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Contingent Liability
Liability may or may not
incurred
Relates to Future
liability
Relates to past event
Not recording is required in
Books of Accounting
Disclosure is required in Accounts
Body Corporate• All Companies incorporated in Pakistan • All Companies incorporated outside Pakistan • Does not include
– Corporation Sole– Cooperative Society– Any body corporate, which is not a company
mentioned in Companies ordinance, even it is a body corporate the Federal Government right to exclude it as Body Corporate by notification in office Gazette.
Body Corporate
All Companies
Include
Incorporated In Pakistan
Incorporated Outside Pakistan
Does not Include
Cooperative Society
Sole Cooperation
Any body corporate, which is not a company mentioned in Companies ordinance, even it is a body corporate the Federal Government right to exclude it as Body Corporate by notification in office Gazette.
Financial Institution
Company or Financial
Institution
Whether Established
Under Special enactment
Operating inside / Outside
Pakistan
Doing BankingBusiness
Include
House Financing CompanyInvestment Banks
MudarbaLeasing
Venture Capital CompanyFinancing Company
NBFCCODE= HIM – LVFN
Federal Government by notification in official Gazette
specify
Sole Cooperation • Public office (created usually by an act of parliament) or ecclesiastical
office (usually the owner of church land) that has a separate and continuing legal existence, and only one member (the sole officeholder).
• Contract made with a corporation-sole continues from one officeholder to his or her successor or, if made during a vacancy in office, to the appointee.
• Just read and enjoy.
Common Seal
• Every company must have its common seal• It is not a rubber stamp• It is embossed on documents only on the
authority of a resolution of Directors.• It shall be affixed to share Capital• Directors must provide Safe Custody of
Common Seal
Capitalization of Profit
• Instead of Cash Dividend when Shares are issued (Bonus Shares/Stock Dividend) to Shares Holders.
• Same a right issuance but here no cash is taken but shares are given to members.
Related Parties
Related Party Transactions
• Company must maintain• Nature of related party (Holding/ Subsidiary/
Associated)• Nature of transaction (Sale/Purchase/
Investment)• Amount of transaction • Terms & Conditions of transaction
How to become Holding Company
By way of Investment in
other company
If Management of one company is also holding
Management of other Company
by Holding of Management
by Holding of more than
50% shares
Purchase of Shares
Holding Company
Subsidiary Company
Buy Shares of its Subsidiary
Can further Can not
Buy Shares of its Holding
If subsidiary buys shares of holding then it becomes BUY BACK. Which is prohibited
How to become Associate Company
By Investment more than 20%
in other company
If Management of one company is also holding
Management of other Company
Holding and Subsidiary
• A private company can be subsidiary of Public company• A public company can be subsidiary of Private company• A private company can be subsidiary of Private company• A public company can be subsidiary of Public company
• A private company can be Holding of Public company• A public company can be Holding of Private company• A private company can be Holding of Private company• A public company can be Holding of Public company
•
How to become Holding Company
By way of Investment in
other company
If Management of one company is also holding
Management of other Company
by Holding of Management
by Holding of more than
50% shares
How to become Associate Company
By Investment more than 20%
in other company
If Management of one company is also holding
Management of other Company
Company
ABC Limited
XYZ Limited
Share Capital 500,000
Shares Holders
Mr. A 5,000Mr. B 10,000Mr. C 35,000Mr. D 50,000Mr. E 300,000Mr. F 100,000
Share Capital 100,000
Shares Holders
Mr. W 20,000Mr. X 10,000Mr. Y 10,000Mr. Z 9,000ABC Limited 51,000
ABC Limited is the Holding Company of XYZ Limited
Investment of ABC
Limited is more than
50%
Xyz is subsidiary of ABC Limited
Company
ABC Limited
XYZ Limited
Share Capital 500,000
Shares Holders
Mr. A 5,000Mr. B 10,000Mr. C 35,000Mr. D 50,000Mr. E 300,000Mr. F 100,000
Share Capital 100,000
Shares Holders
Mr. W 20,000Mr. X 10,000Mr. Y 10,000ABC Limited 60,000
ABC Limited is the Holding Company of XYZ Limited
Investment of ABC
Limited is more than
50%
Xyz is subsidiary of ABC Limited
Company HOHO(Pvt)
Limited
HEHE Limited
Share Capital 500,000
Shares Holders
Mr. A 5,000Mr. B 10,000Mr. C 35,000Mr. D 50,000Mr. E 300,000Mr. F 100,000
Share Capital 100,000
Shares Holders
Mr. W 20,000Mr. X 10,000Mr. Y 10,000HOHO (Pvt) Limited 60,000
HOHO (Pvt) Limited is the Holding Company of HEHE Limited
Investment of HOHO
(Pvt) Limited is more than
50%
HEHE remains public limited
Company
ABC Limited
VIP (PVT)
Limited
Share Capital 500,000
Shares Holders
Mr. A 5,000Mr. B 10,000Mr. C 35,000Mr. D 50,000Mr. E 300,000Mr. F 100,000
Share Capital 100,000
Shares Holders
Mr. W 20,000Mr. X 10,000Mr. Y 10,000ABC Limited 60,000
ABC Limited is the Holding Company of VIP (PVT) Limited
Investment of ABC
Limited is more than
50%
Now laws of public limited will be on VIP
Company
ABC Limited
XYZ Limited
Share Capital 500,000
Shares Holders
Mr. A 5,000Mr. B 10,000Mr. C 35,000Mr. D 50,000Mr. E 300,000Mr. F 100,000
Share Capital 100,000
Shares Holders
Mr. W 20,000Mr. X 10,000Mr. Y 10,000Mr. Z 39,000ABC Limited 21,000
ABC Limited is the Associated Company of XYZ Limited
Investment of ABC
Limited is more than
20%
Company
ABC Limited
XYZ Limited
Share Capital 500,000
Shares Holders
Mr. A 5,000Mr. B 10,000Mr. C 35,000Mr. D 50,000Mr. E 300,000Mr. F 100,000
Share Capital 100,000
Shares Holders
Mr. W 20,000Mr. X 20,000Mr. Y 20,000Mr. Z 30,000ABC Limited 10,000
ABC Limited is nothing of XYZ Limited
Investment of ABC
Limited is less than
20%
Company
ABC Limited
XYZ Limited
Management/ Director
Mr. A Mr. B Mr. C Mr. D Mr. E Mr. F
ABC Limited is an Associate XYZ Limited
As Maximum Management
of ABC on the Board of Director of
XYZ so XYZ is Subsidiary
Management/ Director
Mr. X Mr. Y Mr. C Mr. D Mr. E Mr. F
Company ABC (pvt)
Limited
XYZ Limited
Management/ Director
Mr. A Mr. B Mr. C Mr. D Mr. E Mr. F
ABC (pvt) Limited is an Associate of XYZ Limited
As Maximum Management
of ABC(pvt) Ltd on the Board of Director of XYZ
so XYZ is Subsidiary
Management/ Director
Mr. X Mr. Y Mr. C Mr. D Mr. E Mr. F
Company
ABC Limited
XYZ (pvt)
Limited
Management/ Director
Mr. A Mr. B Mr. C Mr. D Mr. E Mr. F
ABC Limited is an Associate of XYZ (pvt) Limited
As Maximum Management of ABC Ltd on the Board of
Director of XYZ so XYZ (pvt) Ltd
is Subsidiary
Management/ Director
Mr. X Mr. Y Mr. C Mr. D Mr. E Mr. F
Associated Undertaking
• A private company can be Associate of Public company
• A public company can be Associate of Private company
• A private company can be Associate of Private company
• A public company can be Associate of Public company
Classification of Capital
Paid UpCalled
ISSUED
SUBSCRIBED by public
AUTHORIZED / NOMINAL/ REGISTERED
UNISSUED
UNSUBSCRIBED by public
Uncalled
Unpaid Up
Shares Transfer and TransmissionDescription Transfer Transmission
Exercise Voluntary Operation of Law
Example Sales/ Gift/ Barter Death / insolvency
Consideration to Owner of Shares
In case of Sales/ Barter, owner receives Cash or value. In case of Gift it is not present
No Consideration
Recording New name in Member Register
Upon receive of transfer deed
Upon Certificate of Insolvency or Death Certificate
Stamp Duty fees Paid Not paid
Certificate
Certificate of Incorporation Certificate of
Commencement of Business
Both Private & Public Company get it from
RegistrarOnly Public Company gets it
from Registrar after taking COI and meeting other
requirements
Utilization of Premium on shares issued
Writing off
Preliminary Expenses
Commission Paid
Discount allowed
Issuance of Shares &
Debentures
Issuance of Bonus Shares
Providing for the Premium on redemption
Preference Shares /
Debentures
Preparation & Printing of MOA, AOA, and other Documents,
Payment of Capital Duty, Initiative expenses, lawyers fee, etc
Issue of Shares not in Cash • Value of asset must be determined by Engineer
• Engineer must be registered with Pakistan Engineer Council (PEC)
• Engineer must be at least in the panel of two Financial Institution
• Past & current Depreciation shall be reduced from Value of Asset
• Intangible asset are not accepted against Shares only
• Tangible assets are accepted against Shares
• Certificate from Chartered Accountant shall be obtained for the compliance
• Code CV-TIPE
Beneficial Interest or Beneficial Owner
Mean
When any person holds 10% or more than 10% in the Capital of
the Company
Director Any Person Officer
Shall inform to the Company within 15 days
If he has become Beneficial Owner of the Company
Every Director CEO Secretary Chief
Accountant AuditorManaging Agent
Shall submit to Registrar by filling out Form 31 within 1- 30 days and mention
In Public listed Company
Any one of the below is beneficial Owner
Information pertaining to the beneficial ownership of such shares/securities
Person directly or indirectly
hold 10% or more share in company
In case of change in future he shall also submit information on Form 32 to registrar within 1-15 days
Form 31 & 32 to be submitted by Beneficial Owner
From 31Submission within 1-30
days
Form 32
within 1-30 days
When a person becomes beneficial
owner
After becoming beneficial owner
When member further Purchase
shares
When member sales shares
Form 31 to be submitted
First time Subsequently
When first time a member owns 10% or more shares
of the company
Sometimes a member sales that much shares which reduces his 10% holding
He submits form 32, then he again buys shares and his holding again reaches to 10% or more
Now again form 31 is to be submitted
Stock Exchange(Organized Market for Shares & Debentures
Private Company Unlisted Company
Listed Company
Trade on Does not Trade On
Shares of Following Companies
Redeemable Capital
Includes
Participatory Terms Certificate
PTC
Mushrikah Certificate
Term Finance Certificate TFC
Such Instrument specified by
Federal Govt in Official Gazette
Any other security not
based of Interest other than Shares
Obtain of Finance
Purpose of Issue
Representing in
Denomination
Instrument
Called Face Value
Evidence of Investment
Important clauses of AOA of a private
Company
Restriction Prohibition Limitation
Transfer of shares
Subscription of shares &
Debentures to General Public
Of members from 2 to 50
excluding employees
NOTE AOA : IF IBA HAD DEW CAP ARE FOR BOTH PRIVATE AND PUBLIC
COMPANIES
Registers • Fixed Assets• Members• Debenture Holders• Directors, Officers• Directors Interest• Mortgage• Proxy Register
CONVERSION OF Public Company into Private Company • Board Meeting• Calling of Members Meeting• Pass Special Resolution by Members• Approval from SECP• Add RPL in AOA• Reduce Members if they are more than 50• Add “Private” Limited after the name of Company• Submit SILOP to ROC within 14 days after
conversion
Important clauses of AOA of a private
Company
Restriction Prohibition Limitation
Transfer of shares
Subscription of shares &
Debentures to General Public
Of members from 2 to 50
excluding employees
NOTE AOA : IF IBA HAD DEW CAP ARE FOR BOTH PRIVATE AND PUBLIC
COMPANIES
RPL
CONVERSION OF Private Company into Public Company • Board Meeting• Calling of Members Meeting• Pass Special Resolution by Members• Approval from SECP• Remove RPL from AOA• Increase Members if they are less than 3• Remove “Private” after the name of Company• Intimation to ROC within 14 days after conversion
Important clauses of AOA of a private
Company
Restriction Prohibition Limitation
Transfer of shares
Subscription of shares &
Debentures to General Public
Of members from 2 to 50
excluding employees
NOTE AOA : IF IBA HAD DEW CAP ARE FOR BOTH PRIVATE AND PUBLIC
COMPANIES
RPL
WINDING UP COMPANIES
Contributory
Contributory - the term ‘ contributory ‘ is defined every person liable to contribute to the assets of a company in the event of its being wound up.
The expression includes the holder of any shares which are fully paid up.
A past member shall however be not liable to contribute if he ceased to be a member for one year or more before the commencement of the winding up.
Winding up of Companies
Compulsory Winding up
Voluntary Winding up subject to supervision of
Court
Voluntarily Winding Up
without supervision of
Court
By Passing Special Resolution
By Passing Ordinary Resolution
Winding up of Companies
Compulsory Winding up
Voluntary Winding up subject to supervision of
Court
Voluntarily Winding Up
without supervision of
Court
Director files Statement of
Solvency
Members Voluntarily winding Up
Does not files
Statement of Solvency
FileStatement
of Solvency
Creditor Winding Up
Voluntary Winding Up
Without supervision of
Court
With the supervision of
Court
When an application is
made by
Company Liquidator Creditors Contributory
By Passing Special
Resolution
By passing Ordinary
Resolution
Winding up of Companies
Compulsory Winding up
Voluntary Winding up subject to
supervision of Court
Voluntarily Winding Up
without supervision
of Court
Members Voluntarily winding Up
Creditor Winding Up
WINDING UP PROCESS
Life of company ended
Properties of Company
administered for benefits of
The Members of the company
The Creditors of the company
Compulsory Winding Up
After lapse of 1 year from the
date of COI
Business of company is not
operative
When Public Company
Does not
Hold Statutory Meeting
File Statutory Report to
ROC
No of members reduced
Public below 3
Private below 2
SMC below 1Code:-2 LUMS-FSCLapse of one Year after COI no business started or suspend business for whole yearListed Company becomes unlisted CompanyUnable to pay DebtsMembers reduced below statutory requirements Special Resolution passed by Members to wind upFail to File of Statutory Report to ROCStatutory Meeting not Held in time Court on the ground of Just and Equity
Compulsory Winding Up
Members passes Special
resolution
To winding up company
Company unable to pay debts
If the court is of the
opinion
On the grounds of
Just & Equity
To wind up Company
Code:-2 LUMS-FSCOLapse of one Year after COI no business started or suspend business for whole yearListed Company becomes unlisted CompanyUnable to pay DebtsMembers reduced below statutory requirements Special Resolution passed by Members to wind upFail to File of Statutory Report to ROCStatutory Meeting not Held in time Court on the ground of Just and Equity Business is carried on otherwise than Object of company.
Compulsory winding up “Book of accounts are not properly maintained, misfeasance,
malfeasance in relation to company
Requirements For Investigation.
Illegal Or Fraudulent Affairs Of Company Are Found fraudulent,
Dead Lock In The Management.
An Aggressive Policy Is Adopted By The Principal Shareholders Towards The Minorities.
Losses: When The Business Of The Company Carried Except At Loss.
CODE :- BRIDAL
Compulsory Winding Up
Date of starting
When petition is presented to
Court
Until court passes order of Winding Up
The company has to comply all the requirements of Companies Ordinance
The corporate status and the
corporate powers of the Company shall continue
until it is dissolved.
Code:-2 LUMS-FSCOLapse of one Year after COI no business started or suspend business for whole yearListed Company becomes unlisted CompanyUnable to pay DebtsMembers reduced below statutory requirements Special Resolution passed by Members to wind upFail to File of Statutory Report to ROCStatutory Meeting not Held in time Court on the ground of Just and Equity Business is carried on otherwise than Object of company.
Procedure for winding up
Date of commencement of winding up - date on which the
petition is presented to court.
As such, Until winding up order is made , the company will have
to comply with the requirements of the companies act as are
required if company not wound up.
However in case if voluntary winding up the winding of the
company is deemed to have commenced at the time of the
passing of the resolution.
HEARING OF COURT
BEFOREHearing Of The
Petition
the provisional liquidators are
appointed.
to safe guard the assets of the
company
notices issued to all concerned parties.
Intimation
Official Liquidator.
ROC
HEARING OF COURT
Make An Order For Winding Up The Company
The Court May Dismiss It
With or without Cost
Adjoin The Hearing
Conditionally Or Unconditionally
Make Any Interim Order
That Court Thinks Fit
Or Any Order Court that thinks fit.
Consequences of Winding up order
the court must, as soon as the winding up order is made, cause intimation thereof to be sent to the official liquidator and the registrar
The petitioner and the company must also file with the registrar within 30 days a certified copy of the order.
In case the certified copy is not filed the petitioner is fined.the registrar should take the minutes in his book and notify in the
official Gazette that such order has been made.
The order for winding up is deemed to be a notice of discharge to the officers and the employees except when the business is continued.
Suits against the company are stayed, unless the court gives leave to continue or commence proceedings.
All power of the board of directors cease and the same are then exercised by the liquidator.
On the commencement of the winding up the limitation ceases to run in favour of the company.
Any disposition of the property of the company and any transfer of shares in the company are then void.
Official liquidator, by virtue of his office becomes the liquidator of the company and takes possession and control of the assets of the company.
Consequences of Winding up order
• Any distress or execution put in force without the court orders are void.
• Any type of sale or floating charge created within the period of proceedings are void.
• Statement of affairs to be made to the liquidator
• Order of Dissolution by the Court -thereafter the company has no existence
Consequences of Winding up order
Winding up of Companies
Compulsory Winding up
Voluntary Winding up subject to supervision of
Court
Voluntarily Winding Up
without supervision of
Court
By Passing Special Resolution
By passing Ordinary Resolution
. Voluntary winding up Voluntary Winding up - Winding up by the members or
creditors without any intervention of the Court is called voluntary winding up.
a company may be wound up voluntarilyby Ordinary or Special resolutionby Ordinary or Special resolution..------------------------------------------------------------------------------------------------------------------------------------------------------------
By passing an ordinary resolution in general meeting
a. where either the time fixed by the articles for the duration of the company has expired OR
b. the event specified in the Articles has occurred on which the company is to be dissolved.
Voluntary winding up (cont) In any other case, the company may
resolve to be wound up voluntarily by passing a special resolution in general body meeting of shareholders.
• A voluntary winding up is deemed to commence from the time the resolution for voluntary winding up is passed.
• when the company has passed the resolution for voluntarily winding up, it must within 10 days, give notice in official gazette and also in some newspapers in the
Consequences of Voluntary Winding-up
• A voluntary winding up is deemed to be commence at the time when the resolution for voluntary winding up is passed.
• The company ,from the commencement of the winding up, must cease to carry on its business except so far as may be required to secure a beneficial winding up.
• The transfer of shares and alterations in the status of members, made after commencement becomes void.
• A resolution to wind up voluntarily operates as notice of discharge to the employees of the company.
• On the appointment of the liquidator all the powers of the board of directors shall cease except after the permission of the registrar.
Types of voluntary winding upTypes of Voluntary Winding up - Voluntary winding up may be of two
types, namely,
a) Members’ voluntary winding up ;
b) Creditors’ voluntary winding up.
Members’ Voluntary Winding up - Members’ voluntary winding up is possible only in case of solvent companies.
1) DECLARATION OF SOLVENCY The directors must enquire whether the company will be able to able to pay all its
debts within the period of 3 years.In order to be effective, this declaration must be made within 5 weeks
immediately preceding the date of passing of the winding up resolution by the members;
delivered to the Registrar for filing ; and must be accompanied by a copy of the report of the auditors of the company on
the accounts and balance sheet.
• Appointment and remuneration of liquidators: the company in general meeting must:a) appoint one or more liquidatorsb)fix the remunerationany remuneration so fixed cannot be increased in any circumstances whatever, whether with or without the sanction of the court. No liquidator shall charge of his office unless his remuneration is fixed.
• Board’s power to cease: On the appointment of the liquidators all the powers of the directors cease but their powers may continue if the general body or the liquidator sanctions it.
• Notice of the appointment of the liquidator to be given to the registrar(S493):within 10 days of his appointment .otherwise Rs.1000 fine per day.
• Power of liquidator to accept shares, etc., as consideration of sales of property of the company:
• Duty of liquidator to call creditors meeting in case of insolvency: if the liquidator finds that the company will not be able to pay its debts he should tell it to the creditors with all records.
• Duty of liquidator to call general meeting at the end of each year: In case the winding takes more then one year the liquidator must call a general meeting and tell the acts and winding operations done by him.
• Final meeting and dissolution: the liquidator must(a)make up an account of the winding up showing how the company has been disposed of (b)call the general meeting of the company for laying the account before it as well as explanations.
Creditors Voluntary Winding Up
• Creditors’ voluntary winding upCreditors’ voluntary winding up -
• Where the Board of directors does not file a declaration as to solvency of the company, the voluntary winding up is called ‘ the Creditors ‘ voluntary winding up.
• - if the members and creditors nominate two different persons as liquidators, creditors’ nominee shall become the liquidator of the company.
• - Besides, in the case of creditors’ winding up, if the creditors so wish , a ‘ committee of inspection ‘ may be appointed to work along with the liquidator's.
• Notice to registrar: A company of any resolution passed at the creditors meeting must be filed with the registrar within 10 days of the passing thereof otherwise fine of 500 Rs per day.
• Appointment of liquidator: the creditors and the members at their respective first meeting may nominate a person to be liquidator but should take the board of directors into considerations.
• Committee of inspection: The creditors at their first or any subsequent meeting, appoint a committee of inspection of not more than 5 members.
• Fixing of liquidator’s remuneration: the remuneration of the liquidator is fixed by the committee of inspection.
• Board’s power to cease on appointment of liquidator: all the powers of the directors should go to the liquidator.
• Duty of liquidator to call meeting of company and creditors at the end of each year within 3 months from the end of the year.
• Final meeting and dissolution
Voluntary winding up under supervision of the
court
- A voluntary winding up may be effected under supervision of the Court where an application to that effect is made by a creditor or a contributory or the company or the liquidator and the Court makes an order that the voluntary winding up should continue subject to the supervision of the Court.
• Such an order is passed by the Court where • (i) the resolution for winding up was obtained by fraud, or • (ii) the rules relating to the winding up order have not
been observed, or• (iii) the liquidator is prejudicial or is negligent in
collecting the assets.
• The Court is also empowered to make an order for compulsory winding up superseding the order of winding up under its supervision.