SUBJECT: BUSINESS LAWS & REGULATIONS

TYPES OF COMPANIES UNDER COMPANIES ACT 2017 WITH

COMPARISON:
Kinds of company

Non-Profit, NGOs,
Associations, Trust,
Foundations
Company limited by Company limited by Unlimited company
shares guarantee

Public Limited
Private Limited Company
Company

Single Member Pvt. Limited

Company (SMC) Non-Listed Company

Listed Plc. Limited

Multi Members Pvt. Limited Company
Company (MMC)

Definitions:
1) Company Limited By Shares:
 It refers to a company in which the liability of its members is limited to the amount (if any) unpaid on the shares held by them.

 Private Limited Company

Private company means a company which, by its articles
(a) Restricts the right to transfer its shares
(b) Limits the number of its members to fifty not including persons who are in the employment of the company
(c) Prohibits any invitation to the public to subscribe for the shares, if any, or debentures or redeemable capital of the company. It
has following two types.

 Single Member Private Limited Company

Single Member Company or “SMC” means a private company which has only one member/director
and will avail privileges of limiting the liability.
  Multi Member Private Limited Company
A multi member LLC is a limited liability corporation with multiple owners who share control of the company.

 Public Limited Company

Public company means a company which is not a private company. It is divided into two types.

 Non-listed Public Limited Company

An unlisted public company is a public company that is not listed on any stock exchange. 
 Listed Public Limited Company
Listed company means a public company, body corporate or any other entity whose securities are listed on
securities exchange.

2) Company Limited BY Guarantee:

A company limited by guarantee limits its members’ liability to the amount that each has undertaken to contribute to the business’ property if,
and when, it is wound up. A guarantee is a fixed amount. The company constitution typically details all guarantees.

3) Unlimited Company:
Means a company not having any limit on the liability of its members.

4) Non-Profit, NGOs, Associations, Trust, Foundations

Organization traditionally dedicated to furthering a particular social cause or advocating for a shared point of view. In economic terms, it
is an organization using its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the
organization's shareholders, leaders, or members. Being public extensions of a nation's revenue department, nonprofits are tax-exempt or
charitable, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious,
scientific, research, or educational settings.

Comparison between
Company Limited by shares
And
 Company Limited by Guarantee
Company Limited by shares Company Limited by Guarantee
A company in which the liability of the members is limited up to the A company in which member, gives a guarantee to contribute to a
face value of their share is called company limited by shares. specific amount to the assets of the company on it winding up.
Example: Habib Bank Limited Example: Karachi Stock Exchange
Shares are held by the shareholders of the company. There are no shares, the company having members who acts as a
guarantor.
Companies limited by shares can engage in legal traders and have Companies limited by guarantee have special clauses and rules
general clauses. dictating their areas of operation.
Company may be divided into private and public companies. A company limited by guarantee is a public company.
Capital can be raised by selling shares in the company. Capital can be raised by issuing debentures in the company.

Comparison Between
Public Limited Company
And
Private Limited Company
Public Limited Company Private Limited Company
Public limited companies are registered as a public company. Any company that is not a public company is Pvt. Ltd. Co.
The name of the company ends with plc. or public limited company. The name of the company ends with Ltd. or limited.
Capital of the company have minimum and maximum requirements. No minimum or maximum requirements.
The company may raise by advertising its securities (shares and The company is prohibited from offering its securities to the public.
debentures) as available for public subscription.
The company must obtain trading certificate from registrar before The company can start from date of incorporation.
commencing trading.
Minimum number of directors is two. Minimum number of director is one.
 Comparison Between
Single Member Pvt. Ltd. Company
And
Multi Member Pvt. Ltd. Company

Single Member Private Limited Company Multi Member Private Limited Company

A company registered as Single Member Company should have only 1 A company registered as Private Limited Company should have at
member. least 2 members.
 In case of company registered as Private Limited company certificate  In case of company registered as single member company there is no
to commence business from Registrar is not required. requirement to obtain certificate to commence business.
 A company registered as Private Limited Company cannot invite This condition is same for the company registered as Single Member
subscriptions from general public. Company.
Transfer of shares is prohibited in the company registered as private Transfer of share is also prohibited in the company registered as single
limited company. member company and can only be done through the will of the only
single member or as per the requirements of inheritance law.
A Single Member Company can transfer its shares to the legal Multi Member Company cannot offer the shares to general public.
representatives.

Comparison Between
Listed Public Ltd. Company
And
Non-Listed Public Ltd. Company
Listed Public Limited Company Non-Listed Public Limited Company
Listed Company is the company which has its shares on any stock Unlisted Companies are those companies whose shares are not listed
exchange. on any stock exchange of the country and these types of companies are
Example: Habib Bank Limited. not allowed to trade their shares through stock exchange. Example:
Pakistan Steel Mill Limited.
A Listed Company should have at least seven members. An unlisted public company should have at least three members.
A Listed Company is required to file its accounts with the commission An unlisted public company is required to file its accounts with the
and the registrar. registrar only.
A Listed Company has actually obtained subscription from the public. Unlisted Company can invite subscription from the public.
Newspaper publication of notice is required. Newspaper publication of notice is not required.

DISTINGUISHING FEATURES WITH COMPARISON OF SOLE

PROPRIETORSHIP, PARTNERSHIP AND COMPANY:

S.NO CHARACTERISTICS/ SOLE PARTNERSHIP COMPANY

FEATURES PROPRIETOR
SHIP
1 DEFINITION Business A partnership is An artificial person created by
owned by one defined as,  the relation law with perpetual succession
person. between persons who and a common seal.
have agreed to share
the profits of a business
carried on by all or any
of them acting for
all, according to the
Partnership Act of
 1932. 
2 STRUCTURE An individual Two or more people A legal entity separate from it's
doing his own doing business for members.
business. profit.

3 FORMATION No need to be Can be formed orally Must be formed in writing,

formed in or in writing. through a Memorandum and
writing. Articles of Association.
4 REGISTRATION No prior The registration of The registration of company
registration. partnership firm is not with registrar of companies is
mandatory. Firm can be mandatory under companies act
registered after 2017.
partnership deed in
registrar office.

5 SEPARATE LEGAL It is not a Partnership is not a A company is a separate legal, it

ENTITY separate legal separate legal entity is a separate entity from its
entity. from partners. members, promoters, directors
etc.
6 MEMBERSHIP There is only Partnership must have Company must have minimum
one person. minimum of 2 partners of 2 member and maximum of
and maximum 20 200 members in case of private
partners. company. Minimum 7 and
maximum unlimited in case of
public company.
7 CAPITAL Limited Limited, but more Large financial resources.
CONTRIBUTION finance, as availability as there are
there is only 2 or more partners in
one owner. firm.
8 CONTROL AND The sole Partners are agents of Company members are not its
MANAGEMENT proprietor the partnership and are managers (directors) or agents.
owns and generally entitled to
 manages the manage the partnership
business firm.
himself.

9 PROPERTY Owner can Property of firm maybe Company can own property in
OWNERSHIP own property in name of partners or company’s name.
RIGHTS in proprietor’s in name of firm.
name.
10 STATUTORY Quick and easy Quick and easy to setup Numerous formalities and
COMPLIANCES to setup. in comparison of statutory procedures to comply
companies. with.
11 CONTINUITY IN Exists as long Exists subject to A company has perpetual
LAW as the owner is partnership deed. succession until wound up or
alive and struck off.
desires to
continue the
business.
12 BORROWING Unrestricted Unrestricted borrowing Limited in borrowing, only for
POWER borrowing powers. the purpose of its objective as
powers. stated in its Memorandum of
Association.
13 LIABILITY The liability of The liability of partners The liability of members are
owner is are unlimited. limited.
unlimited.
14 DISSOLUTION It can be It can be dissolved There must be a formal
dissolved informally such as in procedure, winding up and
informally. case of insolvency or liquidation, in dissolving the
death of a partner. company. Death or insolvency of
a member company does not
dissolve.
 PROVISION OF LAW RELATING TO
REGISTRATION OF MORTGAGES, CHARGES UNDER
COMPANIES ACT, 2017

Requirement to register a mortgage or charge:

(1) A company that creates a mortgage or charge to which this section applies must file the specified particulars of the mortgage or
charge, together with a copy of the instrument, if any, verified in the specified manner, by which the mortgage or charge is
created or evidenced, with the registrar for registration within a period of thirty days beginning with the day after the date of its
creation.

Provided that:
(a) in the case of a mortgage or charge created out of Pakistan comprising solely property situated outside Pakistan, thirty days after
the date on which the instrument or copy could, in due course of post, and if dispatched with due diligence, have been received in
Pakistan shall be substituted for thirty days after the date of the creation of the mortgage or charge as the time within which the
particulars and instrument or copy are to be filed with the registrar
(b) in case the mortgage or charge is created in Pakistan but comprises property outside Pakistan, a copy of the instrument creating or
purporting to create the mortgage or charge verified in the specified manner may be filed for registration notwithstanding that further
proceedings may be necessary to make the mortgage or charge valid or effectual according to the law of the country in which the
property is situate:
Provided further that any subsequent registration of a mortgage or charge shall not prejudice any right acquired in respect of any
property before the mortgage or charge is actually registered.
(2) This section applies to the following charges-
  a mortgage or charge on any immovable property wherever situate, or any interest therein; or
 a mortgage or charge for the purposes of securing any issue of debentures;
 a mortgage or charge on book debts of the company;
 a floating charge on the undertaking or property of the company, including stock-in-trade; or
 a charge on a ship or aircraft, or any share in a ship or aircraft;
 a charge on goodwill or on any intellectual property;
 a mortgage or charge or pledge, on any movable property of the company
 a mortgage or charge or other interest, based on agreement for the issue of any instrument in the nature of redeemable capital
 a mortgage or charge or other interest, based on conditional sale agreement, namely, lease financing, hire-purchase, sale and
lease back, and retention of title, for acquisition of machinery, equipment or other goods:
Provided that where a negotiable instrument has been given to secure the payment of any book debts of a company, the deposit of the
instrument for the purpose of securing an advance to the company shall not for the purpose of this sub-section be treated as a mortgage
or charge on those book debts.
(3) The registrar shall, on registration of a mortgage or charge under sub-section (1) issue a certificate of registration under his
signatures or authenticated by his official seal in such form and in such manner as may be specified.
(4) The provisions of this section relating to registration shall apply to a company acquiring any property subject to a mortgage or
charge.
(5) Notwithstanding anything contained in any other law for the time being in force, no mortgage or charge created by a company
shall be taken into account by the liquidator or any other creditor unless it is duly registered under sub-section (1) and a certificate of
registration of such charge is given by the registrar under sub-section (3).
(6) Nothing in sub-section (5) shall prejudice any contract or obligation for repayment of the money thereby secured.
(7) Where any mortgage or charge on any property or assets of a company or any of its undertakings is registered under this section,
any person acquiring such property, assets, undertakings or part thereof or any share or interest therein shall be deemed to have notice
of the mortgage or charge from the date of such registration.
 APPLICATION AND IMPORTANCE OF CONTRACT ACT IN
BUSINESSES:

Contract Act is said to be MOTHER of all Contracts.

Offer + acceptance = promise + consideration = agreement + enforcibility at law = CONTRACT

“ANY AGREEMENT ENFORCIBLE IN COURT OF LAW IS CONTRACT”

IMPORTANCE OF CONTRACT ACT IN BUSINESS:

The stability and security of business world depends upon the law of contract. Contract act is quite important while doing business
because it provides security to both the parties and contract becomes inevitable due to the following reasons:
Proof of Details
The prime purpose of creating a contract is related to the recording of details, which both parties have agreed with
mutual consent. These details will serve as legitimate proof and is very important in a contract.
Avoids Misunderstanding
Misunderstanding is a common problem confronted in any business due to several reasons. To avoid such cases,
drafting a contract is a mandate and, it is required for both parties to read the consented rules and abide by them.
Provides Security
A contract document plays a pivotal role in making the parties secure as it clearly specifies the tenure of the
contract and set of responsibilities. The contract can act as legal evidence if any of the party files a case against the
other at times of contract breaching.
 Provides Confidentiality
It includes an NDA (Non-disclosure agreement, which protects confidential information. According to this
agreement, concerned parties are not entitled to reveal the business and, monetary transactions between them with
any third person.
Acts as a Record of the Business
A written contract is a relevant record stating the mutual consent of the proceedings listed in the agreement.  The
tenure of the contract is also highlighted in the agreement, which provides more clarity regarding the termination
detail.
Conclusion:
The above reasons make contracts inevitable for small-scale businesses to keep their information secured and,
protect them from crooked investors.

APPLICATION OF CONTRACT ACT:

Contract Act is used in many kind of businesses which are shown below:

Power of Attorney
Negotiable Agency
Instruments
Memorandum & Article Partnership Deed

CONTRACT
ACT
 Of Association
Leasing
Mortgage

Employment Sale Agreement Bailment/Pledge

Above mentioned are further explained below as to how Contracts are used in these businesses:

 MEMORANDUM & ARTICLE OF ASSOCIATION:

Memorandum of association is a document that contains all the fundamental info which are required for incorporation of company.
Article of association is a document containing all the rules & regulations that governs the company.

 NEGOTIABLE INSTRUMENTS:
It is a document guaranteeing the payment of specific amount of money either on demand or on particular time.

 POWER OF ATTORNEY:
In this Act, Power of Attorney includes any instruments empowering a specified person to act for & in the name of the person
executing it.

 PARTNERSHIP DEED:
It is a contract among the partners specifying rules and regulations and is signed by all partners.

 MORTGAGE:
If you have a mortgage contract and you decide to break it before the end of term, its important to understand that you maybe charged
prepayment charges.

 LEASING:
A lease is a contract outlining the terms under which one party agrees to rent property owned to other party.
  EMPLOYMENT CONTRACT:
It is a kind of contract which is between employee and employer. If there is no contract both may get in conflict.

 AGENCY:
Agency signifies a relationship in which one person has an authority to act on behalf of other person occupying the position of
Principal, to create legal relationships between him & 3rd parties.

 SALE AGREEMENT:
It is also known as Sale of goods agreement between Buyer who wants to purchase goods and Seller who owns the goods and wants to
sell them.

 BAILMENT/ PLEDGE:
Bailment is an act of delivering goods to bailee for a particular purpose without transfer of ownership.
Pledge is something held as security on a contract, a promise or a person who is in a trial period before joining any organization.

ARTICLES OF ASSOCIATION, RELEVANT PROVISIONS OF LAW, AND

CONTENTS OF ARTICLES.
 ARTICLES OF ASSOCIATION
INTRODUCTION:
Each business person is amped up for the initial step of beginning a business, which is giving it a legal identity by getting their
organization enrolled. Organizations are administered through legal documents that work out the do's and don'ts for it. Commonly
known as company charter, Memorandum of Association (MOA) and Articles of Association (AOA) which define organization's
scope of work and its internal management. Drafting of these documents are one of the most critical steps in Private Limited Company
registration process.

MAJOR DIFFERENCE BETWEEN AOA & MOA:

 The Memorandum of association is the constitution of the company. The articles of association, are subordinate to the memorandum
of association of a company, which is the dominant, fundamental constitutional document of the company.

Memorandum of Association is a document that contains all the fundamental information which are required for the incorporation of
the company. Articles of Association is a document containing all the rules and regulations that governs the company.

What is Articles of Association?

The Articles of Association can be viewed generally a rule book inside an organization.
Section 2(5) of the Companies Act, 2013 defines the “Article of Association.”
“articles” means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance
of any previous company law or of this Act.
 Articles of Association is supreme legal document framing the organization's constitution. They are indispensable, and the foundation
of an organization stands on it. Accordingly, drafting them requires most extreme accuracy and clarity. Let us look into the meaning
and importance of articles of association.

Meaning of Articles of Association:

Articles of Association structure an archive that determines the regulations for a company's operations and characterizes the
company's purpose. The document spreads out how errands are to be practiced within the organization, they characterize the rights,
power and duties of the management, the mode and structure where the matter of the business is to be carried on and the way in which
changed in the internal regulations of the company may be made from time to time. Articles lay down the relations between the
company and its members and between the members and members, including the procedure for delegating directors and the handling
of financial records.

Features of Articles of Association:

The major features of articles of association are as follows.

1. Structure of the organization along with control mechanism.

2. A contract between the company & members and among the members themselves.
3. It lays down the duties of shareholders.
4. Voting pattern and rights of the employees.
5. Mode of conduct of director’s meetings.
6. Mode of conduct of AGM of shareholders.
7. The difference in rights of different kinds of shares.
8. Article of Association can be inspected by anyone as they are a public document.

Nature of Articles of Association:

As per the Companies Act, 2013, the Articles of Association of different companies are supposed to be framed in the prescribed form,
since the model form of articles is different for companies limited by shares, companies limited by guarantee having share capital,
companies limited by guarantee not having share capital, an unlimited company having share capital and an unlimited company not
having share capital.

Every company formed under Companies Act is required to have articles, without which a company cannot legally be formed. This
requirement applies to the following types of Companies to have their own articles:

I. Unlimited Companies: The article must state the number of members with which the company is to be registered along with
the amount of share capital, if any.
II. Companies Limited by Guarantee: The article must define the number of members with which the company is to be registered.
III. Private Companies Limited by Shares: The private company having the share capital, then the article must contain the
provision that, restricts the right to transfer shares, limit the number of members to 50, prohibits the invitation to the public for
the further subscription of shares in the form of shares or debentures.
Note: In the case of a public company limited by shares, the articles may be framed by the company itself or in case company does not
register articles then it might adopt all of any of the regulations as contained in Table A in the Companies Act.

RELEVANT PROVISIONS OF LAWS:

Section 2(5) of the Companies Act, 2013 defines the “Article of Association.” as “articles” means the articles of association of a
company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act.
Section 5 of the Companies Act, 2013 also deals with AOA.

Provisions for Entrenchment:

The concept of Entrenchment was introduced in the Companies Act, 2013 in Section 5(3) which implies that certain provisions within
the Articles of Association will not be alterable by merely passing a special resolution, and will require a much more lengthy and
elaborate process. The literal definition of the word “entrench” means to establish an attitude, habit, or belief so firmly that bringing
about a change is unlikely. Thus, an entrenchment clause included in the Articles is one which makes certain changes or amendments
either impossible or difficult.

The provisions for entrenchment shall only be made by:

Private Company  on formation of a company, or

 by an amendment in the articles
agreed to by all the members of the company

Public company By a special resolution

Alteration of Articles of Association:

Section 14 of the Companies Act, 2013, permits a company to alter its articles, subject to the conditions contained in the memorandum
of association, by passing a special resolution. This power is extremely important for the functioning of the company. The company
may alter its articles to the effect that would turn:

 A public company into a private company:

For a company wanting to convert itself from public to a private company simply passing a special resolution is not enough.
The company will have to acquire the consent and approval of the Tribunal. Further, a copy of the special resolution must be
 filed with the Registrar of Companies within 30 days of passing it. Further, a company must then file a copy of the altered, new
articles of association, as well as the approval order of the Tribunal with the Registrar of Companies within 15 days of the
order being received.

 A private company into a public company:

For a company wanting to convert from its private status to public, it may do so by removing/omitting the three clauses as per
section 2(68) which defines the requisites of a private company. Similar to the conversion of the public to a private company, a
copy of the resolution and the altered articles are to be filed with the Registrar within the stipulated period of time.

Form of Article:
Schedule I of the Companies Act, 2013 provides forms for AOA in tables F, G, H, I and J for different types of companies.

Table Form

Table AOA of a company limited by shares

F

Table AOA of a company limited by guarantee and   having share capital

G

Table AOA of a company limited by guarantee and not having share capital
H
Table I AOA of an unlimited company and having share capital

Table J AOA of an unlimited company and not having share capital

Depending upon the applicability, a company may adopt all or any of the regulations contained in the model Article.

AOA- Company Act 2013 VS Company Act 1956:

S.No CA,2013 CA,1956

1. It is compulsory for every company to have Optional for a Public company

its own articles and file the same with ROC limited by shares. Compulsory for
(Registration of company) for registration. other Companies.

2. The articles may contain provisions for There is no such provision

entrenchment. The provisions for
entrenchment shall only be made by;
Private  on formation
Company of a company, or
 by an
amendment in the
articles agreed to by
all the members of the
company

Public company By a special

resolution
The company shall give notice to the
Registrar for entrenchment provisions.
3. The articles of a company shall be in the The articles of any company, not
respective forms specified in Tables F, G, being a company limited by shares
H, I, J in Schedule I as may be applicable to shall be in such Tables C, D, and E in
such company. The liberty to have articles Schedule I as may be applicable or in
or in a form as near thereto as circumstances a form as near thereto as
admit, which was available in the 1956 Act circumstances admit.
is no longer available in the 2013 Act.

CONTENTS OF ARTICLES OF ASSOCIATION:

i. The business of the company.

ii. Share capital and variation of rights includes sub-division, rights of various shareholders, the relationship of these rights, share
certificates, payment of commission.
iii. Lien of shares: To retain or hold the possession of shares in case the member is unable to pay his debt to the company.
iv. Calls on shares: It includes the whole or part unpaid amount on each share which has to be paid by the shareholders on the
demand of the company.
v. Transfer of shares: includes the process for the transfer of shares by the shareholder (transferor) to other person (transferee).
vi. Transmission of shares:  includes title devolution by succession, death, marriage, insolvency, etc.
vii. Forfeiture of shares: The AOA provides for the forfeiture of shares if the purchase requirements of shares are not met with –
fails to pay the call money, instalment.
viii. Alteration of capital: Increase, decrease or reclassification of capital must be done as the Articles of Association provide.
ix. Conversion of shares in stock: In consonance with the AOA, the company can convert the shares into stock by an ordinary
resolution in a general meeting.
x. Capitalization of Profits: Use of a company’s retained earnings to pay a bonus to shareholders in the form of dividends or
additional stock shares.
xi. Buy-back of Shares: Under the provisions of AOA, the Company has the right to buy-back shares issued to shareholders.
 xii. General meetings and proceedings: All the provisions relating to the general meetings and the manner to be conducted are
contained in the Articles of Association.
xiii. Voting rights and Proxy: – The members or the appointment of proxy shall have the right to vote on certain company matters
and the manner in which voting can be carried out is provided in the Articles of Association.
xiv. Board of Directors, Meetings and Proceedings: The appointment, remuneration, qualifications, powers and proceedings of the
Board of Directors’ meetings are detailed out in Articles of Association.
xv. Key Managerial Personnel: The Articles of Association provides for appointment, remuneration, powers of CEO, CS, CFO or
Manager.
xvi. Dividends and reserves: The Articles of association of a company provides for the distribution of dividend to the shareholders.
xvii. Accounts and Audits: Manner in which books of accounts are to be kept is detailed in AOA.
xviii. Borrowing Powers: Every company has powers to borrow; the same has to be consonance with Articles of Association of the
company.
xix. Winding Up: Provisions relating to the winding up of the company and must be done accordingly.
Articles of Association should be duly printed, and divided into paragraphs. All those who have signed the Memorandum of
Association should also put their signatures, names, addresses, occupations, etc. on the Articles of Association.
CONCLUSION:

Articles of Association is very important document. It help the owners to run the company with ease and helps in streamlining the
business.
Properly defined functions and rules increase efficiency and transparency. Hence, it is indispensable for any private or public limited
company.
The memorandum lays down the objectives of the company, the articles lay down the rules by which these objectives are to be
achieved.  In cases of conflict, the Memorandum supersedes the Articles and the Companies Act further, supersedes both
Memorandum and Articles.
These articles may be altered as per Section 14 of the Companies Act, 2013. The entrenchment provisions in the Articles of a
company is to protect the interests of all the minority shareholders by ensuring that amendment in Articles of Association shall be
possible after obtaining the requisite prior approval of the shareholders. The Articles of a company bind the company to its members,
and vice-versa and binds the members to each other, they constitute a contract amongst themselves.