Company Law

Types of Business Organizations

Types of Business Organizations
There are three types of business organizations:
• Sole Trader
• Partnership
• Company
Sole Trader:
A sole trader is a natural (human) person
carrying on business on his own account. His
business and personal affairs are not separated
in any way.
Business debts which cannot be paid out of
business assets can be recovered out of the
trader's non-business property. Personal debts
which are not met can be recovered against
business assets. So owner and business are
treated as one entity
Partnership:
A partnership is a relationship between two or
more persons carrying on a business in common
with a view of profit.
Like a sole trader, the non-business assets and
income of a partner may have to be used to pay
the debts of the partnership business, and his
share of the business may be forfeit to his
private creditors. Like a sole trader partners and
partnership firm are treated as one entity
Company:
A company is an artificial legal person owned by
members / shareholders and managed by directors.
It is entitled to enter in to contracts and own assets.
A company itself is liable for its debts rather than its
owners or directors. So Company is a separate legal
entity or we can say that shareholders (owners) of a
company and Company are two separate legal
entities, Company is not liable for debts/defaults of
its shareholders and similarly shareholders are not
liable for Company’s debts/defaults
Difference among Sole Trader, Partnership, Company

Sole Proprietorship Partnership Company (Corporation)

A business owned and operated by a single A business owned and A legal entity owned by shareholders and managed
Ownership individual. operated by two or more by directors.
individuals.

Liability Sole proprietor is personally liable for all Partners share liability for Limited liability for shareholders; company is liable
debts. debts. for debts.

Legal Entity Not a separate legal entity from the owner. Not a separate legal entity A separate legal entity from its owners
from the partners. (shareholders).

Sole proprietor makes all decisions and Partners share decision- Managed by a board of directors elected by
Management manages the business. making and management shareholders.
responsibilities.

Perpetual Succession Business ceases upon the death of the owner. Dissolved on death of a Continuity is not affected by death of a
partner shareholder. So it has a perpetual succession
Doctrine of Separate Legal Entity/Veil of
Incorporation
Separate Legal Entity: A company is considered a distinct and
separate entity from its owners or shareholders. In essence, the
company is treated as if it were a legal "person“. Company can enter
into contracts just like a natural person, It can borrow and lend, It
can own assets on its own name, it can sue and can be sued in court
of law.

Veil of incorporation: The term "veil of incorporation" specifically

refers to the legal separation that occurs between a company and its
owners (shareholders) upon incorporation of a company. Once a
business is incorporated, it becomes a distinct legal entity separate
from its owners. This separation is often metaphorically described
as a "veil" because it shields the personal assets of shareholders
from the liabilities of the company. In other words, the debts and
legal obligations of the company generally cannot be extended to
the personal assets of its shareholders.
Salomon v Salomon & Co Ltd 1897
Facts: S owned a boot and shoe business. He formed a limited company and
sold his business to the company in return for shares (he became a
Shareholder) and a loan secured on the company's assets (he became a
secured creditor as well). Additionally, he ran it as managing director. The
company became insolvent, and the liquidator appointed to wind up the
company's affairs took the view that:
• Salomon had no right to repayment of the loan because he owned and
controlled the company; and
• Salomon should personally contribute to the assets of the company by
forfeiting repayment of the loan, so that the funds it represented would be
available to the other unsecured creditors.

Salomon objected, and sued the company for payment.

Decision: The company, at law, is a separate person from the shareholders.

Salomon need not contribute towards paying off the debts of the company.
He should be repaid his secured loan
Limited Liability Concept:
Limited liability means that business owners are not personally
responsible for all of the company's debts. If the business cannot
pay its debts, creditors cannot seize personal assets like homes
and savings to cover the outstanding amount. Limited liability
protects the personal assets of business owners from being used
to pay business debts.

In contrast unlimited liability means that business owners are

personally responsible for all of the company's debts. If the
business cannot pay its debts, creditors have the legal right to
seize personal assets such as homes and savings to cover the
outstanding amount. In unlimited liability situations, there is no
legal separation between the business and its owners, leaving
personal assets vulnerable to business debts
Types of Companies
 Company

Private Public Limited

Company Company (PLC)

Single Member Private Limited Private

Company Company Unlimited
(SMC-pvt ltd) (pvt-ltd) Company

Company Company
Limited by Limited by
Shares Guarantee
Public Limited Company (PLC):
• PLCs can sell shares to the general public. They
are permitted to make shares available to the
public at large by advertising new issues. This
allows them to raise a large amount of capital
from a wide range of investors.
• Only a PLC can be listed on the Stock Exchange.
• A PLC can have a minimum of three members
(shareholders) with no limit on the maximum
number of members.
• A PLC can have a minimum of three directors.
Private Limited Company (Ltd):
• Private Ltd Company cannot sell shares to
general public. Their shares are usually held by
a limited number of people, typically family
members, or a small group of investors. There
are also restrictions on transferring these
shares (mentioned in Articles of Association).
• Pvt Ltd Co cannot be listed on Stock Exchange.
• Pvt Ltd Co can have minimum 2 members and
maximum 50 members,
• Pvt Ltd Co can have minimum 2 directors.
Single member company:
“Single member company” means a company
which has only one member. It is a company
which consists of a single member who is also
the director of the company.. In these
companies, “(SMC PVT) Limited” is added to the
name of the company.
Limited Liability Company (LLC):
In LLC owners (Shareholders) are protected. If the company
can't pay its debts, the owners usually won't lose personal
assets like their house or savings. Company itself is liable for
its debts and its shareholders have no responsibility to pay off
its debts

Example: Let's say you invest $10,000 In buying 50% shares of

a limited liability company (LLC) that operates a small café.
Unfortunately, the café encounters financial difficulties and
accrues debts totaling $20,000. As a shareholder or owner of
the LLC, your liability is limited to the $10,000 you initially
invested. Your personal assets, such as your savings or
property, are protected, and you are not required to cover the
additional $10,000 of debt.
Unlimited Liability Company:
Shareholders of an Unlimited Liability Company are fully
responsible for its debts. If the company can't pay what it
owes, Shareholders might have to sell personal stuff like their
car or house to cover the costs. This type of company is less
common due to the high risk it poses to personal assets.

Example: If you're a shareholder of an Unlimited Liability

Company which operates a small construction business, and it
incurs substantial debt due to project delays and cost overruns,
totaling $50,000. You, as the shareholder (owner) are
personally responsible for the entire $50,000 debt. Creditors
can pursue your personal assets, including your home, savings,
and other investments, to settle the company's liabilities.
Company Limited by Shares:
A company where ownership is divided into shares. Owners'
responsibility is limited to what they've invested in shares.
Common for businesses aiming to make a profit. Shareholders
buy shares and their liability is limited to the value of those
shares.

Example: Imagine a tech startup where investors buy shares to

fund the company's growth. If the company faces financial
difficulties and cannot pay its debts, shareholders are only
liable for the amount they invested in buying shares. For
instance, if someone invested $10,000 in shares and the
company goes bankrupt owing $50,000, that investor is only
responsible for their initial $10,000 investment.
Company Limited by Guarantee:
A company where members promise to pay a certain amount if
the company gets into financial trouble. Often used by non-
profits or charities. Members don't buy shares but agree to
contribute a set amount to cover any debts if needed.

Example: Picture a conservation organization that operates as

a company limited by guarantee. Members of this
organization, such as environmental activists or volunteers,
don't buy shares but instead agree to contribute a set amount,
say $100 each, in case the organization faces financial trouble.
If the organization goes bankrupt, each member pledges to pay
$100 to cover its debts, ensuring the organization can fulfill its
conservation goals.
Listed Company: A listed company refers to a company
whose shares are traded on a stock exchange, such as
Pakistan Stock Exchange. Only Public Limited
Companies can be listed on Stock Exchange.

Unlisted Company: An unlisted company, on the other

hand, is a company whose shares are not traded on a
public stock exchange..
Company Incorporation/Registration
Company Incorporation:
Companies in Pakistan are registered with
Company Registration Office (CRO) also known
as Company Registrar, which works under the
Securities & Exchange Commission of Pakistan
(SECP).
Process of Company Incorporation:
The process of incorporation usually involves the following steps:

Step 1: Approval of Company Name

Getting availability of suitable name from the registrar of companies

Step 2: Submission of Documents

Following documents and information will be filed to registrar.
• An application on the specified form
• Memorandum of association
• Articles of association

Step 3: Certificate of Incorporation

If the registrar is satisfied that all the requirements of Companies Act, 2017
have been complied with, he will register the memorandum and other
documents delivered to him and subsequently he will issue the certificate of
incorporation of company.
Certificate of incorporation:
On registration, the registrar shall issue a
certificate of incorporation that shall state:
• the name and registration number of the
company;
• the date of its incorporation;
• whether it is a private or a public company;
• whether it is a limited or unlimited company;
and
• if it is limited, whether it is limited by shares
or limited by guarantee.
Effect of registration of Company:
The registration of the company has the following effects, as from the date of
incorporation:
a) the subscribers to the memorandum, together with such other persons as
may from time to time become members of the company, are a “company” by
the name stated in the certificate of incorporation;
b) the “company” is capable of exercising all the functions of an incorporated
company (legal person) and having perpetual succession;
c) the status and registered office of the company are as stated in, the
application for registration;
d) in case of a company having share capital, the subscribers to the
memorandum become holders of the initial shares; and
e) the persons named in the articles of association as proposed directors, are
deemed to have been appointed to that office.

As the Company has been incorporated so it has become a legal person. Now this
legal person is capable of performing all functions like any other legal person. It can
borrow and lend, It can sue and can be sued, it can buy and sell, it can make
contracts with other legal persons, it can own assets on its own name.
Memorandum of Association
&
Articles of Association
Memorandum of Association:
Memorandum of association consists of various clauses which
contain variety of information. Following clauses usually exist in
the memorandum of association of the company.
• Name clause, (Name with status of Company, Whether pvt-
ltd, plc, SMC or)
• Registered office clause
• Principal line of business clause
• Liability clause, (whether liability is limited or Unlimited)
• Authorized Share capital clause
• Undertaking clause
Alteration of Memorandum of Association:
A company may by special resolution alter the provisions of its memorandum
so as to change any clause. The alteration shall not take effect until it is
confirmed by the Commission on petition/application: Provided that an
alteration so as to change its principal line of business shall not require
confirmation by the Commission.
Articles of Association:
Articles are the byelaws of the company. Provisions of Articles describe the
rules and regulations for governing and conducting internal matters of
company
A company limited by shares can adopt Table A (Sample Articles of
Association mentioned in Companies Act 2017) as it articles. In case of
unlimited company or company limited by guarantee. In case of violation of
articles company and its officers shall be liable to penalty.

If a company contravenes the provisions of its articles of association, the

company and every officer of the company shall be liable to a penalty.
Contents of Articles of Association:
Articles of association usually contains details about following:
• Shares, Transfer and Transmission of Shares
• Alteration of Capital
• Alteration of Articles
• Meetings (Notice, Proceedings of Meetings Votes of Members, Proxy)
• Resolutions
• Directors (Election, Power, Duties, Disqualification)
• Maintenance of Accounts & Audit
• Winding Up
Alteration of Articles of Association :
A company may, by special resolution, alter its articles and any alteration so
made shall be as valid as if originally contained in the articles of Association.
A copy of the articles of association as altered shall, within 30 days from the
date of passing of the resolution, be filed by the company with the registrar
and he shall register the same and the articles so filed shall be the articles of
the company.

Restriction on Alteration :
When alteration in articles affects the substantive rights or liabilities of
members or of a class of members, it shall be carried out only if a majority of
at least three-fourths of the members or of the class of members affected by
such alteration, as the case may be, exercise the option through vote
personally or through proxy vote for such alteration.
Share Capital
Share Capital:
“share” means a share in the share capital of a
company
Difference between Ordinary Shares &
Preference Shares
Ordinary Shares v Preference Shares:

Ordinary shares: Represent ownership (owner’s equity) in the company and

typically come with voting rights, reflecting the primary ownership interest in
the company.

Preference shares: Often regarded as hybrid instruments (equity cum debt)

because they combine characteristics of both equity and debt. They offer
fixed dividends and maybe redeemable like debt instruments and may not
receive dividends for years like ordinary shares, especially in non-cumulative
preference shares.

Priority: Preference shares always have preference over ordinary shares in

case of dividend payment and in case of liquidation, meaning that preference
shareholders are entitled to receive their fixed dividends (in case profit
distribution) and claim assets ahead of ordinary shareholders (in the event of
company liquidation).
Types of Ordinary Shares
 Ordinary Share Capital

Authorized Share Capital

Issued Share Un-Issued

Capital Share Capital

Paid up Unpaid
Share Share
Capital Capital
Authorized Share Capital: Authorized share capital refers to the maximum
amount of share capital that a company is legally permitted to issue to
shareholders.
Issued Share Capital: Issued share capital refers to the portion of authorized
share capital that a company has actually issued to shareholders.
Unissued Share Capital: Unissued share capital refers to the portion of
authorized share capital that has not yet been allocated or issued to
shareholders.
Paid-up Share Capital: Paid-up share capital refers to the portion of issued
share capital that shareholders have fully paid for.
Unpaid Share Capital: Unpaid share capital refers to the portion of issued
share capital for which shareholders have not yet made full payment.
Example: ABC Inc. is a newly incorporated company with an authorized share
capital of $1,000,000, divided into 1,000,000 shares of $1 each (Authorized
Share Capital). Initially, the company decides to issue 600,000 shares to
investors at $1 per share, raising $600,000 in total (Issued Share Capital
$600,000 & Unissued $400,000). Shareholders pay $0.90 per share upon
subscription, resulting in a paid-up share capital of $540,000 (Paid-up Share
Capital). The remaining $0.1 per share and $60,000 in total constitute unpaid
share capital (Unpaid Share Capital).
Liability of Shareholders in case of
Liquidation of Company:
Liability of Shareholders in case of Liquidation of Company:

Fully Paid-up Capital: When shareholders have paid the full amount for their shares
Shareholders have no further financial obligation to the company beyond the value of
their shares. In case of liquidation, they may lose the value of their investment, but
they are not liable to contribute any additional funds to cover the company's debts.
Example: If an investor has fully paid for 100 shares of a company at $10 per share,
their total investment is $1,000. In case of liquidation, they may lose the entire $1,000
investment if there are no assets left to distribute to shareholders, but they are not
obligated to contribute any additional funds to cover the company's debts.

Partly Paid-up Capital: When shareholders have paid only a portion of the total
amount for their shares Shareholders are liable to contribute the remaining unpaid
amount on their shares in case of liquidation. This means they may be required to pay
additional funds to cover the company's debts up to the nominal value of their shares.
Example: If an investor has partly paid for 100 shares of a company with a nominal
value of $10 per share but has only paid $7 per share (making a total payment of $700
out of $1,000), they still owe $3 per share or $300 in total. In case of liquidation, they
will be required to contribute the remaining $300 to cover the company's debts.
Some Important Terminologies
related to share capital
Face Value (Par Value): The value of a share set by the company in its articles
of association is called Face value or Nominal value. It represents the initial
capital contribution per share.
Example: Company XYZ issues shares with a face value of $1 each. This means
that each share represents a capital contribution of $1 to the company.

Market Value: The price at which a share is currently being traded on the
stock market. It is determined by supply and demand dynamics and reflects
investors' perceptions of the company's value.
Example: If Company XYZ had issued its shares at $10 (Face value) but shares
are currently trading at $15 each on the stock market, then the market value
of its shares is $15 per share.

Share Premium: The amount received by a company for its shares above their
face value. It represents the premium investors are willing to pay for the
shares.
Example: Face value of a company XYZ ‘s shares is $1 but due to better
financial position and high demand the company issues new shares at $5
each. The share premium per share would be $4 ($5 selling price - $1 face
value).
Cash Dividend: A dividend is a distribution of a portion of a company's profits to its
shareholders, usually in the form of cash. It is a way for companies to share their profits
with shareholders.
Example: Company XYZ declares a dividend of 5% per share. If an investor holds 1,000
shares of Company XYZ, they would receive a dividend payment of 5% of the face value of
each share they own. If the face value of each share is $10, the dividend payment would be
$0.50 per share, resulting in a total dividend payment of $500 ($0.50 * 1,000 shares).
Bonus Issue: A bonus issue is the distribution of additional shares to existing shareholders
without any consideration. It is usually issued in proportion to the number of shares held
by shareholders.
Example: Company ABC announces a bonus issue of 10% . This means if a shareholder
holds 500 shares, they would receive an additional 50 shares as a bonus without paying any
amount.
Rights Issue: A rights issue is a method used by companies to raise additional capital by
offering existing shareholders the right to buy new shares at a discounted price (lower than
market price), typically in proportion to their existing shareholding. It allows shareholders
to maintain their proportional ownership in the company and exercise their pre-emption
right, ensuring they have the opportunity to subscribe to new shares before they are
offered to the public..
Example: Company DEF announces a rights issue at a price of $5 per share, offering existing
shareholders the right to buy one new share for every five shares held. If the investor holds
100 shares, they would be entitled to buy 20 new shares at $5 each through the rights
issue.
Company Directors
Director: “Director” includes any person occupying the position
of a director (Member BoD), by whatever name called. Directors
of the company may well be said as agents of the company
whom members have given the right to make decisions on their
behalf.

Only natural persons can be directors of a company. Directors

must be member of the company except where law specifically
allows the non-members as directors.

• Single Member Company (SMC) must have at least 1 director.

• Private Limited companies must have at least 2 directors.
• Public companies (unlisted) must have at least 3 directors.
• Public companies (listed) must have at least 7 directors.
Example: Faisal is senior employee of ABC Limited and
his designation is Human Resource Director. However,
he is not appointed to board of directors and does not
participate in board of directors’ decision making. He is
not a director of ABC Limited.

Example: Naveed is senior employee of ABC Limited

and his designation is General Manager Operations. He
is also appointed to board of directors and participates
in board of directors’ decision making. He is director of
ABC Limited.
Different Types of Directors
• Executive Directors: An executive director holds dual roles within a company. They
are not only members of the Board of Directors but also actively involved in the
management of the company's day-to-day operations.
• Non Executive director: A non-executive director serves on the Board of Directors
(Member Bod) but is not involved in the day-to-day management of the company
• Nominee directors: Nominee directors are individuals appointed by specific
stakeholders, such as Creditors, Federal government, provincial government and
any investor company . The directors may be nominated by a company, Federal
Government or Provincial Government if they have made investment in the
company.
• Independent Directors: An independent director is someone with no affiliations,
financial or otherwise, with the company, its associates, subsidiaries, or directors.
They are perceived as capable of making unbiased business decisions without
being influenced by conflicts of interest.
• Alternate Director: An alternate director is a person appointed to act on behalf of
a director when the director is temporarily unavailable or unable to fulfill their
duties.
• Chairman: The Chairman of the Board is the head of the board of directors,
responsible for leading board meetings,. The chairman shall be responsible for
leadership of the board and ensure that the board plays an effective role in
fulfilling its responsibilities.
Chief Executive: Chief executive means an individual who, subject to the
control and directions of the directors, is entrusted with the powers of
management of the affairs of the company.
Chief Executive (if not already a director), shall also be deemed to be a
director. A person who is ineligible to become a director is also ineligible to be
a chief executive.

Chief Executive is appointed by BoD for a maximum period of 3 years from

their appointment date, and a retiring chief executive may be considered for
re-appointment.

A chief Executive can be removed from his/her office either by members

( Special Resolution) or by BoD (3/4th majority)
Election of Directors
Election of Directors:

First Directors: The first directors of a company are determined by the subscribers of
the company, and their details are submitted with the company incorporation
documents. The first directors retire at the first Annual General Meeting (AGM).

Subsequent Directors: In first AGM, all first directors retire and election of directors is
conducted, new directors are elected by shareholders in same meeting. Afterwards
election is held after every 3 years.

Casual vacancy: Any casual vacancy occurring among the directors (due to death,
resignation, disqualification of a director) is filled up by the directors (BoD) and the
person so appointed holds office for the remainder of the term of the director in
whose place he is appointed

Removal of Director: Members may remove directors through ordinary resolution

(51% majority) in their meeting.
Ineligibility to become a director: Following persons are ineligible to become director
• Minor
• Unsound mind
• Bankrupt
• Has been convicted by a court of law for an offence involving moral miscoduct (e.g.
murder, kidnapping)
• Has been debarred from holding such office under any provision of Company Act
2017
• Has betrayed lack of fiduciary behavior (as a director) at any time during preceding
5years
• Does not hold NTN
• Not a member except Nominee directors & Chief executive

Additional Ineligibilities only for Listed Co 

• Declared by Court as defaulter in repayment of loan to a financial institution
• Engaged in business of brokerage, or is spouse of such person or is sponsor,
director or officer of a corporate brokerage house
Penalty: If any person being an insolvent acts as chief executive or director of a
company, he shall be liable to imprisonment for a term not exceeding 2 years or to a
fine, or to both.
Power and Duties of Directors
Power of Directors:
• To issue shares, debentures
• To make loans.
• To approve annual and periodical accounts and to approve
bonus for employees
• To incur capital expenditure or dispose of a fixed asset
• To undertake obligations under contracts
• To authorize others to enter into any contracts
• To write off bad debts, advances and receivables;
• To write off inventories and other assets;.
• To take over a company or acquiring a controlling or
substantial stake in another company;
• Any other specified matter.
Duties of Directors:
Directors have following duties,
• To act in accordance with AoA.
• To act in good faith and in best interests of company,
employees, shareholders, community and for protection of
environment.
• To discharge his duties with due and reasonable care, skill and
diligence and exercise independent judgment.
• To avoid conflict of interests.
• To not make personal benefits from position of directorship
• To not assign his office to any other person (such assignment
shall be void).
Company secretary:
A Company Secretary is a senior position in company, playing a
crucial role in ensuring adherence to statutory and regulatory
requirements, He is responsible for advising board on
compliance of corporate laws and for maintenance of relevant
records and registers. Public company must have company
secretary.

The company secretary of a listed company should be a member

of a recognized body of professional accountants, or a member
of a recognized body of corporate / chartered secretaries or a
person holding a masters degree in Business Administration or
Commerce or a Law graduate from a university recognized by
HEC.
Company Meetings
 Company meetings

Member’s Meetings Director’s Meetings

Class (General Board Committee

Meeting Meetings) Meeting Meeting

Extra Annu Stat

ordin al
ary utor
Gene
Gener
ral
y
al Mee
Meeti Meet
ng ing ting
Types of meetings:

There are two types of Company Meetings

• Meetings of directors
• Meetings of members
Meeting of Directors:

There are two types of meetings of directors, namely:

• Board meetings: which may be attended by all the directors; and

• Meetings of committee of directors: in which selected directors

participate to decide for specific tasks assigned to those committees. The
committees of directors may include audit committee, human resource
and remuneration committee, nomination committee and risk
management committee.
Meetings of members:
There are two general categories of meetings of members namely:
1. General meetings: In General meetings all the members (ordinary
shareholders) who are entitled to attend and vote at such meetings
according to articles may participate. There are three types of general
meetings namely:
• Statutory meeting
• Annual general meeting (AGM)
• Extra-ordinary general meeting (EGM)

2. Class meetings: Meeting of any specific class of members (other than

ordinary shareholders) e.g. meeting of preference shareholders
Statutory Meeting:
Every public company having a share capital must hold a general meeting of the members of the
company (typically shortly after its incorporation), to be called the “statutory meeting”. Statutory
meeting is held once in lifetime of a plc. Private Companies are not required to hold Statutory
meeting.

Timing: The meeting must occur within:

• 180 days from commencing business, or
• 9 months from the date of incorporation, whichever is earlier.

In case first annual general meeting (AGM) of a company is held earlier than the above
mentioned period then no statutory meeting shall be required.

Notice: Members must receive notice of the meeting at least 21 days before the meeting, along
with a statutory report.
Agenda: To discuss and approve “Statutory Report”

Contents of Statutory Report:

• Details of shares allotted, cash received, and financial transactions.
• Particulars of directors, chief executive, secretary, auditor and legal adviser;
• An overview of the company's affairs since incorporation and its business plan.
Example: A public company was incorporated on 3 January 2021
and was allowed to commence business from 25 April 2021. It
should hold statutory meeting latest by 2 October 2021 being
earlier of 180 days from commencement of business (i.e. 21
October 2021) and 9 months from incorporation (i.e. 2 October
2021)

Example: A public company was incorporated on 7 January 2021

and was allowed to commence business from 22 February 2021.
It should hold statutory meeting latest by 20 August 2021 being
earlier of 180 days from commencement of business (i.e. 20
August 2021) and 9 months from incorporation (i.e. 6 October
2021).
Annual general meeting (AGM):
Every company (Except SMC) is required to hold an AGM
Timing, First AGM: within 16 months from the date of company incorporation
Subsequent AGMs: once in every calendar year and within 120 days of financial year end.

Notice: The notice of an AGM shall be sent to the members and every person who is entitled to
receive notice of general meetings at least 21 days before the date fixed for the meeting. In case
of a listed company notice shall also be published in one English and one Urdu Newspaper having
nationwide circulation.
Place of meeting: In case of listed company, AGM shall be held in the town in which the
registered office of the company is situated or in a nearest city

Calling an AGM: AGM is called on the order of directors and not of the members.

Agenda of an AGM:
Ordinary Business:
• Approval of Financial Statements
• Appointment/Reappointment of Directors
• Appointment of Auditors
• Declaration of Dividends
Special Business:
Any other business not falling under Ordinary Business
Example: Suppose ABC Limited is incorporated on 1st April 2020 and it opts for a
financial year end of 30th June every year. It would be required to hold its first annual
general meeting in next sixteen month time period. So it can opt to hold the first
annual general meeting till 31st July 2021. We assume that the company opted to hold
the annual general meeting on 31st July 2021. From this date onward company will be
required to hold the annual general meeting within 120 days of the close of financial
year and at least once in a calendar year. Keeping all the above in view, what shall be
the latest time on which company can hold its AGM in 2022? The next financial year
will close on 30th June 2022, so till when would the company be required to hold its
AGM? It should be 28th October 2022 because it cannot wait for more than 120 days
from close of financial year.

Example: XYZ Limited, another company registered on 1st September 2020, Its
financial year closes in 30th September each year. It held its first annual general
meeting on 1st November 2021 which was well within 16 months from the date of its
incorporation. What is the latest date by which company can hold its second AGM? It
must be within 120 days of close of financial year and at least one AGM must be held
in each calendar year, so latest date should be 31st December 2022
Extra-ordinary general meeting (EGM):
All general meetings of a company, other than the AGM and the statutory meeting, are
called extra-ordinary general meetings.

Timing: Whenever required

Calling EGM: The board may at any time call an EGM to consider any matter which
requires the approval of the company in a general meeting. EGM can also be called on
request of members (requisitionists) holding at least 10% voting power

Notice: The notice of EGM is required to be sent to the member’s at least 21 days
before the date of the meeting similarly as of the notice of AGM. However, in case of
unlisted company, if all the members entitled to attend and vote at any EGM so agree,
a meeting may be held at a shorter notice.

Agenda: The agenda of an EGM typically includes special business, consideration of

urgent matters, approval of amendments to articles of association, approval of
extraordinary transactions, and any other pertinent business.
Power of SECP to call meetings:
The Commission has power to call general meeting of
the company in case of:

• There is default in conducting AGM or statutory

meeting.
• The directors did not proceed to call an EGM on the
requisition of members.
Quorum of general meeting:
Quorum refers to the minimum number of members required to attend a
general meeting. Any business conducted without quorum shall be
considered void.

Minimum quorum requirement:

Listed company: 10 members present personally or through video link,
representing at least 25% voting power.

Other company having share capital: 2 members present personally or

through video link, representing at least 25% voting power (own or proxy).

Company not having share capital: As specified in the articles.

Larger Quorum: A company has the option to set a quorum larger than the
minimum requirement stated above through its articles
Proxies :
A member of a company , entitled to attend and vote at a
meeting of the company, may appoint another person as his
proxy to exercise all or any of his rights to attend, speak and vote
at a meeting

Presiding the meeting:

At each company meeting, the chairman of the board will
preside the meeting. If the chairman is absent or declines the
role, any director present may be elected as chairman. If no
directors are present or willing, the members will select one of
themselves to be the chairman
Resolutions
Resolution: A company resolution is a formal decision made by
the shareholders during a meeting. It's like an official agreement
on important matters such as approving financial reports or
appointing directors etc.

Types of Resolutions:

Ordinary Resolution:
– Passed by a simple majority (51%) of members present at a
meeting.

Special Resolution:
– Passed by a majority of at least 3/4th (75%) of members
present at a general meeting.
Winding up of Company
Winding Up: The term "winding up" refers to the legal process
through which a company is dissolved i.e. the life of a company is
put to an end. The process of winding up a company is also
known as its "liquidation. Purpose of Liquidation of a company is
to sell off assets, pay off creditors, and distribute any remaining
assets to members.

Types of winding up:

The winding up of a company may be either:
a) Voluntary
b) Subject to the supervision of the Court
c) By the Court order
Voluntary Winding up:
A company may be wound up voluntarily if the company passes
a special resolution that the company be wound up voluntarily.
or
it has a fixed period for its duration (mentioned in Articles) which
has expired or an event has occurred which its articles say is an
event leading to liquidation, and on occurrence of such event or
expiry of such fixed period the company has passed an ordinary
resolution to wind-up
Winding up subject to supervision of the Court:
"Winding up subject to supervision of the Court" refers to the
legal process of dissolving a company, which is overseen and
regulated by the court. If a company decides to wind up
voluntarily and if the Court deems it necessary, it can order that
the voluntary winding up continues under its supervision. This
can happen either on the Court's own initiative or upon the
application of any stakeholder entitled to apply for the winding
up of a company.
Winding up on court orders:
Winding up on court orders after a petition refers to the legal process where a
company is dissolved on court orders following a formal petition filed by
creditors, shareholders, or other stakeholders, typically due to financial
insolvency or other legal grounds. Such winding up is also called compulsory
liquidation

LIQUIDATOR: A person/firm appointed to carry out the winding up of a

company is called liquidator. If the winding up is through Court, the term used
for such person is official liquidator.
The duties of liquidator include to get in and realise (sell) the assets of the
company, to pay its debts, and to distribute the surplus (if any) among the
members.
Circumstances in which a company may be wound up by Court:
A company may be wound up by the Court under various circumstances, including:
• If the company passes a special resolution to that effect.
• If the company defaults in delivering statutory reports to the registrar, holding
statutory meetings, or holding two consecutive annual general meetings.
• If the company fails to file financial statements or annual returns to registrar for
two consecutive financial years.
• If the number of members falls below the required minimum.
• If the company is unable to pay its debts.
• If the company engages in unlawful or fraudulent activities, operates in violation of
laws, or oppresses minority members.
• If the company is mismanaged, fails to maintain proper accounts, commits fraud,
or refuses to comply with legal requirements.
• If a listed company loses its listing status.
• If the company's only business is a licensed activity and it stops operating because
its license is revoked by the Commission or another licensing authority.
• If a listed company suspends its business for an entire year.
• if the Court deems it just and equitable to wind up the company.
SECP: The Regulatory body:
The Securities and Exchange Commission of Pakistan (SECP) is the regulatory authority overseeing
the corporate sector in Pakistan. It was established under the Securities and Exchange
Commission of Pakistan Act 1997 and became operational in 1999, with the mandate to regulate
the corporate sector and capital markets.
SECP's main objectives include:
• Regulation: Enforcing laws and regulations to ensure the integrity, transparency, and
efficiency of the corporate sector and capital markets.
• Investor Protection: Safeguarding the interests of investors by ensuring disclosure of accurate
and timely information, preventing market manipulation, and promoting fair trading
practices.
• Market Development: Facilitating the growth and development of the capital markets by
introducing reforms, promoting innovation, and fostering investor confidence.
• Compliance: Monitoring and enforcing compliance with corporate governance standards,
financial reporting requirements, and other regulatory frameworks.

SECP regulates various aspects of corporate activity, including company formation, corporate
governance, mergers and acquisitions, securities issuance, and financial reporting. It works to
create a conducive environment for business growth while maintaining investor confidence and
market integrity.

Overall, SECP plays a crucial role in ensuring the stability, transparency, and growth of the
corporate sector in Pakistan, thereby contributing to the country's economic development and
investor confidence.