2.

Incorporation of Companies (Solutions) Page 736

Ch # 2: Incorporation of Companies
Q# Solution

Q1* Section 16 of Companies Act, 2017

The subscribers of the memorandum of association of AB Limited or any one of them,
authorised by them in writing, may either supply the deficiency and remove the defect
pointed out, or within 30 days of the order of refusal prefer an appeal to the
Commission.

An order of the Commission shall be final and shall not be called in question before any
Court or other authority

Q2* Specimen MOA from (1st Schedule) and Section 26 of Companies Act, 2017
Suggested draft of the Clause to be included in the Memorandum is as follows:

"To grant relief donation for and during calamities, undertake charitable activities
which in the opinion of the company would assist and benefit mankind and to
establish, maintain, run, manage and administer charity programs, providing relief and
to help the needy and poor".
OR
"To subscribe, donate money for any national, charitable, benevolent, public, general
or useful object including any educational institution, hospital, flood or famine relief
fund and other institution or fund established for religious or charitable purpose".

Q3 Section 2(66) Definition of Private Company of Companies Act, 2017.

(a) Special resolution:
Special resolution is a resolution which is passed by a majority of not less than three-
fourths of such members of the company entitled to vote as are present in person or by
proxy or vote through postal ballot at a general meeting of which not less than twenty-
one days‘ notice has been given specifying the intention to propose the resolution as a
special resolution:

Provided that if all the members entitled to attend and vote at any such meeting so
agree, a resolution may be proposed and passed as a special resolution at a meeting of
which less than twenty-one days notice has been given;

Section 38 and 85 of Companies Act, 2017.

(b) Issue of Class C shares:
SL can issue new class C shares only if it is permitted by the memorandum and articles
of association.
Since SL's articles and memorandum lack any such classification, the directors are first
required to alter the provisions of SL's articles of association and memorandum of
association by passing a special resolution.
2. Incorporation of Companies (Solutions) Page 737

It should however be noted that where 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 (3/4) of the members or of the class of members affected by
such alteration, as the case may be, exercise the option through vote either personally
or through proxy.

An altered copy of the articles of association shall be filed with the registrar, within
thirty days from the date of passing of the resolution. The registrar shall register the
same and thenceforth the alteration shall be effective.

Q4 Section 16 of Companies Act, 2017.

 MOA shall be filed with registrar.
 A declaration of compliance shall also be filed with MOA
(Compliance with requirements regarding incorporation of Co)
 Registrar shall register MOA only if it satisfied that
- Company is being formed for lawful purposes,
- All requirements of this Act and associated rules have been complied with
 If registrar refuses the registration of MOA, Co may file an appeal to SECP if no relief
is received against such a refusal.
 Order of SECP on such appeal shall be final
 If registrar think that any document or information contains any matter contrary to
law or is not complete
- He may require company to file revised document or remove deficiencies
within specified period.
- If applicant fails to remove deficiencies, registrar may refuse registration of
company
- Co may file an appeal before SECP within 30 days of refusal.
- Order of SECP, on such appeal, shall be final.

Q5 Section 32 of Companies Act, 2017.

(i) Circumstances in which YL may alter the clauses of its memorandum:
 Changing 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;
 Changing 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.

Section 34 of Companies Act, 2017.

(ii) Conditions which must be satisfied before SECP may issue an order confirming the
alteration
Before confirming the alteration, the Commission must be satisfied that:
 the circumstances, as discussed in (i) above for the alteration of object clauses of
the memorandum, exist and
 sufficient notice has been given by the company to every person who is a holder of
debentures of company or any other person whose interest might be affected.
2. Incorporation of Companies (Solutions) Page 738

 consent of every objecting creditor has been obtained or his debt or claim has been
discharged or determined, or has been secured to the satisfaction of the
Commission.

Q6 Section 32 of Companies Act, 2017.

The procedure required to be followed by each company is different as the registered
office of the holding company is being shifted from one place to another in the same
city where as the registered office of the subsidiary is being shifted from a city in the
Province of KP to a city in the Province of Punjab.

(a) Procedure to be followed by Worldwide Motors Limited:

 When company actually shifts its registered office, it shall inform the registrar
within 15 days of the date of such shifting.

(b) Procedure to be followed by Worldwide Autos(Private) Ltd:

 Pass a special resolution

 Company shall apply to SECP for obtaining its approval
 When company actually shifts its registered office, it shall inform the registrar
within 15 days of the date of such shifting.
 Physical record of company shall be transferred to the other registrar (where the
registered office has been shifted)
 SECP may make an order confirming 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
registrar within 7 days from the date of the order.
 A certified copy of SECP’s order and a printed copy of altered MOA shall be filed
with registrar within 30 days of order
 Registrar shall register it and issue a certificate

Q7 Section 15 of Companies Act, 2017.

As per the requirements of Companies Act 2017 (Section 15), where a company carries
on business for more than 6 months with less than prescribed minimum number of
members (For Private company; Less than 2); every member of the Company
(knowing the fact) during that default time shall be severally liable for payment of the
whole debts of the Co contracted during that time

As in the underlying situation, Indigo (Private) Limited carried out business for more
than 6 months (Aug 28, 2008 to March 2009) with only 1 member; therefore
MrMasoom can be held liable by MrAy’yar if he proves that
a) His debt was contracted during that default period
b) MrMasoom was cognizant of the fact that MrBeemar has died and he is carrying on
the business solely.
2. Incorporation of Companies (Solutions) Page 739

Q8* Regulation 3 and 4 (1) of Companies (Incorporation) Regulations, 2017.

The name (i), (ii) and (iv) contain the words “Bureau”, “SAARC (abbreviation of South
Asian Association for Regional Cooperation)” and “Authority” which are specifically
prohibited words under the Companies (Incorporation) Regulations, 2017 since they
suggest association with government agencies. Such words can only be allowed by the
Commission under special circumstances on the request of any government or
authority. Such special circumstances are not likely in the above case.

The name (iii) JKLM Travel and Tours (Private) Limited may be allowed by registrar
since there is no prohibition to use acronym of subscribers to the memorandum. The
name also commensurate with the proposed principal line of business.

Jazib, Kashif, Lubna and Maria (the applicants) have the option to file either separate
application for reservation of name or combined application for reservation of name
and incorporation of company. Therefore, it is possible to finalise the name first and
then proceed with the incorporation process.

The separate application for reservation of name shall be made along with non-
refundable application fee as specified, in the following manner:

(a) online application through e-service; or

(b) physical application as per Inc. Form-I of the regulations with the registrar.

The applicant may propose up to three names in order of priority for reservation of
any one of them, ensuring that the proposed names fulfil the criteria specified of the
Companies Act, 2017 and Companies (Incorporation) Regulations, 2017. Since three of
the names have been identified to be prohibited already, the applicants may include
two more name along with name suggested in (iii) in order of priority as per their
choice.

The registrar, if satisfied that any one of the proposed names in the order of priority,
fulfils the criteria specified in the Act and these regulations, may issue availability of
name as per Inc. Annexure- I for a period of sixty days from the date of availability of
name letter.

If the applicants fail to file application for incorporation of company along-with

evidence of payment of fee within 60 days period, the name shall not remain available.

Q9* Regulation 5(3) of Companies (Incorporation) Regulations, 2017.

(a) The combined application is allowed in this case which shall be filed online
through e-service on payment of fee along with scanned copies of only relevant
and applicable documents, except memorandum of association and articles of
association, which shall be generated by e-service.
The applicant shall enter three names for the proposed company in the order of
priority, out of which any one may be approved by the registrar subject to
2. Incorporation of Companies (Solutions) Page 740

fulfilment of criteria under the law. If the name as per option one is not available,
the name from other options in order of priority shall be considered for
incorporation and in case of refusal of the proposed names, the registrar shall
issue the order of refusal.
(b) Insurance business is subject to licensing and registration and therefore the
facility of combined application is not available in this case.
(c) Housing Finance Services (NBFC) is subject to licensing and registration and
therefore the facility of combined application is not available in this case.

Q10* Regulation 15 of Companies (Incorporation) Regulations, 2017.

(a) Naveed Rabbani may be required to file additional documents as deemed
necessary by the registrar.
The Commission shall obtain security clearance from Ministry of Interior and the
company shall be incorporated only after the receipt of security clearance.
(b) Heinrich may be required to file additional documents as deemed necessary by
the registrar.
The company will be incorporated on the basis of an undertaking submitted by
Heinrich and the Commission shall forward the case for security clearance.
In case Heinrich is not security cleared, the company shall take immediate steps
for replacement and shall transfer shares, if any, held by Heinrich.
(c) The Commission shall obtain security clearance from Ministry of Interior and the
company shall be incorporated only after the receipt of security clearance.

Q11 The name proposed for the new company i.e. “Pakistan Indonesia Development
Chamber” (PIDC) is not suitable, as consideration has not been given to the following
provisions of the Companies Act, 2017 and the Companies (Incorporation)
Regulations, 2017:
(i) PIDC’s principal line of business i.e. marketing functions of various electronic
equipment, does not commensurate with its name, whereas it is mandatory that it
shall always commensurate with the name.
(ii) The word Chamber is allowed for those companies that is to be established as a
Trade Organization under the Trade Organizations Act, 2013. Since it is not the
intention to form a trade organization, the word ‘Chamber’ cannot be used in the
name.
(iii) New company’s name cannot contain name of two countries i.e. Pakistan and
Indonesia, since there is no indication that it is a Joint Venture of two
governments or companies or individuals of two relevant countries. Permission
for registration with such words may only be extended subject to submission of
documentary evidence to the satisfaction of the registrar to support the fact.
(iv) Since SL intends to issue new company’s 40% shares to the general public, it
means it will be incorporated as a public limited company. Hence, the name must
contain the word “Limited” as the last word of the name of the company.