Chapter # 01
Introduction
and
Definition
Salman Masood Sheikh
M.Com, MBA, M.Phil, ACMA, FPA, CA(Int)
Director Quality Assurance
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Associated Companies/Undertakings:
“Associated companies” and “associated undertakings”
“means two or more companies or undertakings, which
are interconnected with each other in any of the
following manners:
If a person in relation to one company or undertaking
is the:
 Owner;
 Partner;
 Director; or
 Holder of 20% or more shares having voting rights,
 Is also the owner; partner; director; or holder of
20% or more shares having voting right in another
company or undertaking;
 If the companies or undertakings are under
common management or control;
 If one of the companies or undertakings is the
subsidiary of another ; or
 If the undertaking is a modaraba managed by the
modaraba company.
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Undertaking:
 It is also used to mean an enterprise which can be
owned and transferred. However some other statutes
have defined this term, which are as below.
 Banking companies ordinance, 1962 defines
‘undertaking’
as
“any
concern,
institution,
establishment or enterprise engaged in the
production; supply or distribution of good, or in the
provision or control of any services relating to the
provision of transport, entertainment or amusement,
or of facilities in connection with the supply of
electrical or other energy, or insurance or
investment.”
 The competition Act, 2010 defines ‘undertaking’ as
“any natural or legal person, governmental body
including a regulatory authority , body corporate,
partnership, association, trust or other entity in any
way engaged, directly or indirectly, in the production,
supply, distribution of goods or provision or control of
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services.”
Associated person
Where two or more companies or undertakings are
associated of each other then every such person who
is the owner, partner, director or holder of 10% or
more shares (having voting rights) in such companies
or undertakings shall be termed as ‘associated
person’ of every such other person who is also the
owner, partner, director or holder of 10% or more
shares in that companies or undertakings.
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Body Corporate / Corporation
Body corporate or corporation includes a company
incorporated outside Pakistan, but does not include
the following:

A corporation sole;

A registered co-operative society; or

Any other body corporate, not being a company
as defined in the companies’ ordinance, 1984,
which the federal Government may specify.
While defining the term ‘body corporate’ the
ordinance uses the words “includes a company
incorporated outside Pakistan”.
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Book and paper
Central Depository
‘Central depository’ means a company which fulfils
the following conditions.
 It should be incorporated under the companies
ordinance, 1984.
 It is registered with the SECP under section 32A
of the securities and exchange ordinance, 1969.
 It is form to establish and operate a system for
the central handling of securities.
 The securities are deposited with and held by or
registered in the name of such company as a
nominee for the depositors; and
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Chief Executive
Person who fulfills the following conditions shall be
termed as a chief executive:
 The chief executive must be an individual, i.e., a
natural person. an artificial legal person cannot be
appointed as chief executive of a company;
 The chief executive works under the supervision
and control of the directors (collectively known as
board of directors);
 The chief executive is entrusted with the whole or
substantially the whole of the powers within a
company.
 These powers are vested in him for the
management of the affairs of the company;
 He may or may not be designated as chief
executive
or not.
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Commission
Company
Commission means the securities and exchange
commission of Pakistan (SECP). This is the
regulatory body in respect of corporate laws and is
established under section 3 of the Securities and
Exchange Commission of Pakistan Act, 1997.
Company means a company formed and registered
under the companies’ ordinance 1984 or an existing
company.
The term existing company has been defined as a
company formed and registered under any of the
previous companies acts.
Previous Companies Act
Previous companies’ acts include the following
enactments:
 All acts before the Indian companies act 1866
(i.e. the registration of joint stock companies act
1850 and the Indian companies act 1857)
 The Indian companies act 1866
 The Indian companies act 1882, and
 Free
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Indian companies
act 1913
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Company Limited By Shares
It means a company whose memorandum of
association limits the liability of its members to the
unpaid amount if any of the shares respectively held
by each member.
Company Limited By Guarantee
It means a company whose memorandum of
association limits the liability of its members to such
amount as the members may respectively undertake
to contribute to the assets of the company in the
event of its winding up
The Court
The court means the court having jurisdiction under
the companies ordinance 1984, section 7 of the
ordinance specify that the court having jurisdiction
under the ordinance shall be the high court having
jurisdiction in the place at which the registered office
of the company is situated.
However the federal Government may empower any
civil court to exercise all or any of the jurisdictions
conferred upon the court by the companies’
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ordinance,
1984.
Debenture
 Debenture means a borrowing instrument (any
security other than shares ) issued by corporation
or a company which creates a debt and contains
an acknowledgement of the issuer with an
obligation to repay the debt at a fixed future date
and return on it at a specified rate payable by the
issuer whether it makes a profit or not.
 In use it is known as corporate bond.
 For the purpose of company law debenture
includes debenture stock bonds, term finance
certificates or any other securities other than a
share of a company such security may or may not
constitute a charged against the assets of the
company.
Director
 Any person by whatever name called occupying
the position of a director is called the director.
 A person who is member of the board of directors
of a company and is entitled to participate and
vote in the board meetings is a person who
occupies
the position
of a director.
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Document
The term document includes summons notice requisition
order other legal process voucher and register.
Financial Year
 Financial year has been defined in relation to a body
corporate and means a period in respect of which any
profit and loss account or the income and expenditure
account of the body corporate is made up and laid
before it in the general meeting.
 The period for which the financial statements are
made may or may not be a year.
 Generally the financial year is a period of twelve
months however under the following cases it may be
less or more than twelve months:
 The first financial year of the company
 The period during which the financial year of the
company is changed and
 The last financial year (i.e., the period in which
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company
is dissolved).
Financial Institutions
 Any institution which fulfills the following
conditions:
 It is a company or an institution established under
any law (which may be the companies
ordinance,1984 or some special enactment);
 It is operating within or outside Pakistan; and
 It transacts the business of banking or any
associated or ancillary business through its
branches.
 A modaraba;
 A leasing company;
 An investment;
 A venture capital company;
 A financing company;
 A housing finance company;
 A non-banking finance company; and
 Any other company or institution authorized to
undertake any similar business and is notified
as financial business by the federal
Government.
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Form
Listed
From means a form set out in any of the schedules or
as prescribed in the companies (general provision
and forms) Rules 1985 or any other rules made under
the companies ordinance 1984
Listed in relation to securities means such securities
which have been allowed to be traded on stock
exchange.
Listed Company
Listed company means such a company whose
securities have been allowed to be traded on a stock
exchange.
Member
The term member has been defined in relation to
class of the company. Broadly the companies may be
classified into two major classes i.e. companies
having share capital and companies not having share
capital. The provisions of the law in respect of each
class of
companies
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discussed below.
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Company having a Share Capital
Member of a company having share capital means
a person who fulfills any of the following conditions:
 A person who is the subscriber to the
memorandum and
 A person who is a lawful holder of any share
scrip or security which gives him a voting in
the company.
Company not having a Share Capital
Member of accompany not having share capital
means a person who fulfills the following
conditions:
 A person who has agreed to become a
member of the company and
 Whose name is entered in the register of
members of the company
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Memorandum of Association
Memorandum
means
the
memorandum
of
association of a company as originally framed or as
altered from time to time in pursuance of the
provisions of the law.
Modaraba and Modaraba Company
 Modaraba has been defined in the modaraba
companies and modaraba (floatation and control)
ordinance, 1980 as business in which a person
participates with his money and another with his
efforts or skill or both his efforts and skill.
 Modaraba Company means a company engaged
in
the
business
of
floating
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modaraba.
and
managing
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Officer

The term officer includes any director, chief
executive, managing agent secretary or other
executive of the company howsoever designated
but does not include an auditor.

However the auditor is deemed to be an officer of
the company under various sections of the
companies’ ordinance 1984 sections 205, 220, to
224, 260, 261, 268, 351, 352, 417, 418, 474, and
482 deem an auditor as an officer of the
company
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Participatory Redeemable Capital
 ‘Participatory redeemable capital’ means such
redeemable capital as is entitled to participate in
the profit and loss of a company.
 Redeemable Capital means finance obtained on
the basis of: [2(1)30A)]
 Participation Term Certificate (PTC)
 Musharika Certificate
 Term Finance Certificate (TFC)
 Any other security or obligation (other than an
ordinary share of a company) not based on
interest; or
 Any other certificate or instrument as the
Federal Government may notify as redeemable
capital.
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Provisions relating to the winding-up
As respect the provisions of the companies ordinance
relating to the winding-up of companies and other
matters requiring to be determined or decided by the
court prescribed means the provisions prescribed by
rules made by the supreme court in consultation with
the high courts or where the supreme court advises
the federal government to do so by the federal
government in consultation with the high courts.
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Private Company
Private company means a company which by its
articles:
1)
Restricts the right to transfer its shares if any
2)
Limits the number of its members to fifty (other
than the persons who are in the employment of
the company ); and
3)
Prohibits
any
invitation
to
the
public
to
subscribe for the shares or debentures of the
company.
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Prospectus
 Prospectus means any document notice circular
advertisement or other communication described
or issued as prospectus or through which a
company invites offers from the public for the
purchase of its shares or debentures.
 Any invitation made by a banking company or a
financial institution for the deposits will not be
considered as prospectus.
 Following are the prerequisites for rendering a
document as prospectus
1) It should be a communication;
2) The communication is given to public; and
3) It invites offers for subscription in shares or
debentures of the company.
Public Company
Public company means a company which is not a
private
company.
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Register and Registrar
Register
Register means the register of members of a
company. It also includes the register of debenture –
holders or holder of the other securities issued by the
company. The register may maintained on paper or
computer network floppy, diskette, magnetic,
cartridge tape, CD-Rom or any other computer
readable media.
Registrar
Registrar means a person who performs the duty of
registration of companies etc. under the companies’
ordinance 1984. This term includes the following
officials:
1) A registrar
2) An additional registrar
3) A joint registrar
4) A deputy registrar
5) An assistant registrar.
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Scheduled bank & Secretary
Scheduled bank
Scheduled bank means a bank which is included in
the list of banks maintained by the state bank of
Pakistan for this purpose as required under the
provisions of the state bank of Pakistan act 1956.
Secretary
Secretary means any individual appointed to perform
the secretarial administrative or to other duties
ordinarily performed by the secretary of a company.
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Security and Share
Security
Security means the following instrument:
1) A share
2) A scrip (scrip is a certificate to of a right
receive something or it is a certificate
representing a fraction of a share or stock)
3) A debenture
4) A participation term certificate
5) A modaraba certificate
6) A Musharika certificate
7) A term finance certificate
8) A bond
9) A pre-organization certificate or
10) Any other instrument specified by the federal
government as security.
Share
Share means a share in the share capital of
company. It is an interest of a person in the share
capital of company which is measured by the sum of
money.
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Special Resolution & Stock Exchange
Special Resolution
Special resolution means a resolution which fulfils the
following conditions:
1) It has been passed by a majority of at least threeforth of the members present, in person or by
proxy, at a general meeting ;
2) The meeting was held at a notice of at least 21
days; and
3) It was specified in the notice that the resolution
shall be proposed and passed as a special
resolution.
Stock exchange
 ‘Stock Exchange’ means a stock exchange
registered under the securities and exchange
ordinance 1969
 The securities and exchange ordinance, 1969
defines a ‘stock exchange’ as any person who
maintains or provides a market place or facilities for
bringing together buyers and sellers of securities
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Legal Terminologies
Ex-officio
‘Ex-officio’ means ‘by virtue of the office. It is the
office or power exercised by a person which are not
specifically conferred upon him, but are necessarily
implied in his office.
Any person who has appointed as chief executive of
a company will be ex-officio director of that company.
Intra vires
It means within the power or jurisdiction of. It is the
opposite or ultra vires.
Ipso facto
It is a Latin word and means “because of the fact that
has been mentioned. Its other meanings are:
1) By the very nature of the case;
2) By the fact itself;
3) By the mare fact ; and
4) By the mere effect of an act or a fact
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Legal Terminologies
Pari passu
It means “on equal footing or proportionality. This
term is used at various occasions, i.e., issue of
further shares issue of a series of debentures,
creating a charge on the assets. Under all cases it
denotes that the new shares debentures or charge
shall stand equal to the existing ones.
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Legal Terminologies
Prima facie
‘Prima facie’ means a fact presumed to be true unless
disproved by some evidence to the contrary. It also
denotes a fact or document which at the first sight or
appearance or on the face of it seems to be true
although it may be proved false later.
Ultra vires
It means “beyond the scope, power jurisdiction or
authority of any person, company, corporation or
statutory body.”
This term applies absence of capacity or power of the
person to do any act. Such act shall be void. It is not
necessary that an act to be ultra vires must illegal’ it
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may or
may
not be illegal.
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Perpetual succession & Person
Perpetual succession
It means a continuous existence which enables a
corporation to manage its affairs and hold property
without the necessity of perpetual conveyances for
the purpose of transmitting it. By reason of this
quality this ideal and artificial person remains in its
legal entity and personality the same though
frequent changes may be made of its members
Person
Person generally means a human being. In the
legal parlance it denotes an individual or an entity
which:
1) Can own property;
2) Can incur liability;
3) Can sue ;and
4) Can be sued.
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Thank you
for
being with Me
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