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Business & Labour Law
Recommended Text BoxBusiness Law by Khalid Mehmood Cheema
Course Assessment:Quizzes: Minimum 5 quizzes 10 MarksMid Term 25 MarksFinal 40 MarksProject 20 MarksPresentation 05 Marks
Syed Salman Ahmedsirsalmanahmed@yahoo.com
0300-3610026Yahoo Group Name : bllfall15
Group E-Mail : bllfall15@yahoogroups.com
MBA (Marketing & Finance) (Silver Medal) IBA KarachiMEM (Quality Management) (Silver Medal) NED UET Karachi
MBA (MIS) (Silver Medal) IBA KarachiMAS (HRM) UoK Karachi
MA (Economics) UoK KarachiPGD (CIS) (Gold Medal) UoK Karachi
B E (Aerospace) NED UET KarachiLLB UoK Karachi
Teaching Experience : 26 Years
Law : An Introduction
Sources of Law
Material Sources
Legal Sources
Legislation Precedent Customs Agreement
Historical Sources
Common Law Equity
Formal Sources
Law : An Introduction
Legal Sources of Law
• There are four kinds; Customs, Agreement, Legislation & Precedent.
Customs
• They are important sources of law and are based on customary law. As the society developed, this source diminishes its tendency as source of law.
Law : An Introduction
Customs
• Customary law is the written and unwritten rules which have developed from the customs and traditions of communities. For customs and traditions to become law, they must be:• Known to the community,• Followed by the community, and• Enforceable (able to be carried out)
Law : An Introduction
Customs• In Pakistan, this law has been replaced
by the Shariat Law. However, in areas other than Shariat Law, it is still an important source of law.
Agreements• Parties in their agreement stipulate
terms for themselves which serve as law for the contracting parties.
Law : An Introduction
Agreements• This has the force of special law which
is applied in derogation of, or in addition to, the general law of land.
Legislation• Parliamentary sovereignty gives rise to
a number of consequences.• Parliament can make law as it sees fit.• It may repeal statutes.
Law : An Introduction
Legislation• It may overrule case laws developed in
the courts.• It may make new laws on subjects
which have never been regulated by law before.
Process of Legislation• A bill may originate from either of the
house i.e. National Assembly and Senate.• The bill after passing from the
originator house shall move to other house.
Law : An Introduction
Process of Legislation• If the bill is passed by the other house
without amendment, then it will go to President after whose signature. It would become law.• If the bill is passed with amendment
or rejected or not passed within 90 days then it is to be considered in joint sitting of houses where majority vote would decide its fate.
Law : An Introduction
Process of Legislation• The President shall within 30 days
either assent to the bill or return it to Parliament for re-consideration on the objected points.• In case, the bill is returned and both
the houses again passes it with majority votes then President shall not withhold his assent and the act becomes law as Act of Parliament.
Law : An Introduction
Process of Legislation• If the National Assembly is not in
session and some matter warrants immediate action, then President may issue Ordinance (valid for 4 months) which will have the same force as Act of Parliament. • To become a permanent law, the
ordinance has to be presented before Parliament for confirmation within its life.
Law : An Introduction
Case Law and The Precedent• Consistency is an important feature of
good decision making process.• A court’s decision is expected to be
consistent with previous decisions and to provide an opinion which the parties, and others, can use to direct their future relationships. This is the basis of the system of judicial precedent.
Law : An Introduction
Case Law and The Precedent• Once a matter of principle has been
decided (by one of the higher courts), it becomes a precedent.• In any later case to which that principle
is relevant the same principle should be applied.• This doctrine is expressed as “maxim
stare devises” which means “to stand by a decision”.
Law : An Introduction
Case Law and The Precedent
• To accomplish judicial precedent in a coherent manner following 4 things must be considered before applying to a case:-
• It must be a proposition of law.
Law : An Introduction
Case Law and The Precedent• Decision shall be based on
“proposition of law” and not on a “question of fact”. An issue is a “question of fact”, if it depends on credibility of direct evidence or on deductions drawn from circumstantial evidence. For example a judge may, from the direct facts of weather conditions and length of skidmarks, infer that a driver has been negligent. This finding of fact is not binding.
Law : An Introduction
Case Law and The Precedent• It must form part of the “ratio
decidendi” (reason for deciding) of the case. • Ratio decidendi of a case is
“any rule of law expressly or impliedly treated by the judge as a necessary step in reaching his conclusion, having regard to the line of reasoning adopted by him”.
Law : An Introduction
Case Law and The Precedent• The material facts of each case
must be the same.• The preceding court must have
had a superior (or in some cases, equal) status to the later court, such that its decisions are binding on to the later court.
Law : An Introduction
Case Law and The Precedent• The preceding court must have
had a superior (or in some cases, equal) status to the later court, such that its decisions are binding on to the later court.
• If a superior court takes an appeal to the decision of a lower court and reverses its decision, then the previous decision of the lower court cannot form a precedent for its subordinate courts.
Law : An Introduction
Avoidance of a Binding Precedent• Even if a precedent appears to be binding, there are a number of grounds on which a court may decline to follow it:-• It may be able to distinguish the facts.• It may declare that “ratio decidendi” obscure, particularly when a court of Appeal decision by three or five judges gives as many ratios.
Law : An Introduction
Avoidance of a Binding Precedent• It may declare the previous decision made “per incuriam” “without taking account of some essential point of law, such as an important precedent”.• The earlier decision may have been subsequently overruled by another court of the same stature.
Companies Law
Introduction• Companies law was enacted in 1984. It
relates to companies and certain other associations.• It extends to whole Pakistan.• High courts have jurisdiction to resolve
all issues pertaining to companies in the place at which the registered office of the company is situated.• Supreme court has the appellate
jurisdiction.
Companies Law
Types of Companies on the Basis of Liability1. Company limited by Shares
The company which keeps the liability of its members limited up to the nominal value of shares purchased by them.2. Company limited by Guarantee
The company with limited liability of its members to the amount each of them has undertaken to pay in the
event of winding up of the company.
Companies Law
Types of Companies on the Basis of Liability2. Company limited by Guarantee
The company is further sub-divided into two kinds.
(a) Companies limited by guarantee, having a share capital. Liability of its members is limited to
the extent of the unpaid amount of shares held by them plus the amount guaranteed by them. Mostly such companies are in the business of non-profit making nature.
Companies Law
Types of Companies on the Basis of Liability2. Company limited by Guarantee
(b) Companies limited by guarantee, not having share capital. Liability of its members is limited to the extent of the amount guaranteed by them. KSE (Guarantee) Limited, LSE (Guarantee) Limited and ISE (Guarantee) Limited are examples of such companies.
Companies Law
Types of Companies on the Basis of Liability3. Unlimited Company Liability of members is unlimited. It
means the property of the shareholders in company as well as their personal property can be used to pay off the debts of the company. Such companies are rare these days.
Companies Law
Types of Companies on the Basis of Liability4. Association Not for Profit
Under Sec-42, these “association not for profit” can be registered as a company with limited liability. However, such an association does not add the words limited or (private) limited or (guarantee) limited to their names.
Companies Law
Types of Companies on the Basis of Liability4. Association Not for Profit
These associations are registered by authority after being satisfied about the following conditions:-
(a) Association is being formed to promote commerce, art, science, religion, sports, or any other useful object.
(b) It will not pay dividends to its members.
Companies Law
Types of Companies on the Basis of Liability4. Association Not for Profit
(c) Association will apply its profits, to promote its objects.
(d) Permission would be granted subject to certain conditions which would be binding on association and
would be included in its documents.
Companies Law
Types of Companies on the Number of Members1. Private Company
(a) It can be formed by at least two persons.
(b) The number of members must not exceed fifty.
(c) Through its Article of Association, it restrict the transfer of its shares.
(d) It cannot invite the public to purchase its shares and debentures.
Companies Law
Types of Companies on the Number of Members1. Private Company
(e) It must have at least two directors.
(f) A private company has to form its own Articles of Association.
(g) A private company is not required to send copies of profit & loss account and balance sheet to the authority, stock exchange and the registrar.
Companies Law
Types of Companies on the Number of Members1. Private Company
(h) It must use the word (private) limited or unlimited (as may be
applicable) at the end of its name.(j) To form a private company, only two signatories to the
memorandum of association are required.
Companies Law
Types of Companies on the Number of Members2. Public Company
(a) It can be formed by at least seven persons.
(b) Maximum number of members does not have any limit.
(c) Its shares are freely transferable.
(d) It can invite the public to purchase its shares and debentures.
Companies Law
Types of Companies on the Number of Members2. Public Company
(e) It must have at least seven directors.(f) A public company may decide not to form its own Articles of
Association but to adopt Table “A” .(g) A public company is required to send copies of profit & loss
account and balance sheet to the authority, stock exchange and the registrar.
Companies Law
Types of Companies on the Number of Members2. Pubic Company
(h) It must use the word (public) limited or unlimited (as may be
applicable) at the end of its name.(f) To form a public company, seven signatories to the
memorandum of association are required.
Companies Law
Types of Companies on the Basis of Other Classifications
1. Holding CompanyA company is said to be holding
company of the other when it holds more than 50% of the share capital of the other company or it has got control over the constitution of the board of directors of the other company.
Companies Law
Types of Companies on the Basis of Other Classifications
2. Subsidiary CompanyA company is said to be subsidiary
company of the other when that other company holds more than 50% of its share capital or controls the composition of its board of directors.
Companies Law
Types of Companies on the Basis of Other Classifications
3. Associated CompanyWhen a company is not subsidiary
company of the other but works in close contact with some other company, it is called associated company or associated undertaking.
Companies Law
Types of Companies on the Basis of Other Classifications
4. Foreign CompanyA company which is incorporated
outside Pakistan and carries on business in Pakistan through its branches is called a foreign company.
Companies Law
Important Documents
1. Memorandum of Association
2. Article of Association
3. Certificate of Incorporation
4. Prospectus
Companies Law
Memorandum of Association It is the most important document as it forms the charter of the company. It is the statutory deed of the company. It contains the fundamental conditions upon which alone the company is granted incorporation. It is a document which explains the powers and objects of the company. Its one of the main purpose is to provide information to outsiders about the permitted range of activities of the company.
Companies Law
Memorandum of Association It determines the relationship between the company and other persons outside the company. If a company violates the Memorandum of Association, it is absolutely void. It cannot be ratified even by the unanimous consent of all the shareholders. Alterations to MOA is a difficult job. To alter it, passing of special resolution and permission of authority is must.
Companies Law
Contents of Memorandum of Association Name of company
Words like limited, (private) limited, (guarantee) limited etc. shall be placed as last word of the
name of company, as the case may be. Place of its registered office The province or part of Pakistan where the registered office is situated. Objects of the company
The objectives of the company and the territories to which they extend.
Companies Law
Contents of Memorandum of Association Limitation of liability clause
Whether the liability of the members is limited by shares, and / or guarantee (and up to what extent each member is responsible) OR whether the liability is unlimited and property of the members in company as well as their personal property can be used to pay off the debts of the company.
Capital clauseIn case a company is limited by shares only
The amount of share capital with which the company proposes to be registered.
Companies Law
Contents of Memorandum of Association Capital clause
In case a company is limited by shares only The division thereof into shares of a fixed
amount.In case a company is limited by guarantee only
Details of the amount each member contributes to the assets of the company in the event of its being wound up while he is a member to pay of debts / liabilities of the company, costs / charges / expenses of winding up and adjustments of rights of the contributories.
Companies Law
Contents of Memorandum of Association Capital clause
In case a guarantee company with a share capital The amount of share capital with which
company proposes to be registered. The divisions thereof into shares of a fixed
amount. Details of the amount each member
contributes to the assets of the company in the event of its being wound up while he is a member to pay of debts / liabilities of the company, costs / charges / expenses of winding up and adjustments of rights of the contributories.
Companies Law
Contents of Memorandum of Association Capital clause
In case of an unlimited company The amount of share capital with which
company proposes to be registered. The divisions thereof into shares of a fixed
amount. Association Clause and Subscription
Subscribers to MOA (2 in case of private company and 7 in case of public company) declare through association clause that they desire to form a company in pursuance of the MOA.
Companies Law
Contents of Memorandum of Association Association Clause and Subscription
Subscribers agree to take the number of shares set opposite their respective names.
Such subscriptions contains:-a. The names of subscribersb. Address of the subscribersc. Description of the subscribersd. Nos of shares each has
subscribed
Companies Law
Articles of Association It is the second most important document to be filed with registrar of companies. It is a document which explains the rules and regulations of the company for the purpose of its internal management. It determines the relationship between the company and its members and as among the members themselves.
Companies Law
Article of Association If a company does anything beyond the scope of AOA (but within MOA), it is not void and can be easily ratified subsequently by a special resolution. Alterations to AOA is possible and can be done by passing a special resolution and intimation to registrar of companies. Formation of own AOA is not mandatory for public limited companies. They can adopt the Table “A” in first schedule of company law and need not file it separately with registrar.
Companies Law
Contents of Article of AssociationThe AOA contains regulations relating to
following matters:- To what extent Table “A” has been excluded. Division of the share capital of the company and
rules regarding allotment, issue, transfer and forfeiture of shares.
Procedure of holding and conducting of various meetings.
Voting rights of the members and rules regarding methods of voting.
Matters relating to appointment, powers, duties, qualification and remuneration of Directors.
Companies Law
Contents of Article of Association Methods to increase, reduce or alter the capital. Terms of appointment, remuneration, delegation
of authority, etc of secretary, manager, if any. Rules relating to issue of share capital. Declaration of dividend and rules regarding its
payment. Rules relating to accounts, audit, charging of
depreciation and creation of reserves, etc. Methods of securing loans. Rules regarding common seal of the company. Procedure of winding up the company.
Companies Law
Contents of Article of Association Matters relating to appointment, powers, duties,
qualification, removal, remuneration etc. of Chief Executive.
Matters relating to appointment of managing agent, term of office, powers, duties and
remuneration where permitted.
Companies Law
Persons not Eligible to Become Director Minor Person with unsound mind Person who has applied for adjudication as an
insolvent. Person who is an undischarged insolvent. Person who has been convicted by a court of law
for any offence. Person who has been prevented from holding
such office under any provision of the company law.
Person who is not a member.
Companies Law
Prospectus After obtaining certificate of incorporation, a public company may invite general public to subscribe to the capital of the company and for this purpose a prospectus is issued. Prospectus is any such advertisement, notice or information by which the general public is invited for the purchase of the shares or debentures of a company on the terms and conditions contained in it. Only public companies can issue prospectus.
Companies Law
Prospectus The invitation to purchase the share or the debentures of a company is the main characteristic of a prospectus. Its main objectives are as follows:-
a) To inform the public that a company has been established.
b) To convince the public that the company provides the best opportunity for investment because it has the honest and efficient directors.
Companies Law
Prospectusc) To present a true and certified record,
through which the shares and debentures have been placed before the public for sale.
d) To declare that the responsibility of the matters provided in the prospectus lies on the directors of the company.
Companies Law
Contents of ProspectusThe following matters must be stated in
Prospectus:- The main object of the company. Names, addresses and occupations of the directors who have signed MOA and also the nos of shares purchased by them. The details of the interest of the shareholder in
property and profit of the company. The names, description, addresses and occupations of the directors, managers and managing agents and the amount of remuneration available to them.
Companies Law
Contents of Prospectus Number of minimum qualification of shareholder
to become a director. The amount payable on the application and allotment of shares. Names and addresses of those sellers whoi sold
any property to the company. The amount paid or payable in cash, shares or debentures.
The limit of minimum subscription on which the shares can be allotted.
Companies Law
Contents of Article of Association Methods to increase, reduce or alter the capital. Terms of appointment, remuneration, delegation
of authority, etc of secretary, manager, if any. Rules relating to issue of share capital. Declaration of dividend and rules regarding its
payment. Rules relating to accounts, audit, charging of
depreciation and creation of reserves, etc. Methods of securing loans. Rules regarding common seal of the company. Procedure of winding up the company.
Companies Law
Contents of Article of Association Matters relating to appointment, powers, duties,
qualification, removal, remuneration etc. of Chief Executive.
Matters relating to appointment of managing agent, term of office, powers, duties and
remuneration where permitted.
Companies Law
http://www.secp.gov.pk/Guides/IncorporationBrochure_31-12-2012.pdf
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