2 COMPANY LAWCLASSIFICATION OF COMPANIES

• By Virtue Of Legal Forum:• It is also called on the basis of incorporation. There

are four kinds of such companies.

• Chartered Company……• Company created by charter of the King.• The East India Company. • The Crown can cancel the charter and close the

company. • Such companies do not exist in Pakistan.

Classification Of Companies By Virtue Of Legal Forum

• Statutory Company…….• This Company is formed by the special Act of

Parliament or by order of the head of State.• SBP, • NADRA, • WAPDA, • Pakistan Railways are the examples of this type of

company.

• Such companies do not have memorandum and articles of association.

• These enjoy special powers.

• Alteration in the powers of such companies can be made by the Parliament.

Classification Of Companies By Virtue Of Legal Forum

• Government Company…….• It is one in which not less than

51% of paid up share capital is held by the Central Government or by any Provincial Government.

Classification Of Companies By Virtue Of Legal Forum

• Registered Company……..These are formed under

• The Companies Ordinance, 1984 • Or under the Companies Act passed earlier to this.• • Such companies come into existence only when

these are registered under the Ordinance.

• Such companies get their powers

– from The Companies’ Ordinance 1984 and – from The memorandum of association.

• This is the most popular mode of incorporating a company.

Classification On The Basis Of Liabilities

• There are four kinds of such companies.

• Company Limited By Shares……

• It is company, which keeps the • liabilities of its members, limited • up to the nominal value of shares purchased by

them.

• Such companies • Must use the word limited at the end of their

names • So that the public can understand that the

liability of the member if limited.

• These are formed for earning profit.

Classification On The Basis Of Liabilities

• Company Limited By Guarantee…….

• In such companies the liabilities of members is limited

• To the amount each of them has under taken to pay• • In the event of winding up of the company.

• This type can further be divided into two types.

– Company Limited By Guarantee, having a share capital

– Company Limited By Guarantee, and not having a share capital

• The Karachi Stock Exchange (Guarantee) Limited,• • Lahore Stock Exchange (Guarantee) Limited, And

• Islamabad Stock Exchange (Guarantee) Limited

• Are examples of companies limited by guarantee

Classification On The Basis Of Liabilities

• Unlimited Company…….

• If the liability of the members is unlimited, the company is called unlimited company.

• If the company has a share capital,• It shall state the amount of share capital with which

the company purposes to be registered.

• If the company has not a share capital,

• Shall state the number of members with which the company purposes to be registered.

• • This may be either public company or a

private company.

• Such companies are rare these days.

Classification On The Basis Of Liabilities• Association Not For Profit…….• Generally the companies are formed for earning profit.

• Some associations are made not for the purpose of earning profit.

• However, under section 42, “Association not for profit” can be registered as a company with limited liabilities.

• Such as association does not add the word ‘limited’ or ‘privet limited’ or ‘guarantee limited’ to their names

Classification On The Basis Of Composition Of Share Holding

• These may be of following four kinds.

• Holding Company……..• It means a company or a body corporate, • Which holds (directly or indirectly), more than 50% • The voting securities of a company or

• Has a power to elect and appoint more than 50% of directors of each company.

Classification On The Basis Of Composition Of Share Holding ….

• Subsidiary Company……..• It means a company or a body corporate, • whose more than 50% voting securities • are held/controlled directly or indirectly

by some other company • Has a power to elect and appoint more

than 50% of directors of each company.

Classification On The Basis Of Composition Of Share Holding

• Associated Company……• A company whose 20% or more

shares (up to 50%) are held by another company shall be considered as an associated company of that company.

Classification On The Basis Of Composition Of Share Holding

• One Man Company…….

• Where one man holds practically the entire share capital of the company

• and he takes a few other members who are no more than dummies nominees of the former.

• This is done to fulfill the statutory requirement of at least seven members (now 3 under the Companies’ Amendment Ordinance, 2002) in case of public company

• and two (now one under the Companies’ Amendment Ordinance, 2002) in case of private company.

Classification On The Basis Of Number Of Members:

• On the basis of number of members, the following are two types of company.

• Private Company…….• Private Company is a company, which has the

following characteristics. • At least one member• Number of members must not exceed 50.• Restriction on transfer of shares• Cannot invite to the public to purchase its shares

and debentures

Classification On The Basis Of Number Of Members (cont…

• Public Company……..• Public company means a company which is not a

private company. • This means that it may invite the general public to

subscribe for any shares, or debentures of the company.

• The limit of maximum of 50 members as applicable to a private company, does not apply to a public company.

Classification On The Basis Of Number Of Members (cont…

• The minimum number, of members required to form a public company is three.

• At the same time the articles must not contain a clause for restricting the right of members to transfer their shares.

• These are freely transferable.• • It should also be noted that public company must add

the word ‘Limited’ at the end of its name