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INCORPORATION OF A PUBLIC LIMITED COMPANY

Name: Bilal Ahmed Roll no: Am552469 Course: BUSINESS AND LABOUR LAW Level: M.com Assignment submitted to: Prof Khawaja Javed Iqbal Couse code: 8514

ALLAMA IQBAL OPEN UNIVERISITY

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Acknowledgement
All the praises are for Allah Almighty whose uniqueness, oneness and wholeness are absolute. He is the one who gave me courage to gain knowledge and made it possible for to accomplish the report. All respects are for His Holy Prophet Hazrat Muhammad (Peace Be Upon Him) who enabled us to recognized oneness of our Creator.

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INCORPORATION OF A PUBLIC LIMITED COMPANY

Companies remain the most favored form of business organizations in Pakistan especially for medium and large-scale business enterprises. Legal regime for establishment and regulation of companies in Pakistan is given in the Companies Ordinance, 1984. Whereas the function of administration of these companies is vested in the Securities and Exchange Commission of Pakistan and the Registrar of Companies appointed by the Securities and Exchange Commission of Pakistan for a Province of Pakistan where such company is to be registered. Under the provisions of the Companies Ordinance, 1984 a company is a corporate body with separate legal entity and a perpetual succession and a company may be formed by persons associating for any lawful purpose by subscribing their names to the Memorandum of Association and complying with other requirements for registration of a company under the provisions of the Ordinance. The Companies Ordinance, 1984 provides three different types of companies: A company limited by shares A company limited by guarantee An unlimited liability company Further, under the Companies Ordinance, 1984 two types of limited liability companies are provided namely, a) a private limited company and b) a public limited company (which may be listed or unlisted). Any one or more persons associated for any lawful purpose by subscribing their name(s) to the Memorandum of Association and

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complying with other registration specific requirements of the Companies Ordinance, 1984 may incorporate a private limited company. Provided that where a company has only one subscriber to the Memorandum of Association then such a company is called a Single Member Company, however, a Single Member Company remains a private limited company for all intents and purposes of the Ordinance. Whereas any three or more persons so associated may form a public limited company. A company limited by shares whether a private company or a public company is the most common vehicle for carrying out a business enterprise in Pakistan. A company is formed by law for the purpose of carrying on any object such as business, sports, research, charity etc. the purpose of formation of a company can be divided into four stages. 1) Promotion stage. 2) Incorporation stage. 3) Subscription stage. 4) Commencement stage. We now discuss each of these three stages.

Promotion stage:
It is the first stage in the formation of a company. It is the process of exploration, investigation and the organization of necessary resources with the object of starting business in the form of a company. First of all the idea carrying on a business is conceived either by a person or by a group of persons who are called promoters. The promoters take some steps to investigate about the success or

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failure of business. In other words the steps which are taken to persuade number of persons to come together for the achievement of a common objective through the company are called promotion.

The promoter:
The term promoter has not been defined by the companys ordinance, 1984. The person or persons who undertake the responsibility of bringing a company into existence are called promoter.

Functions of promoters:
1) To conceive the idea of forming a company. 2) To find out persons who are willing to sign the memorandum of association and to act as first directors. 3) To select the mane of the company and settle the amount and form of its capital, the kind of shares and the rights of various shareholder. 4) To arrange the registration of a company. 5) To arrange the advertisement of prospectus. 6) To pay the preliminary expenses. 7) To secure allotment of shares and debentures. 8) To take steps to obtain certificate of commencement of business.

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Types of promoters:
Promoter can be divided into two categories.

Professional promoters:
Professional promoters are those who have adopted promotion of companies as their profession. The main function of professional promoters is to promote a company and hand it over to the shareholders on some remuneration.

Occasional promoters:
Occasional promoters are those who promote a particular company. Once a company is promoted they go back to their old profession.

Promoter as an agent or trustee:

A promoter is not an agent for the company, which he is forming because a company cannot have an agent before it comes into existence.

Liability of promoter:
He cannot make any secret profit. He must disclose everything to the company. He is personally liable for all contract made by him with the third party on behalf of company.

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Remuneration of promoter:
Before incorporation, a company has no legal existence and so cannot make a contract. A promoter, therefore, has no legal right to claim remuneration for his services. If the promoter enters into a contract with the company about his remuneration, after the incorporation of company, then directors are liable to pay remuneration.

Payment of remuneration:
1) A commission on business or property taken over by the company through him. 2) A company may give him a lump sum amount in cash. 3) Some share can be allotted to him. 4) He may take commission at a fixed rate on share sold.

INCORPORATION STAGE:
This is the second stage of formation of the company. The work of forming a company is done by some persons called promoters. The promoters must fulfill the following formalities for registration. 1) Fulfilling the preliminary formalities: The promoters must fulfill the following formalities for registration. a) To obtain the approval of the proposed name from the registrar of company; b) To get the memorandum and articles of associations prepared and printed.

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c) To obtained the license from the relevant department. If required. d) To obtain certificate from Securities and Exchange Commission of Pakistan for capital issue, if required. e) To engage underwriters, brokers, bankers, auditors and signatories to memorandum. 2) Submission of documents: The following documents are to be filed with the registrar to obtain certificate of incorporation. a) Memorandum of association: The memorandum of association is the most important document of the company. It contains details of the company, the place of registered office, objects of formation, liability and capital. It shall be printed, divided into paragraphs and signed by each subscriber in the presence of a least one witness who shall attest his signature. In case of Publics Company, seven persons sign the documents. b) Articles of association: The article of association contains the rules to achieve the objects given in the MOA. The articles of association of the company, if any, shall also signed by the subscribers to the memorandum. A public company limited by shares may not have its own articles and, in that case, table A, the modal set of 85 articles, shall be applicable. However, all other companies must prepare their articles. c) Written consent: A written consent of the directors to act as directors is required to be filed. In his consent, each director has to give his name, address, occupation, age and nationality etc. d) List of directors:

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A list of persons who have agreed to act as directors of the company shall be filed by the subscribes to the memorandum with the registrar within fourteen days of the issue of certificate of incorporation of a company. (sec.184 (2) e) Notice of registered office: A notice of the situation of the registered office and of any change therein shall be given within 28 days after the date of the incorporation of the company to the registrar. (Sec. 142(2). f) Qualification shares: This is undertaking signed by directors in which they declare that they have agreed to purchase and pay for qualification shares. g) Registration fees: A necessary fee is required to be deposited. The amount of fees is fixed according to the proposed capital. After depositing a fee, the original copies of receipted challans are filed with the registrar. h) Statutory declaration: A declaration that all the legal requirements in respect of registration have been completed. The declaration shall be made by a person named in the articles as a director or any other officer of the company.

Certificate of incorporation:
The registrar will examine the documents. When the registrar is satisfied about the formalities, he enters the name of the company in the register meant for it. With this the registration of the company is complete and the company gets a separate legal entity apart from its members. The registrar issues a certificate which is called certificate of incorporation.

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1) Meaning: It is a legal document. It bears the date of issue, the name of the company incorporated, the province and the seal of the registrar. It is a birth certificate of company. The date mentioned in it is the first day of the company existence. 2) Legal effect: In the certificate the registrar certifies that the company is incorporated and in the case of a limited company that the company is limited by shares or guarantee as the case may be. 3) Conclusive evidence: The certificate of incorporation is the evidence that: a) The company has been registered in a regular manner; b) The documents of the company have been prepared according to law; and c) The association is duly registered under registered ordinance. Sec.33

Subscription stage and Commencement of business:

Public limited company has to secure certificate of commencement of business. In order to get this certificate of commencement of business, a public company has to submit the following documents with the registrar.

Minimum subscription:
It is the minimum amount stated in prospectus which company must receive from the applicants before allotment of shares. If the company fails to receive such amount, it cannot allot share. The proof of the fact that the minimum subscription has been received in cash.

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Qualification shares:
These are the minimum shares which every director will have to buy to act as directors. The proof that directors of the company have paid full amount on the shares purchased by them. (sec.146 (1) (c)

Application money:
It is actual amount which has been received by the company from applicants. Where the company applies to the stock exchange for enlistment and its if fails, the company must return the application money to the applicants. The proof that no money is liable to be repaid to the applicants for failure to apply or obtain permission for the shares or debenture to be dealt in on any stock exchange.

Prospectus or statement in lieu of prospectus:

If the company has issued a prospectus in order to invite the general public to purchase its shares, then it has to file a copy of prospectus. If a company has not issued prospectus, then it has to file a statement in lieu of prospectus.

Statutory declaration:
The statutory declaration by the chief executive or one of the directors and the secretary that all the above requirement has been completed.

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Certificate of commencement of business:

The registrar will check all the documents. If he is satisfied he will issue a certificate of commencement of business. It is proof that publics limited company can start its business.