CORPORATE LAW

LECTURE NO. 2
Securities and Exchange Commission of Pakistan
Organization
Securities and Exchange Commission of Pakistan (SECP) established under the Securities and Exchange
Commission of Pakistan Act 1997 was operationalized on 1st January, 1999. SECP replaced Corporate
Law Authority, the former corporate regulatory body. It has been vested with adequate operational,
administrative and financial autonomy.

The SECP’s head office is at the Federal Capital, Islamabad and it has eight regional offices (Company
Registration Offices), one at Federal Capital, four at provincial capitals and three in other major cities i.e.
Multan, Faisalabad and Sukkur.

Functions (Section 7)

Commission has been vested with lot of powers under the Companies Act 2017 and other relevant laws.
Commission has got powers to regulate the affairs of all the companies and Insurance Companies, Banking
Companies, Modarbas and Non-Banking Finance Companies etc.

Law has vested various powers to Commission and the Commission is also empowered by the Securities
and Exchange Commission of Pakistan Act, 1997 to exercide many powers and functions in addition to the
functions prescribed under the Companies Act, 2017.

Registrar
Powers and Duties

The power and duties of registrar start from registration of companies to receiving various documents
which the companies are required to submit to the authorities under the Act.

He keeps the record of mortgages and charges also keeps track of company routine documents besides his
powers to call the officers of the company including directors for information and explanations and also
empowered to inspect the books and records of the company. He may seize the books and records if he
believes that seizure is necessary to reach out certain facts by Commission.

Introduction to Memorandum of Association

Memorandum of Association (MOA)

Company is an artificial person who must be registered in order to exist; this existence is a process which
requires certain things undertaken by the members of the company.

MOA is the constitution of the company. It defines in brief what the company, what it is for, where it will
be and what shall be liability of the members of the company.

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It further states the amount of share capital with which the company proposes to be registered and the
persons who are the initial members of the company, the signatories to the MOA.

Registration of company is actually the registration of its constitution, the memorandum of association, so
the memorandum when registered binds the members of the company. It binds all the members of the
company irrespective of the fact that any members has subscribed to it or not. The person becoming
member of the company is deemed to have read and understood the memorandum of the company and the
memorandum shall be binding on him in such a way as if he has signed the memorandum himself.

Clauses of Memorandum of Association (Section 26-29)

Memorandum of association consists of various clauses which contain variety of information and it may
vary from company to company on the basis of the type of the company or the business of the company.
Following clauses usually exist in the memorandum of association of the company.

 Name clause
 Registered office clause
 Principal line of business clause
 Undertaking clause
 Liability clause
 Authorized capital clause
 Subscription clause

We shall discuss each of these clauses at length hereunder.

Name Clause

As we discussed the company has got the availability of name certificate from the registrar till the date of
preparation of memorandum of association hence the first clause of the memorandum is the name clause of
the company which contains the name of the company with the addition of the following words at the end
of the name in case of each of the following companies
 Public Company: “Limited”
 Private Company: “(Private) Limited”
 Single Member Company: “(SMC-Private) Limited”
 Guarantee Limited Company: “(Guarantee) Limited”
 Unlimited Company: “Unlimited”

Registered Office Clause

For registered office clause the province or the part of Pakistan not forming part of a province, as the case
may be, in which the registered office of the company is to be situate.

Principal Line of Business Clause

A company may carry on or undertake any lawful and unrestricted business and enter into any incidental
and ancillary activities which is necessary in attaining its business objectives provided that the principal
line of business will be mentioned in the memorandum which shall be commensurate with its name and in

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case of any change it shall be reported to the registrar within 30 days and the registrar may give directions
for change in name in case of any violation with the above requirements.

Undertaking Clause

The company shall add an undertaking, as may be specified by the Commission, in their memorandum.

Liability Clause

In case of a company limited by shares and limited by guarantee, the liability clause states that ‘the
liability of the members is limited’. In case of an unlimited company, the liability clause states that ‘the
liability of the members is unlimited’.

In case of a company limited by guarantee, an additional sentence is added to clarify the extent of
liabilities of the members of that company in the event of its being wound up.

Authorized Capital Clause

This clause contains the amount of share capital with which the company proposes to be registered, and the
division thereof into shares of a fixed amount. This is the maximum number of shares that can be
subscribed.

In the same clause, every subscriber of the memorandum is required to agree at least one share in the share
capital of the company and each of them is required to write opposite to his name the number of shares he
has agreed to take in the share capital of the company.

Association or Subscription Clause

All of the above clauses are undertaken to be abide by, by the subscribers of the memorandum, they are the
first members of the company, they write as follows,

We, the several persons whose names and addresses are subscribed, are desirous of being formed into a
company, in pursuance of the memorandum of association, and we respectively agree to take the number
of shares in the capital of the company set opposite our respective names

Then they write their names addresses and other required particulars and sign the memorandum of
association in presence of at least one witness who is required to write his own particulars as well.

Alteration in Memorandum of Association (Section 32 to 35)

Alterations

Act allows the alterations of various clauses of the memorandum of association of the company however
there is difference as to the procedure or requirements of law in altering various clauses of the
memorandum.

Liability clause is only altered at the time of conversion of the status of the company (e.g. from limited to
unlimited etc). Subscription clause of the memorandum of the company cannot be altered in the life time
of the company.

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Reasons for Alteration in Principal Line of Business and Registered Office Clause

As per the Act, a company may alter the provisions of its memorandum so as to:

 Change the place of its registered office from one Province to another or from Islamabad Capital
Territory to a part of Pakistan not forming part of a Province and vice versa;
 Change its principle line of business; or
 Adopt any business activity or any change therein which is subject to licence, registration,
permission or approval under any law.

The alteration shall not take effect until and except in so far as it is confirmed by the Commission on
petition of the company filed for this purpose.

Alteration in Registered Office Clause

For alteration in the registered office clause of the company,

 Company shall pass a special resolution

 Company shall apply to the Commission for obtaining its approval
 When the company actually shifts its registered office, it shall inform the registrar within 15 days
of the date of such shifting
 Where alteration involves a transfer of registered office from jurisdiction of one company
registration office to another, physical record of company shall be transferred to the other registrar
(where the registered office has been shifted)

Alteration in Principal Line of Business Clause

For alteration its object clause, company shall pass a special resolution and shall only file the amended
memorandum with registrar within 30 days of the change.

Commission’s Approval for Alteration

For approval of Commission in both of the above cases the company shall file an application to the
Commission on the basis of special resolution as discussed above. The Commission must be satisfied that:

 The circumstances, as discussed above for the alteration of object and registered office clauses of
the memorandum, exist and
 Sufficient notice regarding alteration of memorandum has been given by the company to every
credi9tor and member of the company.

The Commission may make an order confirming the alteration either wholly or in part, and on such terms
and conditions as it thinks fit.

A copy of duly certified order of SECP shall be forwarded to the company and to the registrar within 7
days from the date of the order.

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Registration of Memorandum of Association (Section 16)
Registration

For registration of a memorandum of association, it shall be filed with the registrar of companies. A
declaration of compliance with requirements of the Act in getting the company registered shall be provided
to the registrar along with the memorandum.

Registrar shall register the memorandum of association only if it satisfied that

 the company is being formed for lawful purposes,
 all the requirements of this Act and the rules made thereunder have been complied with in respect
of registration.

Effect of Registration (Section 16(5) and 18)

Registration of memorandum and articles means the registration of the company. The registrar if satisfied
regarding the above mentioned, shall register the company and shall issue a certificate that the company is
incorporated.

The certificate of incorporation shall state

 Name and registration number of the company;
 Date of its incorporation;
 Whether it is a private or a public company;
 Whether it is a limited (limited by shares or guarantee) or unlimited company;

Articles of Association
Introduction to Articles of Association
Articles of Association (Section 36)

The byelaws of the company, subordinate to the constitution of the company and further subordinate to the
Act. They contain the guidelines on day to day issues faced by a company.

It is the option for the company limited by shares to get the articles registered or adopt Table A of the first
schedule to the Companies Act 2017 as its articles.

However the registration of the articles of association is compulsory requirements for a company limited
by guarantee and an unlimited company.

Copies of Memorandum and Articles (Sections 39 and 40)

Every company, upon the request and payment of a prescribed amount by its member, shall supply within
a period of fourteen days a copy of the memorandum and articles of the company.

Alteration in the Articles of Association (Section 38)

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A company may, by special resolution, alter its articles and any alteration so made shall be as valid as if
originally contained in the articles and be subject in like manner to alteration by special resolution:

If such alteration affects the substantive rights or liabilities of members or of a class of members, it shall be
carried out only if a majority of at least three-fourths of the members or of the class of members affected
by such alteration, as the case may be, exercise the option through vote personally or through proxy vote
for such alteration.

A copy of the altered articles of association shall be filed by the company with the registrar within thirty
days from the date of passing of the resolution. Registrar shall register the same.

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