INCORPORATION OF COMPANIES

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INCORPORATION OF COMPANIES. Chapter # 04. RECAP. In Last lecture we have discussed Company (ITS meaning and definition under companies ordinance 1984) Types of companies Differences between public and private companies. Today’s lecture. we shall discuss Incorporation - PowerPoint PPT Presentation

Transcript of INCORPORATION OF COMPANIES

Obligation to be registered as a company

INCORPORATION OF COMPANIESChapter # 04RECAPIn Last lecture we have discussedCompany (ITS meaning and definition under companies ordinance 1984)

Types of companies Differences between public and private companies

Todays lecturewe shall discussIncorporationMeaning and explanationObligation to be registered as company (section 14)Documents required to be submitted for incorporationConversion of private company into public company and vice versaCarrying on the business with less than minimum number of membersEffect of incorporationCommencement of business under section 146

IncorporationmeaningIncorporation is actually giving legal form to an association by registering it

Incorporation is the process of legally declaring a corporate entity separate from its members

Obligation to be registered as a company[SECTION 14] of the ordinace requiresAny association, partnership or company comprises of more then twenty persons

Formed for profit for itself or for the members

Has an Obligation to get itself registered as a company Under COMPANIES ORDINANCE 1984

EXCEPTIONS UNDER [SECTION 14(3)]

QuestionIn which cases the provisions of section 14 shall not apply?Any society, body or association, other than a partnership, formed under any other Pakistani law

A partnership of two or more joint families where number of total members excluding minors does not exceed twenty

EXCEPTIONS continued.UNDER [SECTION 14(3)]

A partnership formed to carry practice as lawyers, accountants or any other profession where practice is a limited liability

A joint family carrying a joint business

PENALTYUNDER [SECTION 14(2)]If the provisions of section 14 are not complied with .. Every member of the association, partner ship or company shall be liable to a fine which may extend to PRs. 5,000

Also be personally liable for all the liabilities incurred in such business

Documents for incorporation For public companyin order to register a public company, documents required are,

Four copies of Memorandum & Article of association signed by each subscriber in the presence of at least one witness

Form 1, which is declaration of compliance with the requirements of companies ordinance 1984 signed by any of the following,Advocate of High or Supreme Court Person named as director in Article of Association Member of ICAP or ICMAP Practicing in Pakistan

3) Copy of treasury Challan as evidence of payment of registration fee

4)Form 27, Contains list of persons consenting to act as directors

5)Form 28, Contains consent of person to act as directors and Chief Executive

Documents for incorporationFOR PRIVATE COMPANYIn order to register a private company, documents required are.

Four copies of Memorandum & Article of association signed by each subscriber in the presence of at least one witnessForm 1, which is declaration of compliance with the requirements of companies ordinance 1984 signed by any of the following,Advocate of High or Supreme CourtPerson named as director in Article of AssociationMember of ICAP or ICAMAP practicing in Pakistan

3)Form 29, contains particulars of Directors, Chief Executive etc

4)Copy of treasury Challan as proof of payment of registration fee

Carrying a business with less than Minimum number of member

UNDER [SECTION 47]If private company carries its business for six months with members less than 2 or 3 then on expiry date of period of six months, Every member shall be severally liable for the debts of the company contracted during that time may be sued without joining in the suit of any other member

Conversion of status of companiesGenerally, following are the types of conversion of companies:- Private Company into Public Company;

Public Company into Private CompanyConversion of private company into publicUnder [section 44]No public company can convert itself into private company exceptwith the approval of Commission in writing and conditions imposed by commissionConversion of status of companiesCONVERSION FROM PRIVATE COMPANY INTO PUBLIC COMPANY Can only be done with the approval of Commission in writing and conditions imposed by commission.Section 45 of the Ordinance provides that a private company may convert its status into a public company by Altering its articles of associationThe company shall file with the Registrar a Prospectus or a statement in lieu of prospectus. No approval of any authority for the conversion of status from a private company into public company is required.

Conversion of status of companiesPROCEDURE FOR THE CONVERSION OF STATUS OF COMPANY FROM PRIVATE COMPANY INTO PUBLIC COMPANY Following procedure is required for conversion of private company into public company:-Step 1: The proposal for conversion of status of private company into public company is firstly discussed and approved by the Board of Directors.Step 2: 21 days notice accompanied with the proposed special resolution is issued for convening the general meeting of shareholders of the company.

Conversion of status of companiesStep 3: Resolution for conversion of the status from Private Company into Public Company and alteration in Articles of Association is placed before the members which is carried as special resolution. A special resolution is to be passed by the majority of not less than three-fourth, of such members entitled to vote as are present in person or by proxy at a general meeting.

There is significant difference in the Articles of both the types of companies. Therefore; the Articles are required to be amended on change of the status, especially restrictive clauses applicable on a private company are to be deleted.

Step 4: The Company shall increase its directors and shareholders if they are less than the minimum number which are required for a public company.Conversion of status of companiesStep 5: The company shall file the under-mentioned documents with the registrar concerned:-Form - 26 within 15 days of passing of special resolution. Memorandum and Articles of Association. (Amended copy) Prospectus or Statement in Lieu of Prospectus within 14 days of passing of special resolution. Form 3 (allotment of shares to new members / directors in case, the new directors are not members of company) Form 27 i.e. list of persons consenting to act as directors. Form 28 Consent to act as directors. Form - 29 (in case of increase of directors, if the company does not already have three directors required for a public company) Bank challan evidencing the deposit of filing fee of the documents in any of the designated banks branches Conversion of status of companiesStep 6: The registrar concerned shall issues a certificate regarding conversion of status of private company into public company and a filing certificate.Step 7: The Company may obtain a certified copy of Memorandum and Articles of Association on payment of copying fee of Rs. 500/- for the application submitted online and Rs. 1,000/- for the application submitted in the physical form.Step 8: The name of the company with the changed status i.e. without the word private shall be mentioned in all letterheads, bills, invoices, seal etc.Copies of Memorandum and Articles of Association are also recorded with the alteration.Conversion of status of companiesPROCEDURE FOR THE CONVERSION OF STATUS OF COMPANY FROM Public COMPANY INTO private COMPANY Following procedure is required for conversion of public company into private company:-Step 1: The proposal for the conversion of status of a public company into private company is firstly discussed and approved by the Board of Directors.Step 2: 21 days notice accompanied with the proposed special resolution is issued for convening the general meeting of the shareholders of the company.

Conversion of status of companiesStep 3: Resolution for the conversion of status from Public Company into Private Company and alteration in Articles of Association is placed before the members, which is carried as special resolution.

There is significant difference in the Articles of both the types of companies. Therefore; the Articles are required to be amended on change of the status; therefore the same must be amended to change the status especially the imposition of restrictions meant for a private company.Conversion of status of companiesStep 4: Special Resolution on Form 26 along with

Bank challan evidencing the deposit of fee in any of the designated bank branches shall be filed with the registrar concerned within 15 days passing company.Conversion of status of companiesStep 5: : Application shall be sent to the Commission within 60 days of the date of passing of the special resolution. Such application shall be accompanied with the following documents:-Form 2. (prescribed under the Rules)Copy of Form 26 (Special Resolution). Copy of the Memorandum and Articles of Association duly amended. Certified copy of the existing Memorandum and Articles of Association. Copy of latest audited Balance Sheet and Profit and Loss Account. Copy of minutes of the General Meeting. Bank challan evidencing the deposit of fee in any of the designated bank branches, on account of application fee (Form-2) Affidavit that the contents of the application are true. Application must be in duplicate and a copy is required to be sent to the registrar concerned under Rule 32 of the Rules. Conversion of status of companiesStep 6: The Commission gives approval for conversion of public company into private company through an Order.

Step 7: Certified copy of the order of the Commission is obtained by depositing the fee as per schedule given in Annexure A for each copy and the requisite court fee stamps.

Step 8: Certified copy of