act, 1934 allows for the employment of children between the ages of 14
and 18 years provided that each adolescent obtains a certificate of fitness from a
certifying surgeon. A certifying surgeon, per section 52 of the Act, shall on the
application of any child or adolescent who wishes to work in a factory, or, of the parent or
guardian of such person, or of the factory in which such person wishes to work, examine
such person and ascertain his or her fitness for such work.
The Act further restricts the employment of a child in a factory to five hours in a day. The
hours of work of a child should thus be arranged in such a way that they are not spread
over more than seven-and-a-half hours in any day. In addition, no child or adolescent is
allowed to work in a factory between 7 p.m. and 6 a.m. The Provincial Government may,
by notification in the Official Gazette in respect of any class or classes of factories and
for the whole year or any part of it, vary these limits to any span of thirteen hours
between 5 a.m. and 7.30 p.m. Moreover, no child is permitted to work in any factory on
any day on in which he or she has already been working in another factory.

Factories are further required to display and correctly maintain in every factory a Notice
of Periods for Work for Children, indicating clearly the periods within which children
may be required to work. The manager of every factory in which children are employed
is compelled to maintain a Register of Child Workers identifying the name and age of
each child worker in the factory, the nature of his or her work, the group, if any, in which
he or she is included, where his or her group works on shifts, the relay to which he or she
is allotted, the number of his or her certificate of fitness granted under section 52, and any
such other particulars as may be prescribed.
The provisions of the Factories Act, 1934 are cited in addition to, and not in derogation of
the provisions of the Employment of Children Rules, 1995. The Employment of Children
Rules extends to the whole of Pakistan with the exception of the State of Azad Jammu
and Kashmir and delimits finite labour conditions afforded for the protection of minors.
Rule 6 insists on cleanliness in the place of work. No rubbish, filth or debris shall be
allowed to accumulate or to remain in any part of the establishment and proper
arrangements shall be made for maintaining in a reasonable clean and drained condition
for the workers of the establishment. Rule 7 further calls for proper ventilation in work
places where injurious, poisonous or asphyxiating gases, dust or other impurities are
evolved from any process carried on, in such establishment. As long as workers are
present in an establishment, the latrines, passages, stairs, hoists, ground and all other parts
of the establishment in so far as the entrance of the said places is not closed, must be
lighted in such manner that safety is fully secured. In addition, in every establishment an
arrangement of drinking water for child and adolescent workers is to be provided free of
charge. All shafts, couplings, collars, clutches, toothend wheels, pulleys, driving straps,
chains projecting set screws, keys, nuts and belts on revolving parts, employed in the
establishment, shall be securely fenced if in motion and within reach of a child worker
and further may not be operated by a child worker.
Under the Employment of Children Rules, anyone who employs a child or permits a child
to work in contravention of the Constitution is punishable by imprisonment for a term
extending up to one year or may be fined up to Rs. 20,000 or subject to both. Repetition

of the offense is punishable by imprisonment for a term extending up to two years and
shall not be less than six months.
Equality
Article 38 of the Constitution imparts the States obligations aimed at achieving equality
in the form of securing the well-being of the people, irrespective of sex, caste, creed or
race, by raising their standard of living, by preventing the concentration of wealth and
means of production and distribution in the hands of a few to the detriment of general
interest and by ensuring equitable adjustment of rights between employers and
employees, and landlords and tenants. All citizens are bestowed, within the available
resources of the country, facilities for work and adequate livelihood with reasonable rest
and leisure and the basic necessities of life, such as food, clothing, housing, education
and medical relief, for all such citizens, irrespective again of their sex, caste, creed or
race, as are permanently or temporarily unable to earn their livelihood on account of
infirmity, sickness or unemployment.
Pay Issues
Wages are construed as the total remuneration payable to an employed person on the
fulfillment of his or her contract of employment. It includes bonuses and any sum
payable for want of a proper notice of discharge, but excludes the value of
accommodations i.e., supply of light, water, medical attendance or other amenities
excluded by the Provincial Government; the employers contribution to a pension or
provident fund, traveling allowance or concession or other special expenses entailed by
the nature of his or her employment; and any gratuity payable on discharge.
The Payment of Wages Act, 1936, regulates the payment of wages to certain classes of
industrial workers. It applies to those workers whose monthly wages do not exceed Rs.
3,000 (51.68 US$) and are employed in factories, railways, plantations, workshops and
establishments of contractors. The main object is to regulate the payment of wages to

certain classes of persons employed in industry. The provisions of the Act can, however,
be extended to other classes of workers by the Provincial Governments after giving three
months notice to the employers of their intention to do so. The Act stipulates that wages
to workers employed in factories and on railways are to be paid within seven days of
completion of the wages period, if the number of workers employed therein is less than
1,000. In other cases, the time limit for payment of wages to the workers is 10 days. No
deduction can be made from the wages of the workers excepts as specified in the Act,
such as for fines, breach of contract and the cost of damage or loss incurred to the factory
in any way other than an accident.
The employer is responsible for the payment of all wages required to be paid to persons
employed by him or her. Similarly any contractor employing persons in an industry is
responsible for payment of wages to the persons he or she employs. The persons
responsible for payment of wages must fix wage periods not exceeding one month.
Wages should be paid on a working day within seven days of the end of the wage period,
or within ten days if 1,000 or more persons are employed. The wages of a person
discharged should be paid not later than the second working day after his or her
discharge.
Workers' Representation in the Enterprise
Until the adoption, on 29 October 2002, of the Industrial Relations Ordinance, 2002 (IRO
2002), which repealed the Industrial Relations Ordinance, 1969, Pakistan had a threepronged system of participation in management (i.e., the Works Council, the
Management Committee and the Joint Management Board), independent of each other
and each having its own sphere of activities.
The new text simplifies the system, introducing a single body in place of the three
previous ones: the Joint Works Council (Article 24 of the IRO 2002). A Joint Works
Council must be set up in any establishment employing fifty persons or more. It consists
of no more than ten members, forty per cent of which are workers representatives. In the

previous system, the Management Committee and the Works Council were composed of
an equal number of representatives of the employer and workers, whereas the Joint
Management Board had a workers participation of 30 per cent. The Convener of the
Joint Works Council is from the management.
The Joint Works Council deals with matters, which were of the competency of the earlier
Joint Management Board, such as the improvement in production, productivity and
efficiency, provision of minimum facilities for those of the workers employed through
contractors who are not covered by the laws relating to welfare of workers. It has also
taken up tasks of the previous Works Council, i.e. promoting settlement of differences
through bilateral negotiations, promoting conditions of safety and health for the workers,
encouraging vocational training within the establishment, taking measures for facilitating
good and harmonious working conditions in the establishment, provision of educational
facilities for children of workers.

Trade Union and Employers Association Regulation

Freedom of association
The right to association is guaranteed by Article 17 of the Pakistani Constitution
imparting on every citizen the right to form associations or unions, subject to any
reasonable restrictions imposed by law in the interest of sovereignty or integrity of
Pakistan, public order or morality. Under Article 3 of the IRO 2002, workers as well as
employers in any establishment or industry have the right to establish and to join
associations of their own choosing, subject to respect of the law. Both workers' and
employers' organizations have the right to establish and join federations and
confederations and any such organization, federation or confederation shall have the right
to affiliate with international organizations and confederations of workers' and employers'
organizations.
Registration of trade unions

Registration of a trade union is to be made under the Industrial Relations Ordinance.

Workers trade unions are registered with the Registrar Trade Unions in the Province, and
if the industry or establishment is nationwide with the National Industrial Relations
Commission, after fulfilling a number of requirements, listed in Article 6 of the IRO
2002. Through its registration, the trade union obtains certain benefits: registration
confers a legal existence as an entity separate from its members. Trade unions in Pakistan
generally function on plant-wide basis, with their membership contingent on the size of
the industry/trade to which they belong. Once established, the trade unions and
employers' associations have the right to draw up their constitutions and rules, to elect
their representatives in full freedom, to organize their administration and activities and to
formulate their programmes.
Collective Bargaining and Agreements
To determine the representative character of the trade union in industrial disputes and to
obtain representation on committees, boards and commissions, the Industrial Relations
Ordinance makes provision for the appointment of a Collective Bargaining Agent (CBA).
The CBA is a registered trade union elected by secret ballot. The CBA is entitled to
undertake collective bargaining with the employer or employers on matters connected
with employment, non-employment, the terms of employment or any right guaranteed or
secured to it or any worker by or under any law, or any award or settlement .
Collective agreements are thus formulated by the CBA. The agreements may contain
matters such as the facilities in the establishment for trade union activities and procedures
for settling collective disputes including grievances and disciplinary procedures.
Substantive provisions settle terms and conditions of employment, wages and salaries,
hours of work, holiday entitlement and pay, level of performance, job grading, lay-offs,
retrenchment, sick pay, pension and retirement schemes. Such agreements once duly
executed by both parties become the source of law. The agreements should invariably be

in writing and should be drafted with care, for they are meant to settle disputes rather
than raise them.
In addition to statutory benefits under the labour laws, the adjustment of rights takes
place through collective bargaining including adjudication in Labour Courts. The IRO
2002 has changed the appellate procedure on the provincial level, which used to be
brought before a Labour Appellate Tribunal. This institution was abolished by the IRO
2002. Appeals of Labour Court decisions now lie directly with provincial High Courts.
Office bearers of trade unions are given protection against arbitrary transfer, discharge
and dismissal. Any ill-intentioned action on the part of the employer against an officebearer of a trade union or against a worker for trade union activities, is construed as an
unfair practice and the National Industrial Relations Commission is entrusted with the
task of preventing such offenses. Security of service is ensured to the workers. Similarly,
unfair labour practices on the part of workers and trade unions is elaborated and
incorporated in law.
Collective Labour Disputes
* Commencement of a dispute
Under the IRO 2002, if an employer or a Collective Bargaining Agent finds that an
industrial dispute has arisen or is likely to arise, they may communicate their views in
writing to the other party. Upon receipt of the communication, the other party has fifteen
days (or more if agreed) to try and settle the dispute by bilateral negotiations.
*Conciliation
If the parties do not manage to reach a settlement, the employer or the CBA may, within
fifteen further days, serve a notice of conciliation on the other party, with a copy to the
Conciliator and to the Labour Court.

If the dispute is settled before the Conciliator, or a tripartite Board of Conciliators, a

report is sent to the Provincial or Federal Government, with the memorandum of
settlement.
* Arbitration
If the conciliation fails, the Conciliator tries to persuade the parties to refer their dispute
to an arbitrator. If they agree, the parties make a join request in writing to the arbitrator
they have agreed upon.
The arbitrator gives his or her award within a period of 30 days or a period agreed upon
by the parties. The award of the arbitrator is final and valid for a period not exceeding
two years.
A copy of the award is sent to the provincial or Federal Government, for publication in
the official Gazette.
Strikes and Lock-outs
* Proceedings of strikes and lock-outs
If dispute settlement proceedings before the Conciliator fail and no settlement is reached,
and if the parties have not agreed to refer their dispute to an arbitrator, the workers retain
the right under section 31 of the Industrial Relations Ordinance 2002, to go on strike
providing due notice to their employer within seven days, and the employer has the right
declare a lock-out after the delay of notice of conciliation has expired. The party raising a
dispute retains the option, at any time, either before or after the commencement of a
strike or lockout, to make an application to the Labour Court for adjudication of the
dispute.
Where a strike or lock-out lasts for more than fifteen days, if it relates to a dispute which
the Commission is competent to adjudicate and determine, the Federal and/or the
Provincial Government may, by order in writing, prohibit the strike or lock-out at any

time before the expiry of thirty days, provided that the continuance of such a strike or
lock-out causes serious hardship to the community or is prejudicial to the national
interest. In such case the Federal Government or the Provincial Government shall
forthwith refer the dispute to the Commission or the Labour Court. After hearing both
parties, the Commission, or the Labour Court shall make such award as it deems fit, as
expeditiously as possible but not exceeding thirty days from the date on which the dispute
was referred to it.
Under section 32 of the IRO 2002, if a strike or lockout occurs within the public utility
services sector the Federal Government and the Provincial Government may, by order in
writing, also prohibit its occurrence at any time before or after the commencement of the
strike or lockout. No party to an industrial dispute may go on strike or declare a lockout
during the course of conciliation or arbitration proceedings, or while proceedings are
pending before the Labour Court. In addition, the National Industrial Relations
Commission (the Commission), adjudicates and determines industrial disputes to which
an industry-wise trade union or federation of such trade unions is a party , as well as
disputes which are of national importance. The Commission also deals with cases of
unfair labour practices.
* Illegal strikes and lock-outs
A strike or lockout is declared illegal if it is commenced without giving notice of
conciliation to the other party of the dispute, or if it is commenced or continued in a
manner other than that provided by the IRO 2002 or in contravention with this text.
In case of an illegal strike or lockout, an Officer from the Labour Department may make
a report to the Labour Court, and require the employer or CBA or the registered trade
union concerned, to appear before the Court. The Court may, within 10 days, order the
strike or lockout to be stopped.

In case of contravention of the order of the Court by the employer, and if the Court is
satisfied that the pursuance of the lock-out is causing serious hardship to the community
or is prejudicial to the national interest, it may order the attachment of the factory and the
appointment of an official receiver, who will exercise the powers of management and
may do all such acts as are necessary for conducting business.
In case of contravention of the order of the Court by the workers, the Labour Court may
pass orders of dismissal against the striking workers, or cancel the registration of the
trade union that committed such contravention.
*Settlement of Individual Labour Disputes
Pursuant to Article 46 of the IRO 2002, a worker may bring his or her grievance in
respect of any right guaranteed or secured by or under any law or any award or settlement
to the notice of the employer in writing, either him or herself or through the shop steward
or Collective Bargaining Agent, within one month of the day on which cause of such
grievance arises. The IRO 2002 reduces the delay from three months to one month.
Where a worker brings his or her grievance to the notice of the employer, the employer
must within fifteen days of the grievance, communicate his or her decision in writing to
the worker
If the employer fails to communicate a decision within the specified period or if the
worker is dissatisfied with such decision, the worker or shop steward may take the matter
to the Labour Court within a period of two months.
* Labour Courts
Section 33 of the Industrial Relations Ordinance, 2002 permits any CBA or any employer
to apply to the Labour Court for the enforcement of any right guaranteed or secured by
law or any award or settlement. The Provincial Government derives its authority to
establish as many Labour Courts as it considers necessary under section 44 of the

Ordinance. Each Labour Court is subject to jurisdictional limitations derived by its

geographical parameters or with respect to the industry or the classes of cases allocated.
Each Labour Court consists of one Presiding Officer appointed by the Provincial
Government.
The Labour Court adjudicates industrial disputes which have been referred to or brought
before it; inquires into or adjudicates any matter relating to the implementation or
violation of a settlement which is referred to it by the Provincial Government; tries
offenses under the Industrial Relations Ordinance; and exercises and performs such other
powers and functions conferred upon or assigned to it. While deliberating offenses, the
Labour Court follows as nearly as possible procedure as prescribed under the Code of
Criminal Procedure, 1898. For purposes of adjudicating and determining any industrial
disputes, the Labour Court is deemed to be a Civil Court and retains the same powers as
are vested in such Court under the Code of Civil Procedure, 1908 (Act V of 1908)
including the enforcement of attendance and examination under oath, the production of
documents and material objects, and the issuance of commissions for the examination of
witnesses or documents.
An award or decision of a Labour Court is produced in writing and delivered in open
Court with two copies subsequently forwarded to the Provincial Government. Upon
receipt, the Provincial Government within a period of one month publishes the award or
decision in the Official Gazette.
The IRO 2002 abolished the Labour Appellate Tribunal. Any party aggrieved by an
award or a decision given or a sentence passed by the Labour Court may now submit an
appeal to the High Court (Article 48 of the IRO 2002). The High Court, may vary or
modify an award or decision or decision sanctioned by the Labour Court. It may, on its
own motion at any time, call for the record of any case or proceedings in which a Labour
Court within its jurisdiction has passed an order, for the purpose of satisfying itself as to
the correctness, legality, or propriety of such order, and may pass such order, in relation
thereto as it thinks fit, provided that the order does not adversely affect any person
without giving such person a reasonable opportunity of being heard.

Official Gazette
The Federal Laws of Pakistan are published by the Government in a document called the
Gazette of Pakistan. The Ministry of Justice, Law and Parliamentary Affairs in addition
publishes individual Acts through the Official Gazette.

TRADE REMEDIAL LAWS OF

PAKISTAN:
AN IMPLICATION OF THE WTO REGIME
Since the establishment of WTO (World Trade Organization) in 1995,
many of its member countries have been active in complying with the
multilateral trade agreements administered by the Organization. It is this
factor
of compliance that has also led Pakistan to undergo legislations to bring into
effect the rules and regulations provided for in the WTO Agreements.
Pakistan was one of the founding members of GATT (General
Agreement on Tariffs and Trade) in 1947 that provided for international rules
regarding trade in goods. This GATT 1947 was later annexed to Marrakesh
Agreement establishing the World Trade Organization as GATT 1994.
Despite
being the founder member, Pakistan has been taking a long time to prepare
for
the challenges posed by international trade regime.
GATT practice has always been to require that the cuts in tariffs
agreed
in multilateral trade negotiations should be implemented in stages over an
agreed number of years. The reason for it was to give industries time to adjust
gradually to the increased competition resulting from reductions in tariffs and
from the removal of other barriers to trade. Even with this phased
implementation of tariff reductions, certain industrial or agricultural sectors,
at
times, face problems in adjusting to increased import competition. These
problems flow chiefly from their failure to rationalize production structures or
to adopt the technological innovations necessary to raise productivity. Yet,
another menace of increased imports is attributable to unfair trade practices
like
dumping and subsidies by foreign suppliers.
Pakistans domestic industry faces similar problems of increased
imports and unfair practices under the global trade regime. WTO Agreements
have an in-built mechanism providing for remedial measures to counteract the
effect of these problems. Accordingly, Pakistan through national legislation
has

given effect to trade remedial measures provided for under the international
trade laws. Pakistan has come up with Anti-Dumping and Countervailing
Duties Ordinances of 2000 against unfair trade practices and the Safeguard
Measures Ordinance of 2002 against surge of imports in order to protect its
domestic industry.
Safeguard Measures Ordinance of 2002
Safeguard measures are one of three types of contingent trade
protection
measures, along with anti-dumping and countervailing measures, available to
WTO Members.
Safeguard measures are defined as "emergency" actions with respect
to
increased imports of particular products, where such imports have caused or
threaten to cause serious injury to the importing Member's domestic industry.
Such measures, which in broad terms take the form of suspension of
concessions or obligations, can consist of quantitative import restrictions or
of
duty increases to higher than bound rates. As an example, United States, at
one
time, had applied safeguard measures to protect its local steel industry by
increasing tariffs on steel imports. However, those measures were later found
to be unjustified by WTO and were removed by US.
The Agreement on Safeguards ("SG Agreement") sets forth the rules
for
application of safeguard measures according to Article XIX of GATT 1994.
This Article provides that where, as a result of tariff reductions, a Member
country finds that a product is being imported in such increased quantities and
under such conditions as to cause or threaten serious injury to domestic
producers, it can impose safeguard measures to restrict such imports for
temporary periods.
Pakistan through Safeguard Measures Ordinance, 2002 has given
effect
to the provisions of Article XIX of the General Agreement on Tariffs and
Trade, 1994, and to the WTO Agreement on Safeguards for the imposition of
safeguard measures. This has been done by providing a framework for

investigation and determination of serious injury or threat of serious injury

caused by products imported into Pakistan.
Pakistan may apply a safeguard measure on an imported product if, it
is
determined by an investigation conducted by one of its Authorities (National
Tariff Commission) in accordance with the provisions of the Ordinance that
as
a result of unforeseen developments and of the effect of WTO obligations
assumed by Pakistan, the product was being imported in such increased
quantities, absolute or relative to domestic production, and under such
conditions as to cause serious injury or threat of serious injury to domestic
industry producing like or directly competitive products.
The investigations for the imposition of such measures can be initiated
either by the National Tariff Commission itself or on the basis of a petition
from the affected industry. In practice, the investigations are generally
initiated

on the basis of petitions from the affected industry. However, petitions can be
submitted only when it is possible to establish that there is a casual link
between increased imports and the alleged serious injury to the industry.
The Safeguard Measures Ordinance, 2002 also lays down the criteria,
which the investigating authorities must consider in determining whether
increased imports are causing serious injury to the domestic industry. It even
sets out basic procedural requirements for the conduct of investigations. One
aim of the procedural requirements is to provide foreign suppliers and
governments whose interests may be adversely affected by the proposed
safeguard actions with an adequate opportunity to give evidence and to
defend
their interests.
The overall primary objective of providing such temporary increased
protection is to give the affected industry time to prepare itself for the
growing
competition that it will have to face after the safeguard measures are
removed.
Anti-Dumping Duties Ordinance, 2000

GATT acknowledges that the rise in imports may also be due to the
adoption of unfair trade practices by foreign suppliers. Its rules therefore lay
down the basis on which governments may levy compensatory duties on
imports of products benefiting from such unfair practices. The GATT rules
deal
with two types of unfair trade practices, which distort conditions of
competition. First, the conditions of competition may be distorted if the
exported goods are dumped in foreign markets. Second, the competition may
become unfair if the exported goods benefit from specific subsidies.
A product is considered dumped if the export price is less than the
price
charged for the like product in the exporting country. Dumping is, in general,
a
situation of international price discrimination, where the price of a product
when sold in the importing country is less than the price of that product in the
market of the exporting country. Thus, in the simplest of cases, one identifies
dumping simply by comparing prices in two markets. However, the situation
is
rarely, if ever, that simple, and in most cases it is necessary to undertake a
series of complex analytical steps in order to determine the appropriate price
in
the market of the exporting country (known as the "normal value") and the
appropriate price in the market of the importing country (known as the
"export
price") so as to be able to undertake an appropriate comparison.
The Agreement on the Implementation of Art. VI of GATT 1994,
administered by WTO, elaborates the basic GATT rules on dumping and
authorizes countries to levy anti-dumping duties on dumped products.
Pakistan
through Anti-dumping Ordinance, 2000 has repealed the Import of Goods
(Anti-Dumping and Countervailing Duties) Ordinance, 1983 and has given
effect to WTO provisions relating to imposition of anti-dumping duties in
order

to offset dumping. This Ordinance has also provided a framework for

investigation and determination of dumping and injury in respect of goods
imported into Pakistan.

The National Tariff Commission in Pakistan may impose antidumping

measures on products imported into Pakistan, in case it determines, after an
investigation initiated and conducted in accordance with the provisions of the
Ordinance, that:
(a) An investigated product is dumped in Pakistan, and
(b) Injury is being caused to domestic industry of Pakistan.
Countervailing Duties Ordinances, 2000
The issue of grant of subsidies by developed countries to their
agricultural sector was one of the main reasons for the failure of Cancun
Ministerial Conference of WTO.
The definition of subsidy contains three basic elements:
(i)
A financial contribution
(ii) By a government or any public body within territory of a WTO Member
(iii) Which confers a benefit
All three of these elements must be satisfied in order for a subsidy to exist.
The basic provisions of GATT on the use of subsidies have been
elaborated by the Agreement on Subsidies and Countervailing Measures
(SCM). The basic aim of these provisions is either to prohibit or to restrain
the
use of subsidies by a WTO Member that affects the interests of other
Members.
However, where the use of permitted subsidies results in material injury to a
domestic industry in an importing country, the rules permit the importing
country to take remedial measures, which could take the form of
countervailing
duties on subsidized imports.
Pakistan through Countervailing Duties Ordinance, 2000 has given
effect to WTO provisions relating to imposition of countervailing duties to
offset such subsidies. This has been done by providing a framework for
investigation and determination of such subsidies and injury in respect of
goods
imported into Pakistan.

Where the National Tariff Commission in Pakistan determines in

accordance with the provisions of the Ordinance that any exporting country
pays or bestows, directly or indirectly, any subsidy upon the manufacture or
production or the exportation of any investigated product including any
subsidy
on transportation of such product and such subsidy causes injury then, upon
the

importation of any such product into Pakistan, it is in a position to impose a

countervailing duty thereon.
Standard of injury
Similar principles apply when governments take safeguard measures
to
restrict imports in order to assist a domestic industry that is being injured by a
sudden and sharp increase in imports. The standard of injury to the industry
that must be established to justify safeguard actions is, however, much higher
than that required for the levy of anti-dumping or countervailing duties. In the
case of safeguard actions, injury to the industry must be serious whereas in
the case of countervailing and anti-dumping duties, a lower standard of proof
of material injury is adequate.
The difference in standards is attributable to the fact that in taking
safeguard measures, the industrys problems do not arise from unfair
competition, while taking anti-dumping or countervailing measures, these are
due to the unfair trade practices of foreign producers.
Conclusion
As a result of increased trade under the multilateral trade regime of
WTO and the emergence of different countries as exporters of their products
to
Pakistan, the threats arising from enhanced imports are becoming imminent
for
the local industry. These days, one often comes across sporadic complaints in
Pakistan that certain products are being dumped by foreign producers or are
being subsidized to such an extent that it amounts to serious distortion of the
market price to the detriment of local producers. In view of this situation, it

can
be anticipated that Pakistani industries would be availing the trade remedies,
more aggressively, by making use of Safeguards, Anti-dumping and
Countervailing Ordinances, in order to protect themselves against foreign
suppliers.