Single Member Companies Rules, 2003

1. Short title - (1) These rules may be called the Single Member Companies Rules, 2003.
(2) These rules shall come into force at once.
(3) These rules shall apply to -
(a) a company incorporated as single member company; and
(b) a private company limited by shares which has more than one member and becomes a single member company after
complying with the requirements of these rules.

2. Definitions.- (1) In these rules, unless there is anything repugnant in the subject or context,-
(a) “non-member director" means an individual who is not a member, but has been nominated as director by and due to
membership of a body corporate, government or an institution or authority in terms of proviso (i) of clause (c) of section 187 and in
such situation the body corporate shall be deemed to be an institution in terms of the said proviso and for the purposes of these rules
only;
(b) "single member company" or "SMC" means a private company which has only one member; and
(c) "sole director" means the director of a single member company who is for the time being the only director and includes a
non-member director.

3. Single member company.- A single person may form a private company limited by shares having only one member to be
called a single member company.

4. Change in status of a single member company.- (1) A single member company may be converted into a private company
on increase of the number of its members to more than one due to transfer of shares or further allotment of shares or death of the
single member or operation of law and a single member company converting into a private company,-
(a) shall, in case of transfer of shares or further allotment of shares,-
(i) pass a special resolution for change of status from single member company to private company and alter its articles accordingly
within thirty days of transfer of shares or further allotment of shares; and
(ii) appoint and elect one or more additional directors in pursuance of clause (b) of sub-section (1) of section 174 within fifteen
days of date of passing of the special resolution and notify the appointment on Form 29 prescribed under the Companies (General
Provisions and Forms) Rules, 1985 (hereinafter referred to as "Form 29") within fourteen days;
(b) may, in case of death of single member, either be wound up in accordance with the provisions of the Ordinance or be converted
into private company for which,—
(i) (i) the secretary shall take steps for transfer of shares in name of legal heirs of the single member within seven days of the
receipt of succession certificate and in case of any impediment, report the circumstances of the case to the registrar on Form S3;
(ii) the company shall pass a special resolution for change of status from single member company to private company and alter
its articles accordingly within thirty days of transfer of shares; and
(iii) the members shall appoint and elect one or more additional directors in pursuance of clause (b) of sub-section (1) of section
174 within fifteen days of date of passing of the special resolution and notify the appointment on Form 29 within fourteen days of
date of such appointment; and
shall, in case of operation of the law,-
(i) transfer the shares, within seven days, in the name of relevant persons to give effect to the order of the court or any other
authority;
(ii) pass a special resolution for change of status from single member company to private company and alter its articles
accordingly within thirty days of transfer of shares; and
(iii) appoint additional director or directors in pursuance of clause (b) of sub-section (1) of section 174 within fifteen
days of date of passing of the special resolution and notify the appointment on Form 29 within fourteen days of date of such
appointment.
(2) A single member company originally incorporated or converted from private company as such may convert into private
company in accordance with the provisions of sub-rule (1).
(3) The persons becoming members due to transfer or transmission or further allotment of shares, as the case may be, shall pass
a special resolution to make alteration in articles and appoint one or more additional directors.
(4) Where a single member company converts into a private company pursuant to sub-rule (1), it shall file a notice of the fact in
writing in the form as set out in Form S2, with the registrar within sixty days from the date of passing of special resolution.

5. Meetings of directors and members.- Any provision of the Ordinance or rules made thereunder or articles of the company
which-
(a) enables or requires any matter to be done or to be decided by directors or members, as the case may be, of the company; or
(b) requires any matter to be decided by a resolution of the directors or members, as the case may be, of the company,
shall be deemed to be satisfied if the decision is taken by the single member or sole director, as the case may be, and is drawn up in
writing and recorded in the minutes book.

6. Company secretary.- (1) A single member company shall appoint a company secretary within fifteen days of incorporation
or of becoming a single member
company or of the office of company secretary falling vacant and notify such appointment on Form 29 within fourteen days of the
date of such appointment:
Provided that the sole director shall not be the company secretary.
(2) The company secretary shall attend and cause a fair and accurate summary of the minutes of all proceedings of general meetings
and meetings of director or directors, as the case may be, along with the names of those participating in such meetings to be entered
in properly maintained minutes book.

7. Transfer of management. - (1) In case of death of the single member, the secretary, shall-
(a) manage affairs of the company till transmission of shares to legal heirs of the single member;
(b) inform the registrar concerned about the death, provide particulars of the legal heirs and in case of any impediment report the
circumstances seeking within seven days of the death directions in the form as set out in Form S3;
(c) after satisfying himself of compliance with all the requirements of the relevant laws, transfer the shares to the legal heirs along
with the management in accordance with the applicable laws; and
(d) call the general meeting of the members to elect directors.
(2) In case of any impediment due to transfer of shares or election of directors or any other circumstances, the registrar concerned
shall call or direct to calling of meeting of the legal heirs, in exercise of the powers conferred by section 170 in such manner as he
deems fit and give such directions with regard to election of directors and making alteration in the articles, if any, and such ancillary
and consequential directions as he thinks expedient in relation to calling, holding and conducting of the meeting.' ;.

8. Contracts with single member.- Where a single member company enters into a contract with the single member of the
company, the single member company shall, unless the contract is in writing, ensure that the terms of the contract are forthwith set
out in a written memorandum or are recorded in the minutes of the first meeting of the directors of the company following the
making of the contract.

9. Company becoming a single member company.- (1) No private company having two or more members on the
commencement of these rules, shall become a single member company unless it passes a special resolution for change of its status
and makes necessary alteration in its articles and obtains approval of the Commission.
(2) An application for seeking approval under sub-rule (1) shall be submitted in the form as set out in Form S4 and shall be submitted
to the Commission by the company not later than thirty days from the date on which the special resolution for change of status to
single member company was passed.
(3) The Commission on being satisfied, after obtaining such further information as it may consider necessary, grant the
approval applied for subject to such conditions as it may deem fit to impose.
(4) The company shall transfer shares in the name of single member within fifteen days of the approval of the Commission and
notify change in the board of directors on Form 29 within fourteen days from date of transfer of shares.
(5) A certified copy of the order containing approval under sub-rule (1), together with a notice in the form as set out in Form S5
shall be filed with the registrar concerned within fifteen days of the approval of the Commission for change of status to single
member company.";

10. "XYZ (SMC-Private) Limited " to be the pattern and style of the name of a single member company.- (1) "XYZ
(SMC-Private) Limited" shall be the pattern and style of the name of a single member company and the parenthesis, letters, hyphen
and words "(SMC-Private) Limited", shall from part of the name of every single member company.
(2) On change of status of a private company into a single member company, the registrar concerned shall issue a certificate in
the form as set out in Form S6, and the parenthesis, letters, hyphen and words "(SMC-Private) Limited" shall from part of the name
of the company.
(3) On change of status of a single member company into a private company, the registrar concerned shall issue a certificate in
the form as set out in Form S7 omitting the letters and hyphen "SMC-" from part of the name of the single member company.

11. Regulations of single member company.- A single member company may adopt the regulations as set out in Form S8, as
its articles or as nearly as possible thereto.

12. Penalty for contravention of these rules.- Whoever fails or refuses to comply with or contravenes ry provision of these
rules or knowingly and willfully authorizes or permits such failure, refusal or contravention shall, in addition to any other liability
under the Ordinance, be also punishable under the provisions of sub-section (2) of section 506.
 REGULATIONS FOR MANAGEMENT OF A SINGLE MEMBER PRIVATE COMPANY LIMITED BY SHARES

PRELIMINARY

2. Any provision of the Ordinance or rules and regulations made thereunder which apply in relation to a private company
limited by shares incorporated under the Ordinance shall, in the absence of any express provision to the contrary, apply in relation to
a single member company as it applies in relation to such a company which is formed by two or more persons or which has two or
more persons as members.

SINGLE MEMBER COMPANY

3. The company is a single member company and as such being a Private Company limited by shares—
(a) it shall not issue invitation to the public to subscribe for any share of the company;
(b) the company shall not register any share(s) in the name of two or more persons to hold one or more shares individually or
jointly; and
(c) number of the members of the company shall be limited to one.

SHARES

4. The company may increase the nominal share capital in accordance with sections 92 and 94.

5. Share certificate shall be issued under the seal of the Company and shall be signed by the member director or the non-
member director, as the case may be, and in case of death of member director , by the secretary.;

6. The company may, upon passing of a special resolution, issue further shares or transfer existing shares or part thereof
causing the number of members to become two or more in accordance with the Rules but it shall become a private company
thereafter.

7. The company shall not transfer all of the shares of a single member to two or more persons or part of shares of single
member to other person(s) or allot further shares to any person other than the single member or, at any time, allow transfer of shares
or allotment of shares or both resulting in number of members to become two or more, except under the authority of a special
resolution for change of status from single member company to private company and to alter its articles accordingly.

8. The single member may transfer all of his shares to a single person under the authority of an ordinary resolution whereby
the company shall remain a single member company as it was before such transfer.

9. A person whose name is entered as a member in the register of members shall without payment, be entitled to receive,
within ninety days after allotment or within forty-five days of the application for registration of transfer, a certificate under the seal
specifying the share or shares held by him.

TRANSFER AND TRANSMISSION OF SHARES

10. Transfer and transmission of shares shall be in accordance with provisions of sections 74 to 81.

11. In case of death of the single member, the power to register or refuse transfer of shares shall be exercised by the secretary
under the Rules.

12. If the company allots further shares or the shares held by the single member are transferred in total or in part and as a result
thereof the company becomes a private company, the fact that it has converted from a single member company to a private company
and number of its members has increased to two or more shall be recorded in the register of members along with the date of the event
and the particulars of the members.

13. Transmission of shares to the legal heirs shall be recorded in the register of members by the secretary.

CHANGE OF STATUS

14. The company may convert itself from single member private company to a private company in accordance with the
provisions of rule 4.
 GENERAL MEETINGS

15. A general meeting, to be called annual general meeting, shall be held, in accordance with the provisions of section 158 and
rule 5.

16. All general meetings of the company other than an annual general meeting as specified in section 158 shall be called
extraordinary general meetings and shall be deemed to be held in accordance with the provisions of rule 5.

17. The secretary shall attend all the meetings of the company but shall have no vote.

NOTICE AND PROCEEDINGS OF GENERAL MEETINGS

18. In case where the law specifies time period for giving of notice of any meeting of the members or of director(s),
requirements of the law shall be deemed to have been complied with if both the secretary and the single member are notified of the
meeting and they attend such meeting provided that in case of annual general meeting the time period for giving of notice to the
auditor of the company shall not be less than twenty one days.

19. The single member present in person or through proxy shall be the quorum for the general meeting provided that secretary
shall not act as proxy of the single member.

20. If a sole director or the single member takes any decision which is required to be taken in a meeting of the board or in the
general meeting or by means of a resolution and such decision is delivered in writing by the sole director and the single member, as
the case may be, within three days of such decision, to the company for entry in the minute book and is so recorded, that decision
shall be valid as if the decision is made in such a meeting.";

DIRECTOR(S)

21. The company shall always have the single member as a director but it may have such number of other director(s) who fulfill
the conditions as specified in section 187.

22. The board shall not have the power to remove the member director or the non-member director but the single member shall
have the power to remove any director, chief executive or secretary through a resolution.";

23. The director(s) shall have the powers as specified in section 196.

24. The director(s) shall appoint a chief executive in accordance with the provisions of sections 198 and 199.

25. The director(s) shall cause minutes to be made in books as required under section 173.

25 A. The directors may hold their meetings through tele or video conferencing in emergent situation where it is not possible for
them to be physically present at the venue of the meeting, provided that the minutes of such meeting are approved and signed
subsequently by all the directors who participated in such meeting, requirements of the requisite quorum and other legal formalities
relating to holding of such meetings have been observed and tele or video recording of the proceedings of the meetings are kept for
the purpose of record.";

SECRETARY

26. A single member private limited company shall appoint a secretary in terms of section 204A and rule 6 who shall be
responsible for discharge of duties and functions normally discharged by a secretary under the corporate laws and secretarial practice.

27. The secretary shall be appointed within 15 days of incorporation and subsequently on the same day or the day next
following his resignation or removal or in case of his death within seven days of the event.

28. The single member shall not be the secretary of the company.

CONTRACTS WITH THE SINGLE MEMBER

29. Contract between the company and single member shall be made in accordance with the provisions of rule 8.
 DIVIDENDS AND RESERVES

30. The company may declare dividends and pay in accordance with the provisions of sections 248 to 251.

ACCOUNTS

31. The director(s) shall cause to keep proper books of account in accordance with the provisions of section 230 and shall, as
required by sections 233 and 236, cause to be prepared and to be laid before the company in general meeting such profit and loss
accounts or income and expenditure accounts and balance sheets duly audited and reports as are referred to in those sections. They
shall in all respects comply with the provisions of sections 230 to 236.

32. So long as the company has only one director, the requirements of section 241 shall be deemed to have been met if the
balance sheet and profit and loss account is authenticated by the sole director.

33. Auditors shall be appointed and their duties regulated in accordance with the provisions of sections 252 to 255.

THE SEAL

34. The director shall provide for safe custody of the seal and the seal shall not be affixed to any instrument except by the
authority of a resolution of the board of directors or by a committee of directors authorized in that behalf by the member director or
the non-member director and in the presence of at least member director or the non-member director and of the secretary or such
other person as the directors may appoint for the purpose and the member director or the non-member director and the secretary or
other person as aforesaid shall sign every instrument to which the seal of the company is affixed in their presence.";

WINDING UP

35. The company shall follow, in case of its winding up, the relevant provisions of the Companies Ordinance, 1984 (XLVII of
1984).

INDEMNITY

36. Every officer or agent for the time being of the company may be indemnified out of the assets of the company against any
liability incurred by him in defending any proceedings, whether civil or criminal arising out of his dealings in relation to the affairs of
the company, except those brought by the company against him, in which judgment is given in his favour or in which he is acquitted,
or in connection with any application under section 488 in which relief is granted to him by the Court.

DISPUTE RESOLUTION

37. In the event that a dispute, claim or controversy arises between the company and its management or between the directors
inter se, all steps shall be taken to settle the dispute and resolve the issue through mediation by an accredited mediator before taking
recourse to formal dispute resolution such as arbitration or litigation.".