Chapter 6
Register your Start-ups
Obtaining Business Licenses and Permits
Learning Objectives
A. Company formation
B. Compliance requirements
C. Winding up a company
A. Company Formation:
Starting a company (incorporation) is as simple as reserving a name and completing the
incorporation application.
Formed through a company ordinance act 1984
Incorporation Types
1. Company - (Single, private and public)
• Single Member Company (SMC) –Single owner
- Suits small businesses and persons who do not like to share their business with others.
- A one man business concern. ◦ Natural person with unlimited liability ◦ Small scale of operations and
fixed customers ◦ Difficulty in obtaining financing from banks
• Private Limited Company (2 owners) – max 200 number of employees NOT shares offered to
public-owners share equal profit/loss
- Suits small & medium sized businesses who need to raise business capital at small scale.
- A minimum Bi-Partner (consultancy services) business concern. ◦ Natural persons with unlimited liability
◦ Small scale of operations with generally rigid clientele ◦ Financing from banks on unfriendly terms
• Public Limited Company – shares offered to public
- Suits to medium & large businesses who need to raise capital at large scale.
- Regulated by financial conduct authority and govt agencies
- Publish financial statements for stakeholders to know the worth of its stock
Single Member Company (SMC)
One person may form a single member company by complying with the
requirements in respect of registration of a private company and such
other requirement as may be specified.
2. Incorporation process
- TWO STEP PROCESS or a COMBINED PROCESS.:
1st Step: Name Reservation
2nd Step: Company Incorporation.
- COMBINED PROCESS (available online only):
Where you submit application for Name Reservation and Incorporation
simultaneously. In this process Memorandum of Association and Articles
of Association are generated automatically.
What do you need? For SMC
incorporation
• A suitable Company Name.
• Principle Line of Business of the Company.
• Registered Office Address.
• Subscriber.
• Memorandum of Association: It is a basic constitutive document for company
formation. It includes five clauses defining: Company Name, Location of
registered office, Principle line of business, limited liability of company and its
authorized capital. Samples available on
[Link]
es-of-association/memorandum-of-association/
• CNIC copies of subscribers and in case of physical application, of witness to
the documents.
• Application forms for Name Reservation (Inc.-Form I) and Incorporation (Inc.-
Form II) prescribed through Companies (Incorporation) Regulations, 2017.
Private Limited Company
Two or more persons so associated may form a private limited company
by complying with the requirements in respect of registration of a
private company and such other requirement as may be specified.
Minimum paid up capital PKR 1 MN
Incorporation process
• TWO STEP PROCESS:
1st Step: Name Reservation
2nd Step: Company Incorporation.
What do you need? For Private Limited
Company Incorporation
• A suitable Company Name.
• Principle Line of Business of the Company.
• Registered Office Address.
• Subscriber/Shareholder (persons who will take shares of the company).
• Directors (persons who will manage affairs of the company on behalf of the shareholders).
• Memorandum of Association: It is a basic constitutive document for company formation. It includes five
clauses defining: Company Name, Location of registered office, Principle line of business, limited liability
of company and its authorized capital. Samples available on
[Link]
association/
• Articles of Association: A statutory document that specifies regulations for managing company’s affairs
e.g. number of maximum directors, manner of transfer of shares, holding of board and general meetings
etc.
• CNIC copies of subscribers and in case of physical application, of witness to the documents.
• Application forms for Name Reservation (Inc.-Form I) and Incorporation (Inc.-Form II) prescribed through
Companies (Incorporation) Regulations, 2017.
Public limited Company
Three or more persons associated for any lawful purpose may, by
subscribing their names to a memorandum of association and
complying with the requirements of this Act in respect of registration,
form a public company.
Incorporation process:
• TWO STEP PROCESS:
1st Step: Name Reservation
2nd Step: Company Incorporation.
What do you need? For Public Limited
Company Incorporation
• A suitable Company Name.
• Principle Line of Business of the Company.
• Registered Office Address.
• Subscriber/Shareholder (persons who will take shares of the company).
• Directors (persons who will manage affairs of the company on behalf of the shareholders).
• Details of the company’s share Capital – Authorized Capital(the maximum amount of share
capital that a company is authorized to issue to its shareholders) and Paid Up Capital (the
amount of money a company has received from shareholders in exchange for issued shares).
• Memorandum of Association: It is a basic constitutive document for company formation. It
includes five clauses defining: Company Name, Location of registered office, Principle line of
business, limited liability of company and its authorized capital.
• Articles of Association: A statutory document that specifies regulations for managing company’s
affairs e.g. number of maximum directors, manner of transfer of shares, holding of board and
general meetings etc.
• CNIC copies of subscribers and in case of physical application, of witness to the documents.
• Application forms for Name Reservation (Inc.-Form I) and Incorporation (Inc.-Form II) prescribed
Issuance of incorporation
certificate • A certificate of incorporation
is a legal document relating
to the formation of a
company or corporation. It is
a license to form a
corporation issued by state
government.
• Time period for registration
of the company:
B. Compliance Requirements
When it comes to a business and corporate management, compliance refers
to the company obeying all of the legal laws and regulations in regards to
how they manage the business, their staff, and their treatment towards their
consumers. The concept of compliance is to make sure that corporations act
responsibly as per companies ordinance Act 1984.
There are three types of compliance’s, a company requires after its
incorporation.
• Post Incorporation compliance.
• Annual compliance.
• Eventual compliance.
Post Incorporation compliance - A list to
follow
• Maintaining a Registered Office
• Board Meeting
o The approval to open a Current Account
o Appointing the very first Statutory Auditor
o Authorizing the Statutory Registrations
• Letter heads with company information
• Registered offices or franchise
• GST Tax registration to collect tax from customers
• Bank account
• Issuing of share certificate (issued by companies to shareholders that sell shares in the market)
• Stamp duty (3 % to be by company paid after issuing/transferring the share certificate in the market)
• Provident Fund (Any company which has more than 20 employees can up to deduct a PF(Provident
Fund) contribution – 10-12%)
• Maintain Statutory Registers and Minute Books (Keeping office records by maintaining registers,
financial statements/account books and minute sheets)
• Register of members (register of shareholders, is a record of the individuals who own the company
and the details of the shares they hold)
Annual Compliance – A list to follow
• Appointment of Auditor
• Holding board meeting
• Holding annual general meeting (AGM)
• File annual returns Annual Return within 60 days of holding of AGM
• File financial statements including Balance Sheet along with Statement of Profit and Loss
Account and Directors’ Report
• Directors annual report -The Directors of the Company present the Annual Report along
with the audited financial statements for the year ended
• Maintaining Statutory registers (record of inventory) books of accounts (financial and
expenses statements) and minute books (attendance of AGM, stakeholder meetings,
director attendance)
• Circulation of financial reports to stakeholder and other members of the company
(approved Financial Statement, Directors’ Report and Auditor’s’ Report at least 21 clear
days before the Annual General Meeting to get an yearly overview of the company)
Eventual compliance – A list to follow
• Changes in the management/officers of the Company.
• Increase in Authorized capital of the company (maximum amount of
share capital that the company is authorized by its constitutional
documents to issue to shareholders)
• Increase in Paid up capital of the Company (the amount of money a
company has received from shareholders in exchange for shares of stock)
• Change in address of the company.
• Change in the name of the Company.
• Change in province of the Company.
C. Winding up a company
There are three modes the company can be wound up.
1. Winding up (activity for individual students)
• By Court
• Voluntary Winding Up
• By Supervision of Court
2. Easy Exit
• A company which ceases to operate and has no known assets and liabilities, may apply
to the registrar in the specified manner, seeking to strike its name off the register of
companies on payment of such fee
3. Struck off by Registrar
• Registrar has reasonable cause to believe that a company is not carrying on business or
is not in operation. He may strike the Company name off the register, and publish
notice thereof in the official Gazette, and, on the publication in the official Gazette of
this notice, the company be dissolved.
Marked Individual Activity – Deadline
09/04/2020 17:00 PM by email!
• Read a Guide on Winding up / Dissolution of Companies uploaded
on LMS.
• Answer the following questions:
1. Explain the three modes of winding up of a company in detail in
your own words? Do not include form names.
2. What do you understand about the winding up process?
3. If you want to liquidate your company (according to the selected
company in your final business plan), what steps/methods would
you take and why?