Corporations

Nature of Corporate form of Organization its operation and salient

features
There is no solid difference between Company and Corporation. But , these days Corporation word is
mostly used in finance area because this word is most popular in USA economy.

A corporation is a legal entity, which is a separate entity from its owners who are called stockholders/
shareholders. As a legal entity, a corporation may acquire, own, and dispose of property in its own
name.

The shareholder /stockholders control a corporation by electing a board of directors.

It may be established as a profit making or non profit organization and may be publicly or privately held.
The stock of public company is traded on a stock exchange . There are minimum 7 and there may be
thousand, even millions, of stockholder in a public company . Stock of a privately held company is not
traded on stock exchange, there are usually 2 minimum and 50 maximum number of stockholders .

The registration process is taken care by Securities and Exchange Commission of Pakistan (SECP). SECP is
the only body who has the powers of company registration. All of the regulations and registrations are
governed by the Companies Ordinance Act 1984.

Documents Need for Registration of Company.

 There are three legal document required for registration of Company

1.Memorandum of Association (MOA) To put simply, MOA tells about the relationship of your
company with the outside world.

A Memorandum of Association (MOA) is a legal document prepared in the formation and registration
process of a limited liability company to define its relationship with shareholders. The MOA is accessible
to the public and describes the company’s name, physical address of registered office, names of
shareholders and the distribution of shares.

2.Articles of Association

The articles of association is a document that specifies the regulations for a company's operations and
defines the company's purpose. AOA lets know about the day-to-day proceedings within the company
i.e. what role CEO and directors would play, business concerned meetings and the appointments of
employees, in short- how the company will run.

3. Prospectus
A prospectus is a legal document issued by companies that are offering securities for sale. A prospectus
includes the name of the company issuing the stock or the mutual fund manager, the amount and type
of securities being sold and, for stock offerings, the number of available shares.

Features of Corporations/Companies
1. Separate legal entity
2. Separate Property ( It can purchase or sell property without the permission of shareholders. In
other words, assets of company are not the assets of members like partnership.)
3. Limited Liability
4. Perpetual Succession (Death,retirement,Insolvency of one shareholder has no effect on the
existence of the company)
5. Common Seal
6. Right to Sue
7. Freely Transferability of Ownership
8. No shortage of capital

What is stockholders' equity?

Stockholders' equity is the amount of capital given to a business by its shareholders, plus donated
capital and earnings generated by the operation of the business, less any dividends issued. It’s also
called the company’s book value.

Shares
Smallest division of the company’s capital is known as shares. The shares are offered for sale in the open
market, i.e. stock market to raise capital for the company. The rate on which the shares are offered is
known as share price.The shares are the owned funds of the company. Shares represent the capital of
the company. The holder of shares is known as shareholder. Shareholders get the dividend.

Share capital
Share capital is the sum of money received by a company by selling its shares to the investors. When a
company issues fresh share to the investors and raises fund, it directly increases the value of share
capital.

Types of share capital

Share capital can be categorized as authorized share capital, issued share capital, subscribed share
capital, called up share capital and paid up share capital.

Authorized share capital:

Authorized share capital is a capital for which a company gets registered. It refers to the total capital
that a company is authorized to accept from investors by issuing shares. In simple terms, a company
cannot raise capital more than its authorized capital.

It represents the capital with which a company is registered that’s why it is also known as ‘registered
capital’.

Issued share capital:

It represents that part of total authorized share capital which has been issued by a company for
subscription by investors. Usually, companies do not issue all of their shares for control purpose. Thus,
the part which is issued represents the issued share capital. And the part not issued is called as unissued
share capital.

Subscribed share capital:

It refers to that part of issued share capital, which has been subscribed by investors. It means when a
company issues shares to raise capital, it may or may not receive subscriptions for all of its shares. The
part of issued share capital for which subscription has been received is known as subscribed share
capital. So subscribed share capital can be equal to subscribed share capital but not more than that. The
part of issued share capital for which subscription has not been received is Known as unsubscribed
capital.

Called up share capital:

A company collects the full amount of share price in more than one lot. The part of subscribed share
capital which has been asked for payment represents called up share capital.

Paid Up Capital:

The amount actually paid by the shareholders is known as Paid-up Capital.