Formation of company as per companies ordinance 1984

Formation of company under companies ordinance 1984, What is Article of Association and Memorandum of Article

Formation of company (company ordinance 1984)

According to companies ordinance 1984, formation of company consists of 4 stages.

• Promotion stage
• Incorporation stage
• Subscription stage
• Commencement stage

Promotion stage

Promotion stage means start a new business, it is the first stage in process of company formation. Persons who take initial steps to form a company is called promotors. Promotors prepare legal documents and apply for registration and prepare following documents. Promotors also check the availability of company name from SECP (Securities exchange commission of Pakistan).

• Memorandum of association
• Article of association
• company name certificate from SECP

Memorandum of association

Memorandum of association is a legal document which is required for the formation of company. It’s an agreement between persons formatting company.it is the charter of the company that contains the basic condition on which company is incorporated.

Name:  It is the legal requirement of the company, name of the company stated in memorandum of association and it must be unique and “limited” must be mentioned in case of public company and “Private Ltd” in case of private limited company.

In case of company limited by Guarantee. Then company will add “Guarantee ltd” after their name.

Address:  It is compulsory to mentioned company address, name of city where office or factory is located.

Nature of business: Objects of the company except in case of trading corporation

Liabilities:  This clause shows the liability of the members.  

Capital: Capital amount must be stated in memorandum of association with which the company proposes to be registered and he division into shares of fixed amount. No subscriber of the memorandum of association shall take less than one share. Number of shares taken by each subscriber must mentioned along their names.

Article of association 

Article of association includes the general rules of business of the company. Standard format of memorandum of association and article of association is mentioned in first schedule of the companies ordinance 1984. They promotors if want can make their own article of association. Article of association includes

• Amount of share capital issued.
• Right of shareholders regarding voting dividend return of capital.
• Rules regarding issue of shares and debentures.
• Procedures and regulation in respect to call a share.
• Procedure to transfer of share.
• Rules regarding appointment of directors, managing directors, agents and secretaries.
• Number, Qualification, power and liabilities of directors.
• Matters related to accounts and audit.

Incorporation stage

The second stage of formation of company. In this stage promotors submit following documents to registrar office of SECP for registration.

• Memorandum of association
• Article of association
• Nominal capital
• Qualification of shares
• List of directors
• Copies of CNIC of subscribers/directors/chief executive officers.
• NOC letter of the relevant authority in case of specialized business.
• In case if subscriber is a foreign company, profile of company and detail of directors, their nationality and country of origin and their memorandum of association & article of association.
• Identification of office location
• Declaration

There are two methods of submitting documents to Registrar office.

• Online incorporation
• Offline incorporation

Online incorporation

Applicant need to create online account under SECP registration system to submit documents online for incorporation. SECP provide username and id for sign in on their system.

Offline incorporation

In this process, fee with challan are deposited to MCB or UBL bank in Pakistan and copy of the paid challan along with documents are submitted to registrar for incorporation.

If registrar is satisfied with documents then they will issue the “certificate of incorporation”. Private limited companies can start their business after getting this certificate. In case of public limited company, “Certificate of commencement” is required to start their operations.

Issue of prospectus or subscription stage

After the receipt of certification of incorporation, promotors issue prospectus along with copy of application form for shares. Prospectus shows the rules regarding purchase and sale of shares and their mode of payment. A copy of prospectus must be submitted to registrar office also.

When the minimum number of shares has been subscribed and the qualifying shares of directors have been paid. Company with submit a declaration to the registrar.

After getting the certificate of incorporation, company need to present company seal, depending on the type of company.

Commencement stage

In this stage company received certificate of commencement after submitting following documents to SECP registrar office.

• Prospectus
• Minimum share subscription
• Directors shares

After verification SECP issue “Certificate of Commencement”. Public ltd company now can start their operations.

Apply for Income, sales & professional tax

For income tax registration, company need to apply for NTN (national tax number) firstly at RTO (Regional tax office) or FBR (Federal board of Revenue). Required documents are

• NTN form
• Company incorporation certificate.
• Memorandum and article of association.
• Bank account
• CNIC copies of directors
• Business address

After getting the NTN company, need to submit above mentioned documents with NTN number to RTO (Regional tax office) of FBR (Federal board of Revenue) to get the Sales tax number and income tax number.

For professional tax, company need to submit these documents to Excise and taxation (ET) for registration.