Brown Floral Background

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Chapter 01 Introduction and
Definition Salman Masood Sheikh M.Com, MBA,
M.Phil, ACMA, FPA, CA(Int) Director Quality
Assurance
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Associated Companies/Undertakings

• Associated companies and associated
  undertakings means two or more companies or
  undertakings, which are interconnected with each
  other in any of the following manners
• If a person in relation to one company or
  undertaking is the
• Owner
• Partner
• Director or
• Holder of 20 or more shares having voting
  rights,
• Is also the owner partner director or holder
  of 20 or more shares having voting right in
  another company or undertaking
• If the companies or undertakings are under common
  management or control
• If one of the companies or undertakings is the
  subsidiary of another or
• If the undertaking is a modaraba managed by the
  modaraba company.

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Undertaking

• It is also used to mean an enterprise which can
  be owned and transferred. However some other
  statutes have defined this term, which are as
  below.
• Banking companies ordinance, 1962 defines
  undertaking as any concern, institution,
  establishment or enterprise engaged in the
  production supply or distribution of good, or in
  the provision or control of any services relating
  to the provision of transport, entertainment or
  amusement, or of facilities in connection with
  the supply of electrical or other energy, or
  insurance or investment.
• The competition Act, 2010 defines undertaking
  as any natural or legal person, governmental
  body including a regulatory authority , body
  corporate, partnership, association, trust or
  other entity in any way engaged, directly or
  indirectly, in the production, supply,
  distribution of goods or provision or control of
  services.

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Associated person
Where two or more companies or undertakings are
associated of each other then every such person
who is the owner, partner, director or holder of
10 or more shares (having voting rights) in such
companies or undertakings shall be termed as
associated person of every such other person
who is also the owner, partner, director or
holder of 10 or more shares in that companies or
undertakings.
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Body Corporate / Corporation

• Body corporate or corporation includes a company
  incorporated outside Pakistan, but does not
  include the following
• A corporation sole
• A registered co-operative society or
• Any other body corporate, not being a company as
  defined in the companies ordinance, 1984, which
  the federal Government may specify.
• While defining the term body corporate the
  ordinance uses the words includes a company
  incorporated outside Pakistan.

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Book and paper
Central Depository

• Central depository means a company which
  fulfils the following conditions.
• It should be incorporated under the companies
  ordinance, 1984.
• It is registered with the SECP under section 32A
  of the securities and exchange ordinance, 1969.
• It is form to establish and operate a system for
  the central handling of securities.
• The securities are deposited with and held by or
  registered in the name of such company as a
  nominee for the depositors and

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Chief Executive

• Person who fulfills the following conditions
  shall be termed as a chief executive
• The chief executive must be an individual, i.e.,
  a natural person. an artificial legal person
  cannot be appointed as chief executive of a
  company
• The chief executive works under the supervision
  and control of the directors (collectively known
  as board of directors)
• The chief executive is entrusted with the whole
  or substantially the whole of the powers within a
  company.
• These powers are vested in him for the management
  of the affairs of the company
• He may or may not be designated as chief
  executive or not.

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Commission

• Commission means the securities and exchange
  commission of Pakistan (SECP). This is the
  regulatory body in respect of corporate laws and
  is established under section 3 of the Securities
  and Exchange Commission of Pakistan Act, 1997.
• Company means a company formed and registered
  under the companies ordinance 1984 or an
  existing company.
• The term existing company has been defined as a
  company formed and registered under any of the
  previous companies acts.
• Previous companies acts include the following
  enactments
• All acts before the Indian companies act 1866
  (i.e. the registration of joint stock companies
  act 1850 and the Indian companies act 1857)
• The Indian companies act 1866
• The Indian companies act 1882, and
• The Indian companies act 1913

Company
Previous Companies Act
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Company Limited By Shares
It means a company whose memorandum of
association limits the liability of its members
to the unpaid amount if any of the shares
respectively held by each member. It means a
company whose memorandum of association limits
the liability of its members to such amount as
the members may respectively undertake to
contribute to the assets of the company in the
event of its winding up The court means the
court having jurisdiction under the companies
ordinance 1984, section 7 of the ordinance
specify that the court having jurisdiction under
the ordinance shall be the high court having
jurisdiction in the place at which the registered
office of the company is situated. However the
federal Government may empower any civil court to
exercise all or any of the jurisdictions
conferred upon the court by the companies
ordinance, 1984.
Company Limited By Guarantee
The Court
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• Debenture means a borrowing instrument (any
  security other than shares ) issued by
  corporation or a company which creates a debt and
  contains an acknowledgement of the issuer with an
  obligation to repay the debt at a fixed future
  date and return on it at a specified rate
  payable by the issuer whether it makes a profit
  or not.
• In use it is known as corporate bond.
• For the purpose of company law debenture includes
  debenture stock bonds, term finance certificates
  or any other securities other than a share of a
  company such security may or may not constitute a
  charged against the assets of the company.
• Any person by whatever name called occupying the
  position of a director is called the director.
• A person who is member of the board of directors
  of a company and is entitled to participate and
  vote in the board meetings is a person who
  occupies the position of a director.

Debenture
Director
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• The term document includes summons notice
  requisition order other legal process voucher and
  register.
• Financial year has been defined in relation to a
  body corporate and means a period in respect of
  which any profit and loss account or the income
  and expenditure account of the body corporate is
  made up and laid before it in the general
  meeting.
• The period for which the financial statements are
  made may or may not be a year.
• Generally the financial year is a period of
  twelve months however under the following cases
  it may be less or more than twelve months
• The first financial year of the company
• The period during which the financial year of the
  company is changed and
• The last financial year (i.e., the period in
  which company is dissolved).

Document
Financial Year
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Financial Institutions

• Any institution which fulfills the following
  conditions
• It is a company or an institution established
  under any law (which may be the companies
  ordinance,1984 or some special enactment)
• It is operating within or outside Pakistan and
• It transacts the business of banking or any
  associated or ancillary business through its
  branches.
• A modaraba
• A leasing company
• An investment
• A venture capital company
• A financing company
• A housing finance company
• A non-banking finance company and
• Any other company or institution authorized to
  undertake any similar business and is notified as
  financial business by the federal Government.

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From means a form set out in any of the schedules
or as prescribed in the companies (general
provision and forms) Rules 1985 or any other
rules made under the companies ordinance
1984 Listed in relation to securities means such
securities which have been allowed to be traded
on stock exchange. Listed company means such a
company whose securities have been allowed to be
traded on a stock exchange. The term member has
been defined in relation to class of the company.
Broadly the companies may be classified into two
major classes i.e. companies having share capital
and companies not having share capital. The
provisions of the law in respect of each class of
companies are discussed below.
Form
Listed
Listed Company
Member
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Company having a Share Capital

• Member of a company having share capital means a
  person who fulfills any of the following
  conditions
• A person who is the subscriber to the memorandum
  and
• A person who is a lawful holder of any share
  scrip or security which gives him a voting in the
  company.
• Member of accompany not having share capital
  means a person who fulfills the following
  conditions
• A person who has agreed to become a member of
  the company and
• Whose name is entered in the register of members
  of the company

Company not having a Share Capital
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Memorandum of Association

• Memorandum means the memorandum of association of
  a company as originally framed or as altered from
  time to time in pursuance of the provisions of
  the law.
• Modaraba has been defined in the modaraba
  companies and modaraba (floatation and control)
  ordinance, 1980 as business in which a person
  participates with his money and another with his
  efforts or skill or both his efforts and skill.
• Modaraba Company means a company engaged in the
  business of floating and managing modaraba.

Modaraba and Modaraba Company
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• The term officer includes any director, chief
  executive, managing agent secretary or other
  executive of the company howsoever designated but
  does not include an auditor.
• However the auditor is deemed to be an officer of
  the company under various sections of the
  companies ordinance 1984 sections 205, 220, to
  224, 260, 261, 268, 351, 352, 417, 418, 474, and
  482 deem an auditor as an officer of the company

Officer
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Participatory Redeemable Capital

• Participatory redeemable capital means such
  redeemable capital as is entitled to participate
  in the profit and loss of a company.
• Redeemable Capital means finance obtained on the
  basis of 2(1)30A)
• Participation Term Certificate (PTC)
• Musharika Certificate
• Term Finance Certificate (TFC)
• Any other security or obligation (other than an
  ordinary share of a company) not based on
  interest or
• Any other certificate or instrument as the
  Federal Government may notify as redeemable
  capital.
•  

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Provisions relating to the winding-up
As respect the provisions of the companies
ordinance relating to the winding-up of companies
and other matters requiring to be determined or
decided by the court prescribed means the
provisions prescribed by rules made by the
supreme court in consultation with the high
courts or where the supreme court advises the
federal government to do so by the federal
government in consultation with the high courts.
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Private Company

• Private company means a company which by its
  articles
• Restricts the right to transfer its shares if any
• Limits the number of its members to fifty (other
  than the persons who are in the employment of the
  company ) and
• Prohibits any invitation to the public to
  subscribe for the shares or debentures of the
  company.

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• Prospectus means any document notice circular
  advertisement or other communication described or
  issued as prospectus or through which a company
  invites offers from the public for the purchase
  of its shares or debentures.
• Any invitation made by a banking company or a
  financial institution for the deposits will not
  be considered as prospectus.
• Following are the prerequisites for rendering a
  document as prospectus
• It should be a communication
• The communication is given to public and
• It invites offers for subscription in shares or
  debentures of the company.
• Public company means a company which is not a
  private company.

Prospectus
Public Company
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Register and Registrar

• Register
• Register means the register of members of a
  company. It also includes the register of
  debenture holders or holder of the other
  securities issued by the company. The register
  may maintained on paper or computer network
  floppy, diskette, magnetic, cartridge tape,
  CD-Rom or any other computer readable media.
• Registrar
• Registrar means a person who performs the duty of
  registration of companies etc. under the
  companies ordinance 1984. This term includes the
  following officials
• A registrar
• An additional registrar
• A joint registrar
• A deputy registrar
• An assistant registrar.

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Scheduled bank Secretary
Scheduled bank Scheduled bank means a bank which
is included in the list of banks maintained by
the state bank of Pakistan for this purpose as
required under the provisions of the state bank
of Pakistan act 1956. Secretary Secretary means
any individual appointed to perform the
secretarial administrative or to other duties
ordinarily performed by the secretary of a
company.
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Security and Share

• Security
• Security means the following instrument
• A share
• A scrip (scrip is a certificate to of a right
  receive something or it is a certificate
  representing a fraction of a share or stock)
• A debenture
• A participation term certificate
• A modaraba certificate
• A Musharika certificate
• A term finance certificate
• A bond
• A pre-organization certificate or
• Any other instrument specified by the federal
  government as security.
• Share
• Share means a share in the share capital of
  company. It is an interest of a person in the
  share capital of company which is measured by the
  sum of money.

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Special Resolution Stock Exchange

• Special Resolution
• Special resolution means a resolution which
  fulfils the following conditions
• It has been passed by a majority of at least
  three-forth of the members present, in person or
  by proxy, at a general meeting
• The meeting was held at a notice of at least 21
  days and
• It was specified in the notice that the
  resolution shall be proposed and passed as a
  special resolution.
• Stock exchange
• Stock Exchange means a stock exchange
  registered under the securities and exchange
  ordinance 1969
• The securities and exchange ordinance, 1969
  defines a stock exchange as any person who
  maintains or provides a market place or
  facilities for bringing together buyers and
  sellers of securities

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Legal Terminologies

• Ex-officio
• Ex-officio means by virtue of the office. It
  is the office or power exercised by a person
  which are not specifically conferred upon him,
  but are necessarily implied in his office.
• Any person who has appointed as chief executive
  of a company will be ex-officio director of that
  company.
• Intra vires
• It means within the power or jurisdiction of. It
  is the opposite or ultra vires.
• Ipso facto
• It is a Latin word and means because of the fact
  that has been mentioned. Its other meanings are
• By the very nature of the case
• By the fact itself
• By the mare fact and
• By the mere effect of an act or a fact

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Legal Terminologies
Pari passu It means on equal footing or
proportionality. This term is used at various
occasions, i.e., issue of further shares issue of
a series of debentures, creating a charge on the
assets. Under all cases it denotes that the new
shares debentures or charge shall stand equal to
the existing ones.
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Legal Terminologies
Prima facie Prima facie means a fact presumed
to be true unless disproved by some evidence to
the contrary. It also denotes a fact or document
which at the first sight or appearance or on the
face of it seems to be true although it may be
proved false later. Ultra vires It means beyond
the scope, power jurisdiction or authority of any
person, company, corporation or statutory
body. This term applies absence of capacity or
power of the person to do any act. Such act shall
be void. It is not necessary that an act to be
ultra vires must illegal it may or may not be
illegal.
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Perpetual succession Person

• Perpetual succession
• It means a continuous existence which enables a
  corporation to manage its affairs and hold
  property without the necessity of perpetual
  conveyances for the purpose of transmitting it.
  By reason of this quality this ideal and
  artificial person remains in its legal entity and
  personality the same though frequent changes may
  be made of its members
• Person
• Person generally means a human being. In the
  legal parlance it denotes an individual or an
  entity which
• Can own property
• Can incur liability
• Can sue and
• Can be sued.

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