COMPANY LIMTIED BY SHARES

Section 2 (20): company limited by shares means a company, having the liability of
its members limited by the memorandum to the extent of amount, if any, remaining
unpaid on the shares respectively held by them.
A shareholder in a limited company is not personally liable for any of the debts of the
company, other than for the amount already invested in the company and for any unpaid
amount on the shares in the company, if any.If shares are issued part paid, then the
shareholders are liable, when a claim is made against the capital of the company, to pay
to the company the balance of the face or par value1 of the shares.
COMPANY LIMITED BY GUARANTEE
Section 2 (19): company limited by guarantee means a company having the
liability of its members limited by the memorandum to such amount as the members
may respectively thereby undertake to contribute to the assets of the company in the
event of its being wound up.
It is an incorporated firm without share capital, and in which the liability of its members
is limited to the amount each one of them undertakes to contribute at the time the firm
is wound up.Unlike a company limited by shares, a guarantee company has no share
capital or shareholders. Instead it has members who undertake to contribute a nominal
amount towards any shortfall in the company's assets to settle its debts in the event of
its being wound up.
UNLIMITED COMPANY
Section 2 (71): unlimited company means a company not having any limit on the
liability of its members.
An unlimited company or private unlimited company is a hybrid company (corporation)
incorporated with or without a share capital (and similar to its limited company
counterpart) but where the legal liability of the members or shareholders is not limited:
that is, its members or shareholders have a joint, several and non-limited obligation to
meet any insufficiency in the assets of the company to enable settlement of any
outstanding financial liability in the event of the company's formal liquidation. The
joint, several and non-limited liability of the members or shareholders of the company
to meet any insufficiency in the assets of the company (to settle its outstanding
1
Stated Value.

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liabilities if any exist) applies only upon the formal liquidation of the company.
Therefore, prior to any such formal liquidation of the company, any creditors or security
holders of the company may have recourse only to the assets of the company, not those
of its members or shareholders.
Until such an event occurs (formal liquidation), an unlimited company is similar with
its counterpart, the limited company, in which its members or shareholders have no
direct liability to the creditors or security holders of the company during its normal
course of business or existence.
MEMORANDUM OF ASSOCIATION
Section 2 (40) of the Companies Ordinance, 2016 states:
Memorandum means the memorandum of association of a company as
originally framed or altered from time to time in pursuance of company law or this
Ordinance.
The Companies Ordinance, 2016 does not sufficiently describe what the memorandum
of association means. However, both courts and critics alike recognise the importance
of this document. Palmer notes that it is a document of great importance in relation to
the proposed company. In the formation of a company, it is both essential and
obligatory by law upon the parties to prepare the memorandum of association. It has
been accepted that the memorandum of association is the document that sets out the
constitution of a company and, as such, it is the foundation of which the structure of the
company is based. It defines its relations with the outside world and the scope of its
activities. The importance of the memorandum of association is evident by the fact that
it contains the following fundamental clauses that have often been described as the
conditions of the companys incorporation.
1. Name Clause;
2. Registered Office Clause;
3. Objects Clause;
4. Liability Clause; &
5. Capital Clause.

NAME CLAUSE

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The first clause of the memorandum of association is require to state the name of the
proposed company. A company, being a legal person, must have a name to establish its
identity. It is said that the name of a corporation is the symbol of it personal existence.
Any suitable name may be selected but this is subject to the restrictions provided
hereunder.
Legal Requirements Regarding Names
Section 10. Prohibition of certain names:
1. No company shall be registered by a name which contains such word or
expression, as may be notified by the Commission or in the opinion of the
Registrar is
a. Identical with or resemble too nearly to the name of a company; or
b. Inappropriate; or
c. Undesirable; or
d. Deceptive; or
e. Designed to exploit or offend religious susceptibilities of the people; or
f. Any other ground as may be specified.
Explanation: A name of the company shall be deemed deceptive if it does not

commensurate with its principle line of business.

2. Except with prior approval in writing of the Commission, no company shall be
registered by a name which contains any word suggesting or calculated to
suggest
a. The patronage of any past or present Pakistani or foreign head of state;
b. Any connection with the Federal Government or a Provincial Government
or any department or authority or statutory body of any such
Government;
c. Any connection with any corporation set up by or under any Federal or
Provincial law;
d. The patronage of, or any connection with, any foreign Government or any
international organisation;

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 e. Establishing a modaraba management company2 or to float3 a modaraba4;
or
f. Any other business requiring licence from the Commission.
3. Whenever a question arises as to whether or not the name of a company is in
violation of the foregoing provisions of this section, decision of the Commission
shall be final.
4. A person may make an application, in such form and manner and accompanied
by such fee as may be specified, to the registrar for reservation of a name set
out in the application for a period not exceeding sixty days.
5. Where it is found that a name was reserved under sub section (4), by
furnishing false or incorrect information, such reservation shall be cancelled and
in case the company has been incorporated, it shall be directed to change its
name. The person making application under sub section (4) shall be liable to a
penalty not exceeding level 1 on the standard scale.5
6. If the name applied for under sub section (4) is refused by the registrar, the
aggrieved person may within thirty days of the order of refusal prefer an appeal
to the Commission.

2
Modaraba Management Company means a company engaged in the business of floating
and managing a Modaraba.
3
The term float refers to the regular shares that a company has issued to the public that are
available for investors to trade.
4
Section 2(ab) of Modaraba Companies Modaraba Floatation Control Ordinance, 1980:
Modaraba means a business in which a person participates with his money and another with
his efforts or skill or both his efforts and skill and shall include Unit Trusts and Mutual Funds
by whatever name called.
Modaraba is a kind of partnership wherein one party provides finance to other party for the
purpose of carrying on business .The party who provides the finance is called the Rabb ul
Mal, whereas the other party who puts its management skills for the Modaraba is called the
Modarib (working partner). Modaraba is one of the prime modes of Islamic financial
system.
5
Section 479. Adjudication of offences and standard scale of penalty: 1) there shall be a
standard scale of penalty for offences under this Ordinance, which shall be known as the
standard scale.
2. The standard scale consists of:
A. For Level 1: a penalty up to Rs 25, 000 and up to Rs. 500 per day penalty during
which the default continues.
B. For Level 2: a penalty up to Rs 500, 000 and up to Rs. 1, 000 per day penalty
during which the default continues.
C. For Level 3: a penalty up to Rs 100 million and up to Rs. 500, 000 per day
penalty during which the default continues.

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 7. An order of the Commission under sub section (6) shall be final and shall not
be called in question before any court or other authority.

Thus, no company can be registered with a name which is in violation of this section.
The name of a company is a part of its business reputation and that would definitely be
injured if a new company could adopt an allied name. The reason for this rule was
explained by Lawrence J in the case of Society of Motor Manufacturers and Traders
Ltd v. Motor Manufacturers and Traders Mutual Insurance Co Ltd.:
Under the Companies Act, a company by registering its name gains a
monopoly of the use of that name since no other company can be registered under a
name identical with it or so nearly resembling it as to be calculated to deceive. 6
Change of Name
Section 11. Rectification of name of a company:
1. A company which, through inadvertence or otherwise, is registered by a name in
contravention of the provisions of Section 10 or the name was obtained by
furnishing false or incorrect information
a. May, with approval of the Registrar, change its name; and
b. Shall, if the Registrar so directs, within twenty one days of receipt of such
direction, change its name with approval of the Registrar:
Provided that the Registrar shall, before issuing a direction for change of the
name, afford the company an opportunity to make representation against the
proposed direction.
2. If the company fails to report compliance with the direction issued under sub
section (1) within the specified period, the Registrar may enter on the register a
new name for the company selected by him, being a name under which the
company may be registered under this Ordinance and issue a certificate of
incorporation on change of name for the purposes of Section 13.
3. If a company makes default in complying with the directions issued by the
Registrar under sub section (1) or continue using previous name after the
name has been changed by the Registrar under sub section (2), shall be liable
to a penalty of level 1 on the standard scale.

6
[1925] 1 Ch. 675.

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Section 12. Change of name by a company: A company may, by special resolution
and with approval of the Registrar signified in writing, change its name.
Section 13. Registration of change of name and effect thereof:
1. Where a company changes its name the registrar shall enter the new name on
the register in place of the former name, and shall issue a certificate of
incorporation altered to meet the circumstances of the case and, on the issue of
such a certificate, the change of the name shall be complete.
2. Where a company changes its name it shall, for a period of three months from
the date of issue of certificate by the registrar under sub section (1), continue
to mention its former name along with its new name on the outside of every
office or place in which its business is carried on and in every document of
notice referred to in Section 22.
3. The change of name shall not affect any rights or obligations of the company, or
render defective any legal proceedings by or against the company and any legal
proceedings that might have been continued or commenced against the
company by its former name may be continued by or commenced against the
company by its new name.

Thus, a company may change its name by passing a special resolution and with the
approval of the Registrar in writing, or, where the provisions of Section 10 have been
violated, the name may be changed by the approval of the Registrar in writing. This
process is known as rectification of name. For example, in British Diabetic Assn. v.
Diabetic Society,7 the British Diabetic Society was order to change its corporate
name to something that would not impinge upon the goodwill of the British Diabetic
Association. There was a sufficient similarity between the two names to necessitate a
change, even though there was no intention to mislead the public.
Use of the Word Limited and Publication of Name
Section 27. Memorandum of company limited by shares:
A. The memorandum shall state:
i. The name of the company with the word Limited as last word of the
name in the case of a public limited company, the parenthesis and words

7
]1995] 4 All. E. R. 812.

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 (Private) Limited as last words of the name in the case of a private
limited company, and the parenthesis and words (SMC Private)
Limited as last words of the name in the case of a single member
company.8

Section 28. Memorandum of company limited by guarantee:

1. In the case of a company limited by guarantee, the memorandum shall state
a. The name of the company with the parenthesis and words (Guarantee)
Limited as last words of its name.9

Section 29. Memorandum of unlimited company: In the case of an unlimited

company the memorandum shall state
1. The name of the company with the words Unlimited as last words of its name.10

These provisions indicate that whatever be the name of the company, if the liability of
the members of the company is limited, the last word of the name must be Limited
and if it is unlimited, then it should state that it is Unlimited. This is to ensure that all
persons dealing with the company shall have clear notice that the liability of the
company is limited or unlimited. And for the same reason it is further required that such
name of the company must be painted on the outside of every place where the business
of the company is carried on. Such name, including the address of the registered office,
must also be mentioned on all business letters and other official publications, on all
negotiable instruments issued and endorsed by the company and on all orders, receipts,
etc. For example, in Nassau Steam Press v Tyler,11 the registered name of a company
was Bastille Syndicate Ltd. The defendants who were the two directors and the
secretary of the company accepted a bill of exchange on its behalf giving the name of
the company as The Old Paris and Bastille Ltd. It was held that the name of the
company was not mentioned in accordance with the requirements of the Act and that the
company not having paid the bill, the defendants were personally liable thereon. The
correct name of the company must be inserted. Any omission or addition amounting to
mis-description would make the person purporting to sign the bill personally liable.

8
Clause (v) of the same Section also provides that the liability of the members is limited.
9
Clause (e) of this Section states that members liability is limited.
10
Clause (e) of this Section states that members liability is unlimited.
11
(1894) 70 LT 376.

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Further reference can be made to Section 22 of the Companies Ordinance, 2016 for the
significance of publicising the name.
Section 22. Publication of name by a company: Every company shall
1. Display in a conspicuous position, in letters easily legible in English or Urdu
characters its name and incorporation number outside the registered office and
every office or the place in which its business is carried on;
2. Display a certified copy of certificate of incorporation at every place of business
of the company;
3. Get its name, address of its registered office, telephone number, fax number, e-
mail and website addresses, if any, printed on letter head and all its
documents, notices and other official publications; and
4. Have its name mentioned in legible English or Urdu characters, in all bills of
exchange, promissory notes, endorsements, cheques and orders for money or
goods purporting to be signed by or behalf of the company and in all bills of
parcels,12 invoices, receipts and letters of credit13 of the company.

REGISTERED OFFICE CLAUSE

The second clause of the memorandum must specify the places in which the registered
office of the company is situate.

Section 21. Registered office of company:

1. A company shall have registered office to which all communications and notices
shall be addressed and within a period of thirty days of its incorporation, notify to
the registrar in the specified manner.
2. Notice of any change in situation of the registered office shall be given to the
registrar in a specified form within a period of fifteen days after the date of
change:
Provided that the change of registered office of a company from
a. One city in a Province to another; or
b. A city to another in any part of Pakistan not forming part of a Province;
Shall not require approval of general meeting through special resolution.

12
An account containing in detail the names of the items which compose a parcel or package of goods;
it is usually transmitted with the goods to the purchaser, in order that if any mistake have been made, it
may be corrected.
13
A letter issued by a bank to another bank (typically in a different country) to serve as a guarantee for
payments made to a specified person under specified conditions.

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 3. If a company fails to comply with the requirements of sub section (1) or (2),
the company and its every officer who is responsible for such non compliance
shall be liable to a penalty not exceeding of level 1 on the standard scale.

Section 27. Memorandum of company limited by shares:

A. The memorandum shall state:
ii. The Province or the part of Pakistan not forming part of a Province, as the
case may be, in which the registered office of the company is to be
situate.14

Within thirty days of incorporation, the exact place where the registered office is to be
located must be decided and notice of the change in situation is to be given to the
Registrar who is required to record the same. All communications to the company must
be addressed to its registered office. This is mentioned in Section 53 of the Companies
Ordinance, 2016, which states:
Section 53. Service of documents on a company: A document or information may be
served on the company or any of its officers at the registered office of the company
against an acknowledgement or by post or courier service or through electronic means
or in any other manner as may be specified.

14
Section 28 (b) and Section 29 (b) also state the same thing.