All definitions of Company Law – CAF 07 (by Sir Atif Abidi) Page 1

Ch # 1 - Introduction to Company & Incorporation

Body corporate “or” Corporation

Body corporate or corporation includes
- a company incorporated under this Act or company law;
- a company incorporated outside Pakistan, or
- a body corporate declared as body corporate in the relevant statute
but does not include
- A co-operative society registered under any law relating to the registration of co-operative
societies; or
- Any other entity, not being a company as defined in this Act or any other law for the time
being which the concerned Minister of the Federal Government may, by notification, specify
in this behalf.

Foreign company
Means any company or body corporate incorporated outside Pakistan, which:
- has a place of business or liaison office in Pakistan whether by itself or through an agent,
physically or through electronic mode; or
- conducts any business activity in Pakistan in any other manner as may be specified.

Companies limited by shares

Liability of its members is limited by the memorandum to the extent of amount, if any,
remaining unpaid on the shares respectively held by them.

Companies limited by guarantee

Liability of owners is limited to the amount member guarantees to contribute in the event that
the company goes into liquidation

Private Company
Company can be registered by at least two members and it restricts
 Maximum number of members to 50
(members jointly holding shares shall be counted as 1 member)
 Right to transfer the shares by its members (save as otherwise provided in act),
 Invitation of subscriptions from general public for its shares debentures or Redeemable
capital.

Public sector company

A company, whether public or private, which is directly or indirectly controlled, beneficially
owned or not less than 51% of the voting securities or voting power of which are held by the
Government or any agency of the Government or a statutory body, or in respect of which the
Government or any agency of the Government or a statutory body, has otherwise power to elect,
nominate or appoint majority of its directors and includes a public sector association not for
profit, licenced by the SECP:

Provided that nomination of directors by the Commission on the board of the securities exchange or
any other entity or operation of any other law shall not make it a public sector company.

Subsidiary company
In relation to any other (holding) company, it means company in which the holding company:
 Holds the Composition of the Board; or
 Exercise or controls more than one-half of its voting securities either by itself or together with
one or more of its subsidiary companies
All definitions of Company Law – CAF 07 (by Sir Atif Abidi) Page 2

Registrar
Means a registrar, an additional registrar, an additional joint registrar, a joint registrar, a deputy
registrar, an assistant registrar or such other officer as may be designated by SECP, performing
duties and functions under this Act.

Members
Subscribers to memorandum of association are deemed to have agreed to become members of
the company and become members on its registration and every other person-
- to whom is allotted, or who becomes the holder of any class or kind of shares; or
- in relation to a company not having a share capital, any person who has agreed to become a
member of the company;
and whose names are entered; in the register of members, are members of the company.

Ordinary Resolution
A resolution passed by a simple majority of such members of the company entitled to vote as are
present in person or by proxy or exercise the option to vote through postal ballot, as provided in
the articles or as may be specified, at a general meeting

Special resolution
A resolution
- which has been passed by a majority of not less than 3/4th of such members entitled to vote as
are present in person or by proxy or through postal ballot at a general meeting
- of which not less than 21 days notice specifying the intention to propose the resolution as a
special resolution has been duly given:

Note: if all the members entitled to attend and vote at any such meeting so agree, a resolution
may be proposed and passed as a special resolution at a meeting of which less then twenty-one
days notice has been given

Voting rights
The right of a member of a company to vote on any matter in a meeting of the company either
present in person or through video-link or by proxy or by means of postal ballot.
All definitions of Company Law – CAF 07 (by Sir Atif Abidi) Page 3

Ch # 3 - Directors

Independent Director

A director who is not connected or does not have any other relationship, whether pecuniary or
other, with company, associates, subsidiaries, holding or directors; and he can be reasonably
perceived as being able to exercise independent business judgment without being subservient to
any conflict of interest

No director shall be considered independent if one or more of following circumstances exist:

 Has been employee of company, its subsidiaries or holding company within last 3 years;
 Is or has been CE of subsidiaries, associated undertaking or holding company in last 3 years
 Has, or has had within last 3 years, a material business relationship with company either
directly, or indirectly as a partner, major shareholder (10% voting power individually or in
concert with his family or as part of group) or director of a body having such relationship.
 Has received remuneration in 3 years preceding his/her appointment as a director or
receives additional remuneration, excluding retirement benefits from company apart from a
director’s fee or has participated in stock option or a performance-related pay scheme;
 Is a close relative of the company’s promoters, directors or major shareholders:
(close relative means spouse, lineal ascendants and descendants and the siblings)
 Holds cross-directorships or has significant links with other directors through involvement in
other companies or bodies not being associations licenced u/s 42;
 Has served on board for more than 3 consecutive terms from date of his first appointment,
and for more than 2 consecutive terms in case of a public sector company
(such person shall be deemed “independent director” after a lapse of one term)
 Person nominated as a director or representing special interest
For public sector companies, time period shall be taken as 2 years instead 3 years in first 3
conditions. An independent director in case of a public sector company shall not be in
service of Pakistan or any statutory body or any body or institution owned/controlled by
Government.

Ch # 4 - Chief Executive and Other Officers

Chief executive
In relation to a company means an individual who, subject to the control and directions of the
directors, is entrusted with the whole, or substantially the whole, of the powers of management
of the affairs of the company, and includes a director or any other person occupying the position
of a chief executive, by whatever name called, and whether under a contract of service or
otherwise
All definitions of Company Law – CAF 07 (by Sir Atif Abidi) Page 4

Ch # 6 - Prospectus and Commencement of Business

Prospectus
Any document described or issued as a prospectus and includes any document, notice, circular,
material, advertisement, offer for sale document, publication or other invitation offering to the
public (or any section of the public) or inviting offers from public for the subscription or purchase of
any securities of a company, body corporate or entity, other than deposits invited by a bank and
certificate of investments and certificate of deposits issued by non-banking finance companies

Shelf-Prospectus
It is a single offering document allowing companies to make multiple offerings as disclosed in
the offering document within a prescribed time and subject to prescribed conditions.

Supplement to Prospectus
A supplement to prospectus invites general public for subscription of the securities earlier
offered to the public through shelf-prospectus. The supplement to prospectus for each offering
contains updated disclosures.

Expert
Includes banker, securities advisor, engineer, valuer, accountant, lawyer and any other person
whose profession gives authority to a statement made by him..

Minimum Subscription
Means the amount, if any, fixed by MOA/AOA upon which directors may proceed to allotment. If
no amount is fixed, the whole amount of share capital (other than that to be issued not for cash)
is minimum subscription.

Ch # 7 - Mortgages & Charges

Pledge: ‘bailment’ of goods as security for the repayment of a debt or performance of a promise.

Mortgage: ‘an interest or lien’ created on the property or assets of a company or any of its
undertakings or both as security.

Alternate definition of Mortgage (The Transfer of Property Act, ,1882)

Transfer of an interest in specific immoveable property for the purpose of securing payment of
money advanced or to be advanced by way of loan, an existing or future debt, or the
performance of an engagement which may give rise to a pecuniary liability”

Charge: Security for payment of a debt or other obligation that does not pass ‘title of property’
or any right to its possession to the person to whom the charge is given.

Ch # 9 - Distribution of Profits

Paying agent” means a bank or any entity including a share registrar and a central depository
appointed by a company and having relevant approval of SBP for making payment of cash
dividend directly into the designated bank account of entitled shareholder.
All definitions of Company Law – CAF 07 (by Sir Atif Abidi) Page 5

Ch # 10 - Investments and Disclosure of Interest

Associated company/Associated undertaking

Two or more companies or undertakings interconnected with each other in the following
manner:
- If companies or undertakings are under common management/control
- If one is subsidiary of another
- If undertaking is a modaraba managed by the company
- If a person is owner or partner or director of company/undertaking, or who, directly or
indirectly (spouse/minor child), holds or controls shares carrying not less than 20% of voting
power in such company or undertaking, is also owner or partner or director of another
company/ undertaking, or directly or indirectly, holds or controls shares carrying not less than
20% of voting power in that company or undertaking.

Exceptions: Following directorships or shareholdings shall not be considered while

ascertaining status of companies to be associated
- Directorship by virtue of nomination by concerned Minister of the Federal Government or a
Provincial Government or a financial institution directly or indirectly owned or controlled by
such Government; or
- Directorship of a person appointed as “Independent Director”
- Shares owned by National Investment Trust (NIT) or the Investment Corporation of Pakistan
(ICP) or a financial institution directly or indirectly owned or controlled by Federal Govt or a
Provincial Govt; or
- Shares registered in the name of a central depository

‘Investment’ include loans, advances, equity guarantees, by whatever name called, or any amount,
which is not in nature of normal trade credit, where the terms and conditions of trade
transaction(s) carried out on arms-length and in accordance with the trade policy of company.

Related party
 A director or his relative (spouse, siblings and lineal ascendants and descendants)
 A key managerial personnel or his relative;
 A firm, in which a director, manager or his relative is a partner;
 A private company in which a director or manager is a member or director;
 A public company in which a director or manager is a director or holds alongwith his
relatives, any shares of its paid up share capital;
 Any body corporate whose chief executive or manager is accustomed to act in accordance
with the advice, directions or instructions of a director or manager;
 Any person on whose advice, directions or instructions a director or manager is accustomed
to act
(advice, directions or instructions given in a professional capacity are excluded)
 Any company which is
- A holding, subsidiary or an associated company of such company; or
- A subsidiary of a holding company to which it is also a subsidiary;
 Such other person as may be specified;

Office of profit
Receives anything by way of remuneration over and above his remuneration as director;
(by way of salary, fee, commission, perquisites, rent-free accommodation, or otherwise)
All definitions of Company Law – CAF 07 (by Sir Atif Abidi) Page 6

Ch # 11 - Accounts and Annual Return

Book and paper / Book or Paper

Includes books of account, cost accounting records, deeds, vouchers, writings, documents,
minutes and registers maintained on paper or in electronic form.

Books of Accounts
Include records maintained in respect of
 all sums of money received and expended by a company and matters in relation to which the
receipts and expenditure take place;
 all sales and purchases of goods and services by the company;
 all assets and liabilities of the company; and
 items of cost in respect of production, processing, manufacturing or mining activities;

Financial Statements
 Statement of financial position as at the end of the period;
 Statement of profit or loss and other comprehensive income
(or an income and expenditure statement in case of not for profit);
 Statement of changes in equity for the period;
 Statement of cash flows for the period;
 Notes, comprising a summary of significant accounting policies and other explanatory
information;
 Comparative information in respect of the preceding period; and
 Any other statement as may be prescribed;

Financial year
In relation to a company or any other body corporate, means the period in respect of which any
financial statement of the company or the body corporate, as the case may be, laid before it in
general meeting, is made up, whether that period is a year or not.
All definitions of Company Law – CAF 07 (by Sir Atif Abidi) Page 7

Some simple yet unnecessary definitions

(chances of asking are minimum)

Company
A Company formed and registered under this Act or the company law.

Company law
The repealed Companies Act, Companies Ordinance, 1984, Companies Ordinance, 2016 and also
includes this Act unless the context provides otherwise

Unlimited companies
This has all advantages of a normal company except that, liability of its members is not limited

Public Company
A company which is not a private company

Listed Company.
Whose securities are listed on stock exchange and are traded on it

Unlisted Company
Whose securities are not listed on stock exchange

Single Member Company

Which consists of a single member who is director of the company.
[In these companies (SMC-PVT) Limited is added to the name]

Holding Company
Means a company which is another company‘s holding company if, but only if, that other
company is its subsidiary.

Wholly owned subsidiary

A company shall be deemed to be a wholly owned subsidiary of another company or the
statutory body if all its shares are owned by that other company or the statutory body.

Officer
Includes any director, chief executive, chief financial officer, company secretary or other
authorised officer of a company.

Board
in relation to a company, means board of directors of the company

Director
Includes any person occupying the position of a director, by whatever name called

Company secretary
Any individual appointed to perform secretarial and other duties customarily performed by a
company secretary and declared as such, having such qualifications and experience, as may be
specified

Chief financial officer (CFO)

Means an individual appointed to perform such functions and duties as are customarily
performed by a CFO