Company Law & Partnership Act
Q. In what different ways a person becomes a member of a company and ceases to be a member of a company. 1. Introduction:
A company is defined as a voluntary organization which is an artificial person created by law, having limited liability of its members and a perpetual succession with its capital divided into transferable shares and which has a common seal.
Prof L. H. Haney:
Company is an artificial person created by law having separate entity with a perpetual succession and common seal.
2. Characteristics of a company:
Following are the main characteristics of a company.
(i) It is a voluntary association.
(ii) It is an artificial person.
(iii) it has a separate legal entity.
(iv) Liability of its member is limited.
(v) Ownership and management are in two different hands.
(vi) The shares of the company are freely transferable.
(vii) It has a common seal.
(viii) It has perpetual existence.
3. Types of Companies:
Companies are of three types according to companies ordinance 1984.
(a) A company limited by shares is one in which the liability of its member is limited to the extent of face value or the amount of their shares.
(b) A company limited by guarantee is one in which each member given a guarantee to contribute a specified sum to the company in event of its being wound up.
(c) Unlimited company is third type. it is a company in which the liability of shareholder is unlimited as in an ordinary partnership.
4. Share holder:
Member of company is called share holder.
5. Different ways for becoming member of a company:
Following are the different ways in which a person can become member of a company.
I. Membership by subscription:
All person who subscribe their name to the memorandum are deemed to the members of the company. such share holders must take their shares direct form company and pay calls duly made on them.
II. Membership by application:
A person may become shareholder of a company by filing an application to the company. the application is regarded as offer form the applicant and the acceptance is communicated to the application by giving him a notice of allotment.
(a) Revocation of application:
The applicant can revoke his application before the notice of allotment is put in course of transmission to him.
(b) Types of application:
I. Simple: There is on condition in simple application.
II. Conditional: If there is any condition, the allotment must be made on the basis of conditions specified.
III. Membership by transfer: A person can become member of a company by transfer of shares. the shares of a company are moveable property and freely transferable. so by transfer of shares a person can become shareholder or member of a company.
IV. Membership by succession: The heirs of a deceased shareholder or the official assignee become entitled to be members in place of a deceased or an insolvent.
V. Membership by acquiescence or estoppels:
A person may be deemed to be a member of a company if he allows his name to be on the register of member or otherwise holds out as a member. the liability arises form his assent to remain on the register and he is estoppeld form denying that he is registered with his consent.
6. Ways to cease to be a member:
A person may ceased to be a member in one of the following ways:
I. By transfer of shares: A shareholder who transfers his shares to another person is ceased to be member of the company.
II. Forfeiture of shares: If shares of the member are forfeiture then, he is ceased to be member of the company.
III. Surrender of shares By valid surrender of shares a member may cease to be member of the company.
IV. Sale by company: By sale the company in existence of its lien over his shares a person may be ceased to be member.
V. Death of share holder: By the death of the shareholder, his shares would be transmitted to his personal representatives.
VI. Insolvency of shareholder: In case of insolvency of shareholder, he may be ceased to be member of the company:
VII. Winding up of company: On winding up of the company a member is ceased to be shareholder of the company.
VIII Rescission of the contract: On rescission of the contract of membership on the ground of misrepresentation or mistake a person may be ceased to be member of the company
7. Conclusion:
company is a voluntary association formed by people to carry on a certain business for profit. there who contribute their capital in the forms of shares are shareholders of the company. there are no qualification for membership prescribed by the companies ordinance 1984. the provisions of contract act are applicable.
Process of formation of a company | How to form a Company?
Ans: The process of formation of a company can be discussed and divided in following four stages:
1)Promotion,
2)Incorporation..or..Registration,
3)CapitalSubscription,
4) Commencement of Business
1)Promotion,
2)Incorporation..or..Registration,
3)CapitalSubscription,
4) Commencement of Business
Of these stages only two are necessary for the formation of a private company and of a public company not having any share capital. They may commence business immediately after they have received a certificate of incorporation. But a public company having a share capital has to pass through all the above mentioned four stages before it can commence business or exercising any borrowing powers.
1. Promotion:
Before a company can be formed, there must be some persons who intend to form a company and who take the necessary steps to carry that intention into operation. Such persons are called promoters. The promoter is a person “who The promotion is the first stage in the formation of the company. 2. Incorporation of a Company:
Any seven or more persons or where the company to be formed will be a private company, any two or more persons, associated for any lawful purpose may, by subscribing their name to a memorandum of associations and otherwise complying with the requirement of this Act in respect of registration, form an incorporated company, with or without limited liability. a. Documents to be filed for registration: After ascertaining the availability of name, the promoter should prepare the following documents and file with the registrar of companies:
I. Memorandum of Association:
The memorandum of association is the charter of the company. This includes its objectives, its name, the address of its registered office, the capital which the company is authorized by law, the nature of members as well as the names, addresses and agreement of people who agree to form a company.
II. Articles of Association:
The other important document is the articles of association which contains the rules and regulations relating to the internal management of the company. However, it is not necessary for a public company limited by shares to file the Articles of Association. If such public company does not file Articles of
Association, it is deemed to have adopted “Table A” of schedule I of the Act.
Association, it is deemed to have adopted “Table A” of schedule I of the Act.
III. Copy of proposed agreement: If a company purposes to enter into an agreement with any individual for appointment as a Managing Director, or a whole-time director or manager, a copy of such an agreement should also be filed with the Registrar of companies.
IV. Consent of Directors: According to Section 266, in the case of a public limited company having share capital, a person cannot be appointed as a Director by the Articles of Association unless, he has, before the registration of the articles, either himself or through his agent, signed and filed, with the registrar his consent in writing to act as Director.
3. Certificate of Commencement of Business: A private company can commence business immediately after incorporation. However, in the case of companies other than the private company and a company having no share capital, further requirement is to be compiled with, namely, obtaining ‘a certificate of commencement of business’ before it can commence its business.
Q cheque and bill of exchange
1.Introduction:
The negotiable instrument act recognized only three instrumentviz., a bill of exchange a cheque and a promissory not. a bill ofexchange is an instrument in writing containing an unconditional order signed by the maker directing to pay a certain sum ofmoney to a certain person or bearer. a cheque is a written order of a depositor upon a bank to the designate party or bearer a specified sum of money on demand.
2. Definition of a cheque: According to Sec 6.
"A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand."
3. Explanation: The person who draws a cheque is called drawer and person to whom the cheque is made payable is called payee and the bank upon which the cheque is drawn is known as drawee.
4. Kinds of cheque:
(i) Bearer cheque. (ii) open cheque.
(iii) order cheque. (iv) Crossed cheque.
(v) Traveller's cheque.
5. Essentials of a cheque:
Following are the essentials of a cheque.
I. Written: The cheque must be in writing.
II. Unconditional: It contain an unconditional order to pay.
III. Signature of the drawer: It should contains the signature of the drawer.
IV. Certain sum of money: It contains a certain sum of money.
V. Upon a bank: Cheque is an order of a depositor upon a bank.
VI. Payable on demand: It must be payable on demand.
VII. Certain person: It must be payable to a certains person.
6. Bill of exchange:
I. Definition: According to Sec. 5.
"A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at a fixed or determinable future time a certain sum of money only to or order of a certain person or the bearer of the instrument."
Explanation: The person who makes the bill is called drawer. the person who is directed to pay is the drawee. the person to whom the payment is to be made is called payee.
III. Essentials:
(i) Written:vThe bill of exchange must be in writing it may be written in any language.
(ii) Unconditional order: The order contained in the bill of exchange must be unconditional.
(iii) Signed by the drawer: Bill of exchange must be signed by the drawer.
(iv) The drawee must be a certain person:
The drawee of a bill of exchange must be a certain person. his name should be mentioned in it.
(v) The payee must be a certain person:
The payee of the bill also be a certain person.
(vi) The sum payable must be certain:
The sum payable must be certain and definite.
(vii) Pakistani currency:
The sum payable must be in Pakistani currency.
(viii) Other legal formalities:
(i) It should be dated.
(ii) Name of place where it is drawn.
(iii) It should be attested.
(iv) It should be properly stamped.
7. Distinction between cheque and a bill of exchange:
I. Drawee:
A cheque is always drawn on a specified bank.
A bill may be drawn on any person including a banker.
II. Payable on demand:
A cheque is drawn payable on demand.
A bill of exchange is drawn payable on demand or expiry of certain period.
III. Condition of acceptance:
A cheque does not require an acceptance by the drawee.
A bill of exchange requires acceptance by the drawee.
IV. As to revocation:
A cheque can be revoked by the drawer.
Bill of exchange cannot be revoked.
V. Payable to bearer on demand:
A cheque drawn payable to bearer on demand is valid.
A bill of exchange drawn payable to bearer on demand is not valid.
VI. As to stamps:
A cheque does not require any stamps.
A bill of exchange is stamped according to the stamp act.
VII. As to crossing:
A cheqye may be crossed.
A bill of exchange can not be crossed.
VIII. As to notice of dishonouer:
When cheque is dishonoured no notice is required.
When a bill of exchange is dishonour notice is required to all the parties.
IX. As to noting or protest:
In cheque there is no need of noting and protest.
In bill of exchange, there is need of noting and protest.
X. Grace period:
There is no grace period in a cheque.
There grace days are allowed in calculating the maturity date of the bill of exchange.
8. Conclusion:, a cheque is a written order of a depositor upon a bank to pay that designated party or bearer a specified sum of money on demand where as a bill of exchangeis an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or order of a certain person or bearer ofinstrument. a cheques mainly drawn to minimize the use of metallic money. in both instruments three parties are involved.
The negotiable instrument act recognized only three instrumentviz., a bill of exchange a cheque and a promissory not. a bill ofexchange is an instrument in writing containing an unconditional order signed by the maker directing to pay a certain sum ofmoney to a certain person or bearer. a cheque is a written order of a depositor upon a bank to the designate party or bearer a specified sum of money on demand.
2. Definition of a cheque: According to Sec 6.
"A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand."
3. Explanation: The person who draws a cheque is called drawer and person to whom the cheque is made payable is called payee and the bank upon which the cheque is drawn is known as drawee.
4. Kinds of cheque:
(i) Bearer cheque. (ii) open cheque.
(iii) order cheque. (iv) Crossed cheque.
(v) Traveller's cheque.
5. Essentials of a cheque:
Following are the essentials of a cheque.
I. Written: The cheque must be in writing.
II. Unconditional: It contain an unconditional order to pay.
III. Signature of the drawer: It should contains the signature of the drawer.
IV. Certain sum of money: It contains a certain sum of money.
V. Upon a bank: Cheque is an order of a depositor upon a bank.
VI. Payable on demand: It must be payable on demand.
VII. Certain person: It must be payable to a certains person.
6. Bill of exchange:
I. Definition: According to Sec. 5.
"A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at a fixed or determinable future time a certain sum of money only to or order of a certain person or the bearer of the instrument."
Explanation: The person who makes the bill is called drawer. the person who is directed to pay is the drawee. the person to whom the payment is to be made is called payee.
III. Essentials:
(i) Written:vThe bill of exchange must be in writing it may be written in any language.
(ii) Unconditional order: The order contained in the bill of exchange must be unconditional.
(iii) Signed by the drawer: Bill of exchange must be signed by the drawer.
(iv) The drawee must be a certain person:
The drawee of a bill of exchange must be a certain person. his name should be mentioned in it.
(v) The payee must be a certain person:
The payee of the bill also be a certain person.
(vi) The sum payable must be certain:
The sum payable must be certain and definite.
(vii) Pakistani currency:
The sum payable must be in Pakistani currency.
(viii) Other legal formalities:
(i) It should be dated.
(ii) Name of place where it is drawn.
(iii) It should be attested.
(iv) It should be properly stamped.
7. Distinction between cheque and a bill of exchange:
I. Drawee:
A cheque is always drawn on a specified bank.
A bill may be drawn on any person including a banker.
II. Payable on demand:
A cheque is drawn payable on demand.
A bill of exchange is drawn payable on demand or expiry of certain period.
III. Condition of acceptance:
A cheque does not require an acceptance by the drawee.
A bill of exchange requires acceptance by the drawee.
IV. As to revocation:
A cheque can be revoked by the drawer.
Bill of exchange cannot be revoked.
V. Payable to bearer on demand:
A cheque drawn payable to bearer on demand is valid.
A bill of exchange drawn payable to bearer on demand is not valid.
VI. As to stamps:
A cheque does not require any stamps.
A bill of exchange is stamped according to the stamp act.
VII. As to crossing:
A cheqye may be crossed.
A bill of exchange can not be crossed.
VIII. As to notice of dishonouer:
When cheque is dishonoured no notice is required.
When a bill of exchange is dishonour notice is required to all the parties.
IX. As to noting or protest:
In cheque there is no need of noting and protest.
In bill of exchange, there is need of noting and protest.
X. Grace period:
There is no grace period in a cheque.
There grace days are allowed in calculating the maturity date of the bill of exchange.
8. Conclusion:, a cheque is a written order of a depositor upon a bank to pay that designated party or bearer a specified sum of money on demand where as a bill of exchangeis an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or order of a certain person or bearer ofinstrument. a cheques mainly drawn to minimize the use of metallic money. in both instruments three parties are involved.
Q. Write a note on articles of association and memorandum of association of public limited company drawing a distinction between the two (2003)
1. Introduction:
1. Introduction:
The memorandum of association and articles association are important document for the formation of company these documents are basic legal documents of a company.
2. Articles of association:
Articles of association is a document in which rules and regulations are written which governors the internal administration of a company. in other words, it is concerned with the procedural matters in the routine conduct of the affairs of the company.
3. Importance of articles of association:
It has much importance because the rights of the members of the company among themselves, and the manner in which the business of the company shall be conducted.
4. Contents of articles of association:
following are the main contract of article of association.
1. Amount of capital and its division into various shares.
2. Rights regarding the different shares holders.
3. Rules regarding transfer of shares.
4. Calls on shares.
5. Appointment of directors.
6. Powers and duties of director.
7. Alteration of capital.
8. The functions and powers of managing agents.
9. Number, qualification, remuneration and liabilities of directors.
10. Procedure of disposing of company.
11. Stamp of company.
12. Voting right of Share-holder.
13. Procedure for winding up of company.
14. Declaration of dividend.
15. Rules regarding the forfeiture and surrender of shares.
16. Proceeding of Share holders meeting.
17. Convening and conduct of meetings with reference to notice, quorum, poll, proxy, resolutions etc.
18. Procedure for winding up of company.
5. Memorandum of association:
Memorandum of association is a basic document of a company. it is also called charter of the company memorandum of association sets the limits outside which the company cannot go.
(a) Purpose:
The main purpose of memorandum of association is to enable, shareholders, creditors and all those who concerned with the company to know what is the permitted range of the enterprise.
6. Contents of memorandum of Association:
Following are the main contents of memorandum of association.
1. Name of the company.
2. Place of registered office.
3. Objects of the company.
4. Liability of the shareholders of the company.
5. Total amount of share capital which is called authorized or registered capital.
7. Difference between articles of association and memorandum of association:
I. As to alteration: M. O. A is regarded unalterable document in it. A O A is regarded alterable document company can change conditions mentioned in it at any time.
II. As to subordination: M. O. A is like a controller of company. A. O. A is the subordinate to M. O. A.
III. As to importance: M. O. A has primary importance. A. O. A has the secondary importance in the formation of the company.
IV. As to compulsion: M. O. A is a compulsory document for formation of company.
A. O. A is optional document for formation of company.
V. As to clauses: M. O. A has usually six clauses.
A. O. A has many clauses. table A of the companies ordinance has 85 clauses.
VI. As to legal effect: Any act beyond the limit of M. O. A is illegal. Any act beyond the limit of A. O. A is not illegal.
VII. As to object: M. O. A lays down the objects of the company. A. O. A contains the procedure for achieving objects.
VIII. As to limits business: M. O A determines the company business. Business limits are not mentioned in A. O. A
IX. As to nature: M. O. A is the charter of the company which defines the internal powers of the company. A. O. A contains the rules and regulation for internal management.
X. As to relation: M. O. A defines the relationship between company and out sides. A. O. A defines the relationship between management and shareholders.
XI. As to rights and duties: In M.O.A rights and duties of company are ascertained. An A.O.A right and duties of members and directors are ascertained.
XII. As to certificate of commencement:
M.O.A is essential for getting certificate of commencement. A.O.A is not essential for getting certificate of commencement.
XIII. As to incorporation: M.O.A contains the conditions upon which the company is granted incorporation. A.O.A gives a final touch to the conditions described in it.
XIV. As to scope: M.O.A. has wider scope. A.O.A has lessor scope.
XV. As to registration: M.O.A has to be registered in case of company limited by shares. It is not compulsory to register A.O.A.
XVI As to permission for alteration:
For alteration of M.O.A prior permission is to be given by federal govt. There is no need of permission for alteration in A.O.A
8. Conclusion:
Memorandum of association is a document which sets out the constitution of a company. it defines its relation with outside world and the scope of its activities. where as articles of association are the rules made by the company for internal management of its affairs and for carrying out the objects of the company. memorandum of association and articles of association must be filed in registrar's office for the registration and incorporation of a company.
Articles of association is a document in which rules and regulations are written which governors the internal administration of a company. in other words, it is concerned with the procedural matters in the routine conduct of the affairs of the company.
3. Importance of articles of association:
It has much importance because the rights of the members of the company among themselves, and the manner in which the business of the company shall be conducted.
4. Contents of articles of association:
following are the main contract of article of association.
1. Amount of capital and its division into various shares.
2. Rights regarding the different shares holders.
3. Rules regarding transfer of shares.
4. Calls on shares.
5. Appointment of directors.
6. Powers and duties of director.
7. Alteration of capital.
8. The functions and powers of managing agents.
9. Number, qualification, remuneration and liabilities of directors.
10. Procedure of disposing of company.
11. Stamp of company.
12. Voting right of Share-holder.
13. Procedure for winding up of company.
14. Declaration of dividend.
15. Rules regarding the forfeiture and surrender of shares.
16. Proceeding of Share holders meeting.
17. Convening and conduct of meetings with reference to notice, quorum, poll, proxy, resolutions etc.
18. Procedure for winding up of company.
5. Memorandum of association:
Memorandum of association is a basic document of a company. it is also called charter of the company memorandum of association sets the limits outside which the company cannot go.
(a) Purpose:
The main purpose of memorandum of association is to enable, shareholders, creditors and all those who concerned with the company to know what is the permitted range of the enterprise.
6. Contents of memorandum of Association:
Following are the main contents of memorandum of association.
1. Name of the company.
2. Place of registered office.
3. Objects of the company.
4. Liability of the shareholders of the company.
5. Total amount of share capital which is called authorized or registered capital.
7. Difference between articles of association and memorandum of association:
I. As to alteration: M. O. A is regarded unalterable document in it. A O A is regarded alterable document company can change conditions mentioned in it at any time.
II. As to subordination: M. O. A is like a controller of company. A. O. A is the subordinate to M. O. A.
III. As to importance: M. O. A has primary importance. A. O. A has the secondary importance in the formation of the company.
IV. As to compulsion: M. O. A is a compulsory document for formation of company.
A. O. A is optional document for formation of company.
V. As to clauses: M. O. A has usually six clauses.
A. O. A has many clauses. table A of the companies ordinance has 85 clauses.
VI. As to legal effect: Any act beyond the limit of M. O. A is illegal. Any act beyond the limit of A. O. A is not illegal.
VII. As to object: M. O. A lays down the objects of the company. A. O. A contains the procedure for achieving objects.
VIII. As to limits business: M. O A determines the company business. Business limits are not mentioned in A. O. A
IX. As to nature: M. O. A is the charter of the company which defines the internal powers of the company. A. O. A contains the rules and regulation for internal management.
X. As to relation: M. O. A defines the relationship between company and out sides. A. O. A defines the relationship between management and shareholders.
XI. As to rights and duties: In M.O.A rights and duties of company are ascertained. An A.O.A right and duties of members and directors are ascertained.
XII. As to certificate of commencement:
M.O.A is essential for getting certificate of commencement. A.O.A is not essential for getting certificate of commencement.
XIII. As to incorporation: M.O.A contains the conditions upon which the company is granted incorporation. A.O.A gives a final touch to the conditions described in it.
XIV. As to scope: M.O.A. has wider scope. A.O.A has lessor scope.
XV. As to registration: M.O.A has to be registered in case of company limited by shares. It is not compulsory to register A.O.A.
XVI As to permission for alteration:
For alteration of M.O.A prior permission is to be given by federal govt. There is no need of permission for alteration in A.O.A
8. Conclusion:
Memorandum of association is a document which sets out the constitution of a company. it defines its relation with outside world and the scope of its activities. where as articles of association are the rules made by the company for internal management of its affairs and for carrying out the objects of the company. memorandum of association and articles of association must be filed in registrar's office for the registration and incorporation of a company.
What are the Kinds of Companies?
Classification on the basis of liability
1. Companies with limited liability
(a) Companies limited by shares- where the liability of the members of a company is limited to the amount unpaid on the shares, such a company is known as a company limited by shares
(b) Companies limited by guarantee- where the liability of the members of a company is limited to a fixed amount which the members undertake to contribute to the assets of the company in the event of its being wound up, the company is called a company limited b guarantee.
2. Unlimited companies- A company without limited liability is known as an unlimited company. In case of such a company, every member is liable for the debts of the company.
Classification on the basis of number of members
Private company-a private company is normally what the Americans call a ‘close corporation’. According to Section 3(1), a private company means a company which has a minimum paid-up capital of Rs. 1,00,000 or such higher paid-up capital as may be prescribed, and by its Articles-
(i) restricts the right to transfer its shares, if any. The restriction is meant to preserve the private character of the company
(ii) limits the number of its members to 50 not including its employee-members
(iii) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company
(iv) prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.
Ever private company, existing on the commencement of the Companies(Amendment)Act, 2000, with a paid-up capital of less than Rs. 1,00,000 shall, within a period of 2 years from such date of commencement, enhance its paid up capital to Rs. 1,00,000.
Public company- A public company means a company which –
(i) has a minimum paid-up capital of Rs. 5 lakh or such higher paid-up capital, as may be prescribed
(ii) is a private company which is a subsidiary of a company which is not a private company.
Ever public company, existing on the commencement of the Companies(Amendment)Act, 2000, with a paid-up capital of less than Rs. 5,00,000 shall, within a period of 2 years from such date of commencement, enhance its paid up capital to Rs. 5,00,000.
Classification on the basis of control
Holding company-Section 4(4)- a company is known as the holding company of another company if is has control over that other company
1.Subsidiary company-Section 4(1)—a company is known as a subsidiary of another company when control is exercised by the latter(called holding company) over the former called a subsidiary company.
A company is deemed to be a subsidiary of another company when-
(i) where the company controls the composition of Board of Directors of the subsidiary company
(ii) where the company holds more than half the nominal value of equity share capital of another company
(iii) where a company is subsidiary of another company, which is itself is subsidiary of the controlling company.
Classification on the basis of ownership
1.Government company-a Government company means any company in which not less than 51 % of the paid-up share capital is held by-
(i) the Central government
(ii) any State government or governments
(iii) partly by the Central government and partly by one or more State governments.
2.Non-government company
Foreign company- it means any company incorporated outside India which has an established place of business in India. (Section 591(1)
Q. Define a public Ltd company and a private ltd company and draw a distinction between the two.
Q. Define a private company. how does a private company differs from a public company
Q. Define a private company. how does a private company differs from a public company
1. Introduction:
A company is an association of a number of individuals formed for some common purpose. most of the present day companiesare incorporated under companies ordinance 1985. a company is capable of holding property, incurring debts, and suiting and being sued in the same manner as an individual.
S. E Thomas: According to S. E Thomas
"A company is an an incorporated association of persons formed usually for the pursuit of some commercial purpose."
3. Kinds of company:
According to companies ordinance following are different kinds.
a) Company Limited by shares.
b) Company Limited by Guarantee
c) Un-limited company (d) Holding company
e) Subsidiary company (f) Private company
g) Insurance company (h) Company not for profit
i) Single member private company (SMC)
Through amendment in companies ordinance (2002)
4. Private company :
Private company means a company which its articles.
(i) Restrict the rights to transfer its shares, if any.
(ii) Limits the number of its member two fifty not including person who are not employ of the company and as a singlemember.
5. Public company:
According to sec 2 (30) of the companies ordinance public company means a company which is not a private company. it is required to have at least seven members and seven directors appointed accordingly.
Distinguish between private company and public company:
Differences
A company is an association of a number of individuals formed for some common purpose. most of the present day companiesare incorporated under companies ordinance 1985. a company is capable of holding property, incurring debts, and suiting and being sued in the same manner as an individual.
S. E Thomas: According to S. E Thomas
"A company is an an incorporated association of persons formed usually for the pursuit of some commercial purpose."
3. Kinds of company:
According to companies ordinance following are different kinds.
a) Company Limited by shares.
b) Company Limited by Guarantee
c) Un-limited company (d) Holding company
e) Subsidiary company (f) Private company
g) Insurance company (h) Company not for profit
i) Single member private company (SMC)
Through amendment in companies ordinance (2002)
4. Private company :
Private company means a company which its articles.
(i) Restrict the rights to transfer its shares, if any.
(ii) Limits the number of its member two fifty not including person who are not employ of the company and as a singlemember.
5. Public company:
According to sec 2 (30) of the companies ordinance public company means a company which is not a private company. it is required to have at least seven members and seven directors appointed accordingly.
Distinguish between private company and public company:
Differences
I. As to member:
In private Ltd company minimum 2 partners maximum 50.
In public Ltd Company minimum 7 members but maximum no limited but according to their shares.
II. As to sale shares:
In private Ltd company minimum 2 partners maximum 50.
In public Ltd Company minimum 7 members but maximum no limited but according to their shares.
II. As to sale shares:
Private company can not sell it share.
public company can sell its share to public.
III. As to transfer of shares:
Shares of private Ltd company are not transferable.
Shares of public Ltd company are easily transferable.
IV. As to books of Accounts:
Books of accounts are maintained in private company. While Books of accounts must be maintained in public company.
V. As to statutory meeting:
In private Ltd company there is no need to hold statutory meeting. It is compulsory to hold statutory meetings in public Ltd company.
VI. As to payment of tax:
In private Ltd company tax is paid by the company on whole profit.
In public company double tax is paid first by the company and second by the individual on its income.
VII: As to dissolution:
There is separate procedure for dissolution of private Ltd company.
Public Ltd company can easily dissolved under the companiesordinance 1948.
VIII. As to title:
Private company uses the word private limited with its name.
Public company uses the word public limited with its name.
6. Conversion of a public limited company into a private limited company:
A public company may be converted into a private company by suitable in the articles of association.
7. Main features of company:
(i) A company has legal separate legal entity.
(ii) Property of a company belongs to its company and not to its individual.
(iii) A member of a company is never deemed to be an agent of company.
(iv) Company's shares are transferable.
(v) The liability of shareholders of company is limited.
(vi) profit is distributed according to the article of association.
(vii) It possesses a long life.
(viii) Authorized capital is mentioned in the memorandum of association.
8. Conclusion:
To conclude I can say that a company is voluntary association for profit with capital divisible into transferable share limited liability having a corporate body and common seal. if such
public company can sell its share to public.
III. As to transfer of shares:
Shares of private Ltd company are not transferable.
Shares of public Ltd company are easily transferable.
IV. As to books of Accounts:
Books of accounts are maintained in private company. While Books of accounts must be maintained in public company.
V. As to statutory meeting:
In private Ltd company there is no need to hold statutory meeting. It is compulsory to hold statutory meetings in public Ltd company.
VI. As to payment of tax:
In private Ltd company tax is paid by the company on whole profit.
In public company double tax is paid first by the company and second by the individual on its income.
VII: As to dissolution:
There is separate procedure for dissolution of private Ltd company.
Public Ltd company can easily dissolved under the companiesordinance 1948.
VIII. As to title:
Private company uses the word private limited with its name.
Public company uses the word public limited with its name.
6. Conversion of a public limited company into a private limited company:
A public company may be converted into a private company by suitable in the articles of association.
7. Main features of company:
(i) A company has legal separate legal entity.
(ii) Property of a company belongs to its company and not to its individual.
(iii) A member of a company is never deemed to be an agent of company.
(iv) Company's shares are transferable.
(v) The liability of shareholders of company is limited.
(vi) profit is distributed according to the article of association.
(vii) It possesses a long life.
(viii) Authorized capital is mentioned in the memorandum of association.
8. Conclusion:
To conclude I can say that a company is voluntary association for profit with capital divisible into transferable share limited liability having a corporate body and common seal. if such
Q Director and its liability and powers?
1. Introduction:
A company is an artificial person. therefore, its ownership is separated from the management. the shareholders who are the owner of the company do not take part in the management of the company directly but they elect their representatives to run business. these elected representative are called "director of the company."
2. Definition of director:
Under companies ordinance 1984 "director" includes any person occupying the position of a director, by whatever name called.
3. Number of directors:
(a) Private company:
Every private company must have not less than two directors.
(b) Public company:
Every public company must not have less than seven directors.
4. Board of directors:
The board of directors is the top management of the company and representative the interest of shareholders. the board of directors sets and general policy for the company.
5. Appointment of directors:
Directors are appointed according to the following.
I. By promoters:
The first director of the company are elected by promoters.
II. By subscribers:
If there is no provision in the articles regarding the first director then the subscribers of the company are deemed to be directors.
III. By shareholders:
The shareholders in annual general meeting may appointed directors.
IV. By directors:
A causal vacancy of any director may be filled by the board of directors.
V. By creditors:
The creditors of the company may also nominate any person as the director of the company.
6. Qualification of director:
According to the companies ordinance of the company.
(i) A whole time director who is the employee of the company.
(ii) A chief executive.
(iii) A person representing a creditor.
(iv) Any person other than artificial person.
7. Ineligibility of certain person to become director:
Following persons can become director of any company.
(i) A, minor.
(ii) Person of unsound mind.
(iii) One who has applied to be adjudicated as an insolvent and his application is pending.
(iv) A person convicted by a court of law for an offence involving moral turpitude.
(v) Any person who has been debarred from holding such office under any provision of the companies ordinance.
(vi) A person who is not the member of the company.
8. Powers of directors:
I. Power without the consent of general meetings:
(i) To issue shares.
(ii) To issue debentures.
(iii) To obtain loans form other source other than debentures.
(iv) To invest the funds of company.
(v) To make calls for unpaid money of shares.
(vi) To approve the bonus for employees.
(vii) To determine the dividend.
(viii) To pay government expenditure.
(ix) To pass the company,s annual or other periodic accounts.
(x) To fill the vacant seats of directors.
(xi) To allot the shares.
(xii) To make contract on behalf of the company.
(xiii) To transfer a part of a profit to reserve fund.
(xiv) To forfeit shares of member.
(xvi) To perform any other function in the interest of the company.
II. Powers with the consent of general meeting:
Following power may be exercised with the consent of annul general meeting.
(i) To sell or to give the whole business on lease or a sizeable part there of.
(ii) To give any relief or extension of time for the repayment of any debt outstanding against any person.
9. Duties of director:
(i) Director make the arrangement to conduct the company,s meetings.
(ii) Director prevent the misuse of capital.
(iii) Director should submit the constitutional of company, s meetings.
(iv) Director make arrangement for the payment of divident to shareholder.
(v) Director keep check to stop the wrong payment.
(vi) Director form the policies.
10. Liabilities of director:
Liabilities of director may be limited or unlimited.
I. Liability to outsiders:
A director may be made liable to an outsider in case of an ultra vires transaction, on an implied warranty of authority.
II. Liability to the company:
The liability of directors towards the company may arise.
(i) In case of negligence.
(ii) Breach of trust imposed on them by the company.
(iii) From misfeasance.
III. Criminal liability:
The companies ordinance imposes penalities upon the directors for omitting to comply with provisions of the ordinance.
11. Position of director:
The directors are trustee as well as agents of the company.
12. Term of office of director:
Director shall hold office for a period of three years.
13. Remuneration:
The remuneration is provided according to the articles of association of there may be an express agreement regarding there to.
14. Vacation of office of director:
Under the following circumstances the office of director vacant.
(i) At the time of first general meeting, the first director of the company resign his post.
(ii) If any director fails to obtain his qualification shares.
(iii) He becomes unsound mind.
(iv) If he is declared unsound mind.
(v) If the shareholders of the company terminate any director by passing extra ordinary resolution.
(vi) If any director resign voluntarily.
(vii) If any director is not performing his duties according to the article of associations.
(viii) If any director completes fixed duration of his post.
(ix) If director remains absent from three consecutives meeting of the board of directors without notice.
(x) If he works against the interest of the company.
15. Removal of director:
A company may by resolution general meeting remove a director appointed under Sec 176 or Sec 180 or under sec 178 of the companies ordinance.
16. Conclusion:
share holders are the actual proprietors of the company but their role in the management of the company is not worth mentioning. the shareholders elect directors to run the business of the company. the directors act as a board. they may meet together for, the dispatch of business, adjurn and otherwise regulate the meeting as they deem fit. they are trustee and agents of the company.
A company is an artificial person. therefore, its ownership is separated from the management. the shareholders who are the owner of the company do not take part in the management of the company directly but they elect their representatives to run business. these elected representative are called "director of the company."
2. Definition of director:
Under companies ordinance 1984 "director" includes any person occupying the position of a director, by whatever name called.
3. Number of directors:
(a) Private company:
Every private company must have not less than two directors.
(b) Public company:
Every public company must not have less than seven directors.
4. Board of directors:
The board of directors is the top management of the company and representative the interest of shareholders. the board of directors sets and general policy for the company.
5. Appointment of directors:
Directors are appointed according to the following.
I. By promoters:
The first director of the company are elected by promoters.
II. By subscribers:
If there is no provision in the articles regarding the first director then the subscribers of the company are deemed to be directors.
III. By shareholders:
The shareholders in annual general meeting may appointed directors.
IV. By directors:
A causal vacancy of any director may be filled by the board of directors.
V. By creditors:
The creditors of the company may also nominate any person as the director of the company.
6. Qualification of director:
According to the companies ordinance of the company.
(i) A whole time director who is the employee of the company.
(ii) A chief executive.
(iii) A person representing a creditor.
(iv) Any person other than artificial person.
7. Ineligibility of certain person to become director:
Following persons can become director of any company.
(i) A, minor.
(ii) Person of unsound mind.
(iii) One who has applied to be adjudicated as an insolvent and his application is pending.
(iv) A person convicted by a court of law for an offence involving moral turpitude.
(v) Any person who has been debarred from holding such office under any provision of the companies ordinance.
(vi) A person who is not the member of the company.
8. Powers of directors:
I. Power without the consent of general meetings:
(i) To issue shares.
(ii) To issue debentures.
(iii) To obtain loans form other source other than debentures.
(iv) To invest the funds of company.
(v) To make calls for unpaid money of shares.
(vi) To approve the bonus for employees.
(vii) To determine the dividend.
(viii) To pay government expenditure.
(ix) To pass the company,s annual or other periodic accounts.
(x) To fill the vacant seats of directors.
(xi) To allot the shares.
(xii) To make contract on behalf of the company.
(xiii) To transfer a part of a profit to reserve fund.
(xiv) To forfeit shares of member.
(xvi) To perform any other function in the interest of the company.
II. Powers with the consent of general meeting:
Following power may be exercised with the consent of annul general meeting.
(i) To sell or to give the whole business on lease or a sizeable part there of.
(ii) To give any relief or extension of time for the repayment of any debt outstanding against any person.
9. Duties of director:
(i) Director make the arrangement to conduct the company,s meetings.
(ii) Director prevent the misuse of capital.
(iii) Director should submit the constitutional of company, s meetings.
(iv) Director make arrangement for the payment of divident to shareholder.
(v) Director keep check to stop the wrong payment.
(vi) Director form the policies.
10. Liabilities of director:
Liabilities of director may be limited or unlimited.
I. Liability to outsiders:
A director may be made liable to an outsider in case of an ultra vires transaction, on an implied warranty of authority.
II. Liability to the company:
The liability of directors towards the company may arise.
(i) In case of negligence.
(ii) Breach of trust imposed on them by the company.
(iii) From misfeasance.
III. Criminal liability:
The companies ordinance imposes penalities upon the directors for omitting to comply with provisions of the ordinance.
11. Position of director:
The directors are trustee as well as agents of the company.
12. Term of office of director:
Director shall hold office for a period of three years.
13. Remuneration:
The remuneration is provided according to the articles of association of there may be an express agreement regarding there to.
14. Vacation of office of director:
Under the following circumstances the office of director vacant.
(i) At the time of first general meeting, the first director of the company resign his post.
(ii) If any director fails to obtain his qualification shares.
(iii) He becomes unsound mind.
(iv) If he is declared unsound mind.
(v) If the shareholders of the company terminate any director by passing extra ordinary resolution.
(vi) If any director resign voluntarily.
(vii) If any director is not performing his duties according to the article of associations.
(viii) If any director completes fixed duration of his post.
(ix) If director remains absent from three consecutives meeting of the board of directors without notice.
(x) If he works against the interest of the company.
15. Removal of director:
A company may by resolution general meeting remove a director appointed under Sec 176 or Sec 180 or under sec 178 of the companies ordinance.
16. Conclusion:
share holders are the actual proprietors of the company but their role in the management of the company is not worth mentioning. the shareholders elect directors to run the business of the company. the directors act as a board. they may meet together for, the dispatch of business, adjurn and otherwise regulate the meeting as they deem fit. they are trustee and agents of the company.
Q memorandum of association?
1. Introduction:
There are there basic legal documents issued by a companythese are.
(i) Memorandum of association.
(ii) Article of association.
(iii) Prospectus.
Memorandum of association is one of the basic documents of the company. it is knows as charter of the company. it sets out the limits out side which company cannot go memorandum of association defines the constitution of the company. it contains the fundamental conditions upon which a company is registered.
2. Definition memorandum of association:
It is document which sets out the constitution of the company. it is foundation on which the structure of the company is based.
3. Definition under companies ordinance 1984:
Sec 16 of the companies ordinance 1948. memorandum means the memorandum of association of a company as originally framed or as altered in pursuance of the provisions of this ordinance.
4. Importance of memorandum of association:
The memorandum of association is the charter of the company. it defines the limitation and powers. it is a document which regulate the external affairs of the company.
5. Purpose:
The main purpose of memorandum of association is to enable share holders, creditors and all those who concerned with thecompany to know what is permitted range of the enterprise.
6. Form of memorandum of association:
Memorandum of association should be in printed form and divided into various paragraphs and signed by the prescribes in the presence of witnesses.
7. Alteration in memorandum of association:
Memorandum of association is considered as unalterable document. but it can be amended by passing special resolution and with sanction of court of central government.
8. Time place for filing memorandum of association:
Memorandum of association is to be filed with the registrar at the time of formation of a company.
9. Clauses of memorandum of association:
I. Name clause:
This clause states the name of the company. a company may select any name but it should not resemble the name of any other company. the companies ordinance 1984 provides that the name of the company must end with the word limited. so that all persons dealing with the company must know that their liability is limited to the extent of their shares.
(a) Restriction:
Any name may be chosen subject to the following restrictions:
The words expressing or implying the patronage of any Pakistani or foreign head of state or provincial government federal Govt, or any of their authority or corporation cannot be used.
(i) Exception:
Such name can be used with the permission of commission.
(b) Examples:
Examples of such words are "Royal", "Imperial", "State". reserve "bank", "Municipal", "charted" etc.
(c) Appearance of name:
The name of the company must appear or every office or place of business of company in a conspicuous manner and on all cheques, bills, notices, advertisement, etc of the company.
(d) Change of name of the company:
The name of the company can be changed at any time subject to the following conditions:
(i) A special resolution is passed.
(ii) Approval in writing of the registrar is obtained.
(iii) Registrar notified the new name and issues a certificate.
II. Situation clause:
It is also known as domicile clause. the memorandum muststate the name of the place of business of the company. thecompany must have a registered office and its place must be notified to the registrar.
(a) Change of place of registered office:
(i) Form province to province:
Registered office of the company may be changed by passing a special resolution and obtaining the confirmation of the commission.
(ii) From town to town in the same province:
The place of registered office of the company may be changed from one town to another town with in the same province by special resolution and a notice to the registrar without any confirmation of the commission.
III. Object clause:
The statement of objects defines the sphere of the companyactivities. it determines and restricts the powers of thecompany. the object clause offer protection to the shareholders by ensuring them that amount collected for undertaking is not risked in any other undertaking.
(i) Scope of objects:
The company can have any object provided that it is not contrary to law.
(ii) Act done out side the objects:
The company cannot do any thing outside the powers specified in the object clause.
(a) Effect:
Any thing so done is ultra vires (beyond the powers of) thecompany and hence void.
IV. Liability clause:
The fourth clause in a memorandum of association is a statement that liability of the company is limited to the extent of the shares purchased by them.
(a) Exception:
If however the number of members of the company is reduced.
(i) In case of a private company below 2.
(ii) In case of a public company below 7 and the business is carried on for more than 6 months, thereafter every member who knows this fact, is personally liable for all debts contracted during that period.
V. Capital clause:
The clause must state the amount of the capital and the way in which it is to be divided into shares. it must be stated in this clause as to what funds are necessary to set the business going. the capital is divided into shares of a certain value which is specified in the capital clause, for example, the authorized share capital of the company shall be Rs. 5,000,000 consisting of 5,000,000 equally shares of rs, 10 each.
VI. Association and subscription clause:
This clause contains a declaration by the subscribers that they are desirous of forming a company and agree to have number ofshares written against their respective names.
(a) Signature and attestation:
Each subscriber must sign the memorandum in the presence of at least one witness who shall attest the signature.
10. Conclusion:
the memorandum of association is of supreme importance in determining its powers and in this respect it is the charter of the company. it contains the fundamental conditions upon which the company can be incorporated. memorandum of association must be printed, divided into paragraphs and signed by the members of thecompany.
There are there basic legal documents issued by a companythese are.
(i) Memorandum of association.
(ii) Article of association.
(iii) Prospectus.
Memorandum of association is one of the basic documents of the company. it is knows as charter of the company. it sets out the limits out side which company cannot go memorandum of association defines the constitution of the company. it contains the fundamental conditions upon which a company is registered.
2. Definition memorandum of association:
It is document which sets out the constitution of the company. it is foundation on which the structure of the company is based.
3. Definition under companies ordinance 1984:
Sec 16 of the companies ordinance 1948. memorandum means the memorandum of association of a company as originally framed or as altered in pursuance of the provisions of this ordinance.
4. Importance of memorandum of association:
The memorandum of association is the charter of the company. it defines the limitation and powers. it is a document which regulate the external affairs of the company.
5. Purpose:
The main purpose of memorandum of association is to enable share holders, creditors and all those who concerned with thecompany to know what is permitted range of the enterprise.
6. Form of memorandum of association:
Memorandum of association should be in printed form and divided into various paragraphs and signed by the prescribes in the presence of witnesses.
7. Alteration in memorandum of association:
Memorandum of association is considered as unalterable document. but it can be amended by passing special resolution and with sanction of court of central government.
8. Time place for filing memorandum of association:
Memorandum of association is to be filed with the registrar at the time of formation of a company.
9. Clauses of memorandum of association:
I. Name clause:
This clause states the name of the company. a company may select any name but it should not resemble the name of any other company. the companies ordinance 1984 provides that the name of the company must end with the word limited. so that all persons dealing with the company must know that their liability is limited to the extent of their shares.
(a) Restriction:
Any name may be chosen subject to the following restrictions:
The words expressing or implying the patronage of any Pakistani or foreign head of state or provincial government federal Govt, or any of their authority or corporation cannot be used.
(i) Exception:
Such name can be used with the permission of commission.
(b) Examples:
Examples of such words are "Royal", "Imperial", "State". reserve "bank", "Municipal", "charted" etc.
(c) Appearance of name:
The name of the company must appear or every office or place of business of company in a conspicuous manner and on all cheques, bills, notices, advertisement, etc of the company.
(d) Change of name of the company:
The name of the company can be changed at any time subject to the following conditions:
(i) A special resolution is passed.
(ii) Approval in writing of the registrar is obtained.
(iii) Registrar notified the new name and issues a certificate.
II. Situation clause:
It is also known as domicile clause. the memorandum muststate the name of the place of business of the company. thecompany must have a registered office and its place must be notified to the registrar.
(a) Change of place of registered office:
(i) Form province to province:
Registered office of the company may be changed by passing a special resolution and obtaining the confirmation of the commission.
(ii) From town to town in the same province:
The place of registered office of the company may be changed from one town to another town with in the same province by special resolution and a notice to the registrar without any confirmation of the commission.
III. Object clause:
The statement of objects defines the sphere of the companyactivities. it determines and restricts the powers of thecompany. the object clause offer protection to the shareholders by ensuring them that amount collected for undertaking is not risked in any other undertaking.
(i) Scope of objects:
The company can have any object provided that it is not contrary to law.
(ii) Act done out side the objects:
The company cannot do any thing outside the powers specified in the object clause.
(a) Effect:
Any thing so done is ultra vires (beyond the powers of) thecompany and hence void.
IV. Liability clause:
The fourth clause in a memorandum of association is a statement that liability of the company is limited to the extent of the shares purchased by them.
(a) Exception:
If however the number of members of the company is reduced.
(i) In case of a private company below 2.
(ii) In case of a public company below 7 and the business is carried on for more than 6 months, thereafter every member who knows this fact, is personally liable for all debts contracted during that period.
V. Capital clause:
The clause must state the amount of the capital and the way in which it is to be divided into shares. it must be stated in this clause as to what funds are necessary to set the business going. the capital is divided into shares of a certain value which is specified in the capital clause, for example, the authorized share capital of the company shall be Rs. 5,000,000 consisting of 5,000,000 equally shares of rs, 10 each.
VI. Association and subscription clause:
This clause contains a declaration by the subscribers that they are desirous of forming a company and agree to have number ofshares written against their respective names.
(a) Signature and attestation:
Each subscriber must sign the memorandum in the presence of at least one witness who shall attest the signature.
10. Conclusion:
the memorandum of association is of supreme importance in determining its powers and in this respect it is the charter of the company. it contains the fundamental conditions upon which the company can be incorporated. memorandum of association must be printed, divided into paragraphs and signed by the members of thecompany.
Promissory and Bill of Exchane?
Introduction:
Promissory note and bill of exchange are negotiable instruments. the negotiable instrument recognizes only three instrument viz., a promissory note, bill of exchange and a cheque. the essentials of the both the instruments are to great extent are same. sometimes a bill of exchange is called a draft.
2. Definition of promissory note:
According to Sec 4 of the negotiable instrument act "Apromissory note is an instrument in writing (not being a bank note or currency note) containing an unconditional undertaking, signed by the maker to pay on demand or at a fixed or determinable future time a certain sum of money only to or to the order of a certain person or to the bearer of theinstrument.
3. Essentials of a promissory note:
Following are the essentials of a promissory note.
(i) Written:
Promissory note must be in written form. a verbal promise to pay does not become a promissory note.
(ii) It must contain promise to pay:
There must be a promise or an undertaking to pay. a mere acknowledgment of debt is not a promissory note.
(iii) Unconditional promise:
It must contain an unconditional promise to pay. the promise to pay must not depend upon the happening of some uncertain event or condition.
(iv) Signature of maker:
The maker must singed the promissory note.
(v) Maker must be a certain person:
The promissory note must indicate who is the person taking responsibility to pay the amount.
(vi) The payee must be certain:
The payee of promissory note must also a certain person.
(vii) The sum payable must also be certain:
The sum payable must also be certain and definite.
(viii) The sum payable must be in Pakistani currency:
The sum of money payable must be in Pakistani currency apromissory note containing a promise to pay a certain amount in foreign currency is not a valid promissory note.
(ix) Other legal formalities:
(i) Consideration must be lawful.
(ii) It should be dated.
(iii) It must be properly stamped.
(iv) Place should be mentioned where it is made.
(v) It is also necessary to cross all stamps affixed on the note.
4. Bill of exchange:
I. Definition:
According to Sec. 5.
"A bill of exchange is an instrument in writing containing an unconditional order, singed by the maker, directing a certain person to pay on demand or at a fixed or determinable future time a certain sum of money only to or the order for a certain person or the bearer of the instrument."
II. Explanation:
The person who makes the bill is called drawer. the person who is directed to pay is the drawee. the person to whom thepayment is to be made is called payee.
III. Essentials:
(i) Written: The bill of exchange must be in writing. it may be written in any language.
(ii) Unconditional order: The order contained in the bill of exchange must be unconditional.
(iii) Signed by the drawer Bill of exchange must be signed by the drawer.
(iv) The drawee must be a certain person:
The drawee of a bill of exchange must be a certain person. his name should be mentioned in it.
(v) The payee must be certain:
The payee of the bill also be a certain person.
(vi) The sum payable must be certain:
The sum payable must be certain and definite.
(vii) Pakistani currency:
The sum payable must be Pakistani currency.
(viii) Other legal formalities:
(i) It should be dated.
(ii) Name of place where it is drawn.
(iii) It should be attested.
(iv) It should be properly stamped.
5. Distinction between promissory note and a bill ofexchange:
I. Number of parties: In promissory note there are two parties. While In a bill of exchange there are three parties.
II. Promise and order: In an promissory note there is a promise to pay while In an bill of exchange there is an order to pay.
III. Nature of liability: Liability of the maker of promissory note is primary while Liability of the maker of a bill of exchange is secondary in nature.
IV. Position of make: The maker of a promissory note stands in an immediate relation with the payee.
In bill of exchange, the drawn of bill stands in an immediate relation with the drawee and the drawee with payee.
V. As to liability of drawer: The maker of a promissory note is a debtor while The drawer of bill of exchange is the creditor.
VI. Payable to bearer: A promissory note can not be drawn payable to bearer while A bill of exchange can be drawn payable to bearer.
VII. As to acceptance: A promissory note needs no acceptance while A bill of exchange needs acceptance by the drawee.
VIII. Payable to maker: A promissory note cannot made payable to maker himself while A bill of exchange can be make payable to the maker himself.
IX. As to notice of dishonour:
In case of dischonour of promissory note there is no need to give a notice of dischonour to the maker.
In case of dishonour of a bill of exchange there is a need to give notice to all the parties of bill.
X. As to protest: A promissory note need not to be protested while A foreign bill of exchange must be protested for dishonour.
XI. As to copies: A promissory not can not be drawn in sets. While A bill of exchange can be drawn in sets.
6. Conclusion:
A promissory note and bill of exchange are two different types of negotiable instrument. in a bill of exchange the drawer does not make a promise to pay the money himself but orders a third person to make the payment. in a promissory note there is a promise to pay the money.
Promissory note and bill of exchange are negotiable instruments. the negotiable instrument recognizes only three instrument viz., a promissory note, bill of exchange and a cheque. the essentials of the both the instruments are to great extent are same. sometimes a bill of exchange is called a draft.
2. Definition of promissory note:
According to Sec 4 of the negotiable instrument act "Apromissory note is an instrument in writing (not being a bank note or currency note) containing an unconditional undertaking, signed by the maker to pay on demand or at a fixed or determinable future time a certain sum of money only to or to the order of a certain person or to the bearer of theinstrument.
3. Essentials of a promissory note:
Following are the essentials of a promissory note.
(i) Written:
Promissory note must be in written form. a verbal promise to pay does not become a promissory note.
(ii) It must contain promise to pay:
There must be a promise or an undertaking to pay. a mere acknowledgment of debt is not a promissory note.
(iii) Unconditional promise:
It must contain an unconditional promise to pay. the promise to pay must not depend upon the happening of some uncertain event or condition.
(iv) Signature of maker:
The maker must singed the promissory note.
(v) Maker must be a certain person:
The promissory note must indicate who is the person taking responsibility to pay the amount.
(vi) The payee must be certain:
The payee of promissory note must also a certain person.
(vii) The sum payable must also be certain:
The sum payable must also be certain and definite.
(viii) The sum payable must be in Pakistani currency:
The sum of money payable must be in Pakistani currency apromissory note containing a promise to pay a certain amount in foreign currency is not a valid promissory note.
(ix) Other legal formalities:
(i) Consideration must be lawful.
(ii) It should be dated.
(iii) It must be properly stamped.
(iv) Place should be mentioned where it is made.
(v) It is also necessary to cross all stamps affixed on the note.
4. Bill of exchange:
I. Definition:
According to Sec. 5.
"A bill of exchange is an instrument in writing containing an unconditional order, singed by the maker, directing a certain person to pay on demand or at a fixed or determinable future time a certain sum of money only to or the order for a certain person or the bearer of the instrument."
II. Explanation:
The person who makes the bill is called drawer. the person who is directed to pay is the drawee. the person to whom thepayment is to be made is called payee.
III. Essentials:
(i) Written: The bill of exchange must be in writing. it may be written in any language.
(ii) Unconditional order: The order contained in the bill of exchange must be unconditional.
(iii) Signed by the drawer Bill of exchange must be signed by the drawer.
(iv) The drawee must be a certain person:
The drawee of a bill of exchange must be a certain person. his name should be mentioned in it.
(v) The payee must be certain:
The payee of the bill also be a certain person.
(vi) The sum payable must be certain:
The sum payable must be certain and definite.
(vii) Pakistani currency:
The sum payable must be Pakistani currency.
(viii) Other legal formalities:
(i) It should be dated.
(ii) Name of place where it is drawn.
(iii) It should be attested.
(iv) It should be properly stamped.
5. Distinction between promissory note and a bill ofexchange:
I. Number of parties: In promissory note there are two parties. While In a bill of exchange there are three parties.
II. Promise and order: In an promissory note there is a promise to pay while In an bill of exchange there is an order to pay.
III. Nature of liability: Liability of the maker of promissory note is primary while Liability of the maker of a bill of exchange is secondary in nature.
IV. Position of make: The maker of a promissory note stands in an immediate relation with the payee.
In bill of exchange, the drawn of bill stands in an immediate relation with the drawee and the drawee with payee.
V. As to liability of drawer: The maker of a promissory note is a debtor while The drawer of bill of exchange is the creditor.
VI. Payable to bearer: A promissory note can not be drawn payable to bearer while A bill of exchange can be drawn payable to bearer.
VII. As to acceptance: A promissory note needs no acceptance while A bill of exchange needs acceptance by the drawee.
VIII. Payable to maker: A promissory note cannot made payable to maker himself while A bill of exchange can be make payable to the maker himself.
IX. As to notice of dishonour:
In case of dischonour of promissory note there is no need to give a notice of dischonour to the maker.
In case of dishonour of a bill of exchange there is a need to give notice to all the parties of bill.
X. As to protest: A promissory note need not to be protested while A foreign bill of exchange must be protested for dishonour.
XI. As to copies: A promissory not can not be drawn in sets. While A bill of exchange can be drawn in sets.
6. Conclusion:
A promissory note and bill of exchange are two different types of negotiable instrument. in a bill of exchange the drawer does not make a promise to pay the money himself but orders a third person to make the payment. in a promissory note there is a promise to pay the money.
Q What are the Kinds of Share Capital?(S)
Share capital means the capital raised by a company by the issue of shares. The capital of a company may be of two kinds-
1. Equity share capital-
(i) with voting rights
(ii) with differential rights as to dividend, voting or otherwise in accordance with such rules and subject to such conditions as may be prescribed.
Shares with differential rights- it means a share that is issued with differential rights in accordance with the provisions of Section 86.
2. Preference share capital-it means, in the case of a company limited by shares, that part of the capital of the company which carries a preferential right as to-
(a) payment of dividend during the lifetime of the company
(b) repayment of capital on winding up
Equity share capital means, with reference to a company limited by shares, all share capital which is not preference share capital. In other words it is capital which does not carry preferential right as to-
(a) payment of dividend
(b) repayment of capital on winding up.
Called-up capital-this is that part of the issued capital which has been called up on the shares.
Paid-up capital-this is that part of the issued capital which has been paid up by the shareholders or which is credited as paid-up on the shares
Uncalled capital-this is the remainder of the issued capital which has not yet been called.
Reserve capital-this is that part of the uncalled capital of a company which can be called only in the event of its winding up.
Authorized or nominal capital-This is the nominal value of the shares which a company is authorized to issue by its Memorandum of Association.
Issued or subscribed capital-issued capital is the nominal value of the shares which are offered to the public for subscription.
Q windding up and modes of windding up??????
1. Introduction:
By winding up of a company is meant the end of the life of a company is an artificial person. the winding up of a company is a legal procedure in which all the affairs of the company are wound up. it is permanent closing down of the business of the company. its assets and liabilities are determined asserts are sold out and claims of the creditors must out of sale proceeds. the balance of any, is distributed among the shareholders in proportionate to their shares.
2. Definition:
When a company ceases to exist and its property is administrated for the benefits of its creditors and member, it is called winding up.
3. Modes of winding up:
According to the companies ordinance 1984 a company can be wound up by the following three ways.
(i) Compulsory winding up by the court.
(ii) Voluntary winding up.
(iii) Winding up under the supervision of the court.
4. Compulsory winding up by the court:
A company may be wound up by an order of the court. this is also called compulsory winding up of the company.
5. Grounds:
Following are the grounds for the compulsory winding up of the company.
I. By special resolution: If a special resolution has been passed by the company to be wound up by the court.
II. Failure to submit statutory report:
If company fails to submit statutory report to have registrar of the companies.
III. Failure to submit statutory report:
If company fails to hold statutory meeting with in a prescribed period.
IV. Failure to hold annual general meeting:
If company fails to hold two consecutive annual general meetings.
V. Delay in commencement of business:
If a public company does not commence business with in one year of the date of its incorporation or suspends business for a whole year, the court may order for its winding up.
VI. Reduction in members: A public company may be wound up if its members are reduced below seven and in case of private company below two.
VII. Unlawful or fraudulent activities:
If company is carrying on business which is unlawful or fraudulent activities the court may order for winding up.
VIII. Failure to pay debt: A public company may be wound up by the order of the court. if it is proved that it is unable to pay debts.
IX. Failure to maintain accounts:
If a company fails to maintain its accounts the court may order for the winding up of the company.
X. Ceases to be a listed company:
The court may wind up a company if it ceased to be a listed company.
XI. Just and equitable: The court can order thew winding up of the company if its feels that it is just and equitable that the company should be wound up.
XII. Failure to pay debt:
(i) If the amount equal one percent of its paid up capital and company has not paid within thirty days after getting the notice of payment.
(ii) If the order of the payment has been passed against the company by the court or by the order of other competent authority the payment has not been made wholly or partly.
(iii) The court has sufficient reason that company has not paiddebts.
6. Who may petition:
Under companies ordinance 1984 following may make an application for winding up of the company.
I. Petition by the company:
The company may itself present a petition for winding up of the company when it has passed a special resolution.
II. Contributor's petition:
Contributors who are the shareholders of the company may present a petition for winding up of the company.
III. Creditor's petition :
A creditor may apply for the winding up of the company.
IV. Registrar petition:
The registrar of a company may also file a petition for the winding up of company.
V. Commission's petition:
The commission is entitled to file a petition for the winding up, where it appears from the report of the person appointed to investigate the affairs of the company, that the business of the company has been conducted for fraudulent or unlawful purposes.
7. Conclusion:
To conclude I can say that, by winding up of a company means end of the company. it is proceeding under the companies ordinance 1984 in which all affairs are wound up. companies ordinance lays down three different method to wind up the business of the company. the court is empowered to order for the winding up of the company.
By winding up of a company is meant the end of the life of a company is an artificial person. the winding up of a company is a legal procedure in which all the affairs of the company are wound up. it is permanent closing down of the business of the company. its assets and liabilities are determined asserts are sold out and claims of the creditors must out of sale proceeds. the balance of any, is distributed among the shareholders in proportionate to their shares.
2. Definition:
When a company ceases to exist and its property is administrated for the benefits of its creditors and member, it is called winding up.
3. Modes of winding up:
According to the companies ordinance 1984 a company can be wound up by the following three ways.
(i) Compulsory winding up by the court.
(ii) Voluntary winding up.
(iii) Winding up under the supervision of the court.
4. Compulsory winding up by the court:
A company may be wound up by an order of the court. this is also called compulsory winding up of the company.
5. Grounds:
Following are the grounds for the compulsory winding up of the company.
I. By special resolution: If a special resolution has been passed by the company to be wound up by the court.
II. Failure to submit statutory report:
If company fails to submit statutory report to have registrar of the companies.
III. Failure to submit statutory report:
If company fails to hold statutory meeting with in a prescribed period.
IV. Failure to hold annual general meeting:
If company fails to hold two consecutive annual general meetings.
V. Delay in commencement of business:
If a public company does not commence business with in one year of the date of its incorporation or suspends business for a whole year, the court may order for its winding up.
VI. Reduction in members: A public company may be wound up if its members are reduced below seven and in case of private company below two.
VII. Unlawful or fraudulent activities:
If company is carrying on business which is unlawful or fraudulent activities the court may order for winding up.
VIII. Failure to pay debt: A public company may be wound up by the order of the court. if it is proved that it is unable to pay debts.
IX. Failure to maintain accounts:
If a company fails to maintain its accounts the court may order for the winding up of the company.
X. Ceases to be a listed company:
The court may wind up a company if it ceased to be a listed company.
XI. Just and equitable: The court can order thew winding up of the company if its feels that it is just and equitable that the company should be wound up.
XII. Failure to pay debt:
(i) If the amount equal one percent of its paid up capital and company has not paid within thirty days after getting the notice of payment.
(ii) If the order of the payment has been passed against the company by the court or by the order of other competent authority the payment has not been made wholly or partly.
(iii) The court has sufficient reason that company has not paiddebts.
6. Who may petition:
Under companies ordinance 1984 following may make an application for winding up of the company.
I. Petition by the company:
The company may itself present a petition for winding up of the company when it has passed a special resolution.
II. Contributor's petition:
Contributors who are the shareholders of the company may present a petition for winding up of the company.
III. Creditor's petition :
A creditor may apply for the winding up of the company.
IV. Registrar petition:
The registrar of a company may also file a petition for the winding up of company.
V. Commission's petition:
The commission is entitled to file a petition for the winding up, where it appears from the report of the person appointed to investigate the affairs of the company, that the business of the company has been conducted for fraudulent or unlawful purposes.
7. Conclusion:
To conclude I can say that, by winding up of a company means end of the company. it is proceeding under the companies ordinance 1984 in which all affairs are wound up. companies ordinance lays down three different method to wind up the business of the company. the court is empowered to order for the winding up of the company.
Cuncel Of Commen Intrest?
1. Introduction:
In order to divide government organizations and department among the provinces, the council of common interest has been set up under the present constitution. The council of common interest in an constitutional body which irons out differences, problems and irritants between the provinces interest and also between the provinces and the federation. it is an institution which provide constitutional justice to the provinces and federation.
2. Relevant Provisions:
Article 153 to 155.
3. Object f council of common interest:
4. Organization:
The members of the council shall be provincial chief minister and an equal members from the federal government who are nominated by prime minister from time to time.
5. Appointment of Members:
The members of common interest is appointed by the president of Pakistan.
6. Chairman Of The Council Of Common Interest:
Prime Minister is the member of the council and its chairman. Otherwise President shall appoint federal minister.
7. Responsibility Of The Council:
Council of common interest shall be answerable to the parliament.
8. Function Of The Council:
(i) Policy Making:
Council of common interest formulates and regulates Policies in regulates to matters enumerated inpart II of the Federal legislative list and with regard to electricity.
(ii) Decisions of Complaints:
Council of common interest decides complaints regarding water; when the provincial or federal government makes a law or passes an order regarding water or any natural resource affecting the interests of a province.
(iii) End of differences:
It is an important duty of council of common interest to bring into conformity and policies of all provinces and not any difference arise between the federal and provincial policies.
(iv) Supervisory of the institutions:
The council of common interest supervise the institutions such as railways mineral, oil, electricity natural Gas, development of industries and institution, establishment, bodies and corporation administrated or managed by the federal govt.
9. Mode of decision:
The decision of the council are expressed as the opinion of the majority.
10. Conclusion:
To conclude I can say that; council of common interest is an important constitutional body. its man object is to care the common interest of all the provinces. council of common interest is coordinating body between the provinces and the federation. it regulate policies in relation to matters in part 11 of the federal legislative list.
In order to divide government organizations and department among the provinces, the council of common interest has been set up under the present constitution. The council of common interest in an constitutional body which irons out differences, problems and irritants between the provinces interest and also between the provinces and the federation. it is an institution which provide constitutional justice to the provinces and federation.
2. Relevant Provisions:
Article 153 to 155.
3. Object f council of common interest:
4. Organization:
The members of the council shall be provincial chief minister and an equal members from the federal government who are nominated by prime minister from time to time.
5. Appointment of Members:
The members of common interest is appointed by the president of Pakistan.
6. Chairman Of The Council Of Common Interest:
Prime Minister is the member of the council and its chairman. Otherwise President shall appoint federal minister.
7. Responsibility Of The Council:
Council of common interest shall be answerable to the parliament.
8. Function Of The Council:
(i) Policy Making:
Council of common interest formulates and regulates Policies in regulates to matters enumerated inpart II of the Federal legislative list and with regard to electricity.
(ii) Decisions of Complaints:
Council of common interest decides complaints regarding water; when the provincial or federal government makes a law or passes an order regarding water or any natural resource affecting the interests of a province.
(iii) End of differences:
It is an important duty of council of common interest to bring into conformity and policies of all provinces and not any difference arise between the federal and provincial policies.
(iv) Supervisory of the institutions:
The council of common interest supervise the institutions such as railways mineral, oil, electricity natural Gas, development of industries and institution, establishment, bodies and corporation administrated or managed by the federal govt.
9. Mode of decision:
The decision of the council are expressed as the opinion of the majority.
10. Conclusion:
To conclude I can say that; council of common interest is an important constitutional body. its man object is to care the common interest of all the provinces. council of common interest is coordinating body between the provinces and the federation. it regulate policies in relation to matters in part 11 of the federal legislative list.
PART B PARTNERSHIP ACT
Q. Define partnership. What are the essentials of partnership.
1. Introduction:
A partnership is mean of bringing together the person who can contributes capital skill for expansion of business. This type of business is very popular in our country.
2. Definition: According to Sec. 4
“Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all”.
3. Elements of partnership:
Following are the features of partnership.
(i)It is the result of an agreement.
(ii)Agreement is between two or more persons.
(iii)It is organized to carry on some business.
(iv)Persons should be agree to share the profit of business.
(v)Business is to be carried on by all or any of them acting for all.
4. Feature of partnership:
Following are the essentials of partnership.
(I)Agreement: Partnership is the result of agreement without it partnership can not be formed. It may be written or oral.
(II)Registration: Registration of partnership is not necessary.
(III)Number of patners:There must be two member.
(IV)Business: The object of partnership is to carry on business.
(V)Unlimited liability: The liability of partner is unlimited to the invested.
(VI)Profit and loss distribution: Profits is distributed among the partners according to their agreement in case of loss all the partners share in it.
(VII)Legal entity: Partnership has not separate entity from its member.
(VIII)Management: All the partner can participate activity in the affairs of business.
(IX)Payment of tax: Each partner pays tax on his share of profit individually.
(X)Co-operation: The success of the business depends upon mutual trust and confidence.
(XI)Share in capital: Capital of the firm is supplied by the all partners according to the agreement.
(XII)No audit: In the business of partnership no audit is necessary.
(XIII)Mutual agency: Business may be carried on by all or any of them acting for all. Each is a principal and an agent.
(XIV)Transfer of interest: A partner cannot transfer his interest with out the consent of other partners.
(XV)Dissolution: Partnership is dissolved easily. It operates the pleasure of partner.
5. Kinds of partnership:
Following are the kinds of partnership.
(I)Partnership at will:
If no provision is made in the agreement regarding the duration of the partnership it is called partner ship at will.
(II)Particular partnership:
Such partnership is formed to do a particular business.
(III)Limited partnership: The liability of limited partner is limited to the extent of his investment in the business.
(IV)Registered partnership: The registration of partnership is not compulsory when a partnership is registered. It is called registered partnership.
(V)Un-registered partnership: Partnership which is not registered. It is called unregistered partnership.
6. Conclusion:
it can be said that, A partnership is a form of business. It has at least two member. Who joined capital or services for prosecuting of some business.
Right and duties of partner
Q. What are the right and duties of partner under partnership act 1932.
1. Introduction:
Partnership is the relation between persons who have agreed to share the profit of business carried on by all or any of them acting for all. The person who have entered into partnership with one another are called partner. The rights and duties of partner. The rights and duties of partners are determined in accordance with the agreement of the firm, are agent as well as principals.
2. Partner:
The person who enters into partnership trough agreement is known as partner. He has agreed to divide profit and share in loss.
3. Kinds of partner:
Following are kinds of partner:
* Active partner * Silent partner * Partner in profit
* Secret partner *Nominal partner * Sub-partner
* Partner by estoppels * Junior partner
* Senior partner * Minor partner
* Partner with limited liability
(i)Partner with unlimited liability
4. Rights of partner:
Following are the rights of a partner.
(I)Right to manage the business:
Every partner has right to take part in the management of business.
(II)Right to express opinions:
Every partner has right to express his opinions relation to business matters.
(III)Right to access the accounts books.
Every partner has right to access the account books of firm.
(IV)Right to share the profit:
Every partner has right to share the profit of the business.
(V)Right to interest on capital:
Every partner can charge interest on capital contributed by him.
(VI)Right to interest on advances:
Every partner has right to interest on advances at the of 6% per annum.
(VII)Right to be indemnified:
Every partner has right to be indemnified by the firm in respect of payment by him.
(VIII)Partner’s authority in emergency:
Partner has right to act in emergency to protect the firm from loss.
Conditions
(i)There must be an emergency.
(ii)The act must be done for the purpose of protecting the firm from loss.
(iii)The act must be such as a person of ordinary prudence, would have done in his own case acting under similar circumstances.
(IX)Right to give consent for new partner:
Every partner has right to prevent the introduction of a new partner unless he consents to that.
(X)Right to retire:
Every partner has right to retire from the firm.
(XI)Right not to be expelled:
A partner can not be expelled from firm by any majority of partners provided the decision is made in good faith and there is a provision in contract.
(XII) Right to carry on competing business:
Every out going partner has a right to carry on a business similar to that of the firm subject to certain restrictions.
(XIII)Right of dissolution of firm:
Every partner has right to file suit for dissolution of firm.
(XIV)Right to restrain from use of firm name or firm property:
Every partner has the right to see that the property of the firm is used only for the purpose of partnership.
(XV)Right of the partner who leaves the firm due to any reason is entitled to claim any share according to the agreement.
5. Duties of partner:
Following are the duties of a partner.
(I)Duty to carry on business:
Every partner is bound to carry on the business of the firm to common advantage.
(II)Duty to maintain true accounts:
Every partner must render true and proper account to his co-partner.
(III)Duty to keep secrecy:
It is duty of every partner that he should maintain the secrecy for the business.
(IV)Duty to provide information:
Every partner should provide all the necessary information about the business to co-partners.
(V)Duty to compensate:
It is duty of every partner to compensate any loss incurred by him.
(VI)Duty to abide by the decisions:
Every partner should abide by the decision taken by the majority of the partners.
(VII)Duty to share the loss:
Every partner shall bear the loss equally borne by the firm irrespective of their capital contribution.
(VIII)Duty not to use firm property for his own.
It is the duty of every partner of the firm to hold and use the property of the firm only for the purpose of business.
(IX)Sincere and faithful:
Every partner should be just and faithful to the other partners.
(X)Duty to indemnify for willful neglect:
Every partner shall indemnify the firm for any loss caused to it by his willful neglect in the conducted of business of firm.
(XI)Duty not to carry other business.
It is the duty of a partner not to carry other business.
(XII) Duty to pay profit to firm:
If a partner earns profit from any source of the firm it should be paid to firm.
(XIII)Duty to be liable jointly and severally:
Every partner is liable jointly and severally for all the acts of the firm.
(XIV)Duty not to transfer his rights:
A partner cannot transfer his rights and interest in the firm to an outsider to make him partner in the business without the consent of others partners.
6. Conclusion:
it can be said that, partner is a person who has agreed to share the profit of the business. Each partner acts as an agent of the other partner of the firm. Every partner has right and duties under the agreement made by them.
Dissolution of firm
Q. State the grounds on which the court may dissolve a partnership firm at the suit of a partner.
Q. What are the various modes of dissolution of partnership? Discuss in detail the ground on which court may dissolve firm.
1. Introduction:
The partnership can be dissolved easily by mutual consent of the partners. Formal document are not required for this purpose. Dissolution of firm, includes the dissolution of partnership but the dissolution of the partnership may or may not include the dissolution of the firm.
2. Meaning of dissolution:
Dissolution of the firm means end of the firm.
3. Grounds of dissolution of firm:
Following are the grounds of dissolution of a firm.
(I)Dissolution by agreement: A firm may be dissolved with the consent of all the partners. The consent of majority is not enough to dissolve a partnership firm.
(II)Compulsory dissolution: A firm is dissolved:
(i)When all partners are declared insolvent.
(ii)When all except one of the partners are declared insolvent,
(iii)When the business carried on by the firm becomes un-lawful.
(III)Contingent dissolution: Subject to the contract between the partners a firm is dissolved:
(i)If constituted for a fixed term, by the expiry of that term.
(ii)On the completion of the object for which the firm was formed.
(iii)On the death of a partner.
(iv)On the insolvency of a partner.
(v)On the resignation of a partner.
(IV)Dissolution by notice:
(a)Where the partnership is at will, the firm may be dissolved by any partner by giving notice in writing to all the other partner of his intention to dissolve the, firm.
(b)The firm is dissolved as form the dissolution or if no date is mentioned, as from the date of communication of his notice.
(V)Dissolution by the court:
According to Sec. 44 court can dissolve on the following grounds.
(a)Unsoundness of mind:
If a partner has become of unsound mind, the court may dissolve the firm.
(b)Permanent incapability:
If a partner other than the partner suing, has become in any way permanently incapable of performing his duties as a partner.
(c)Misconduct:
When a partner except the partner suing is guilty of misconduct, which may affect the reputation of the firm.
(d)Breach of agreement:
If a partner commits breach of agreement relation to the management of the affairs of the firm or the conduct of the business the court may order for the dissolution of the firm.
(e)Transfer of interest:
When a partner, except the partner suing, has transferred the whole of his interest in the firm to a third party without the consent of the other party.
(f)Just and equitable cause:
When on any other ground the court considers it just and equitable that the firm should be dissolved the court may order for the dissolution of the firm.
4. Conclusion:
dissolution of firm is end of firm under partnership act. There are five modes of dissolution of firm. Dissolution of firm may not necessarily mean dissolution of partnership as in the case of dissolution of partnership, the firm may continue with some of the remaining partner.
Implied authority
Q. What are implied authorities of a partner? What matters have been excluded specifically from such authorities by the act.
1. Introduction:
Under partnership act 1932 every partner has right to takes part in management of business of the firm. Business is carried on by all the partners or any of them acting for all the partners. The partner have to exercise their authorities in order to conduct the business. The authority of a partner to act be express or implied.
2. Implied authority:
Where there is no express agreement, the act of a partner which is done to carry on in the usual way, business of the kind carried on by the firm binds the firm. It is implied authority.
3. Form of authority
Authority may be:
(i)Express or
(ii)Implied
4. Conditions of implied authority:
Conditions of implied authority are as under.
(a)Conditions on behalf of firm:
Act done by a partner is on behalf of a firm.
(b)Act done as partner:
Act done on behalf of firm is done by person as a partner of firm.
(c)Use the name of firm:
The act is done in the name of the firm.
(d)Business objects:
Act done is for business objects a firm.
(e)To carry on business:
The act done relates to the normal business of the firm.
5. Implied authority of a partner:
A partner can do the following acts under implied authority.
(I)Borrowing money:
A partner can borrow money on the credit of the firm
Case law
(II)Purchasing of goods:
He can purchase goods for the firm on credit if it is necessary to carry on the business.
(III)Contracts:
He can make contract on behalf of firm.
(IV)To sale property of firm:
He can sale the goods of the firm, (moveable)
(V)Granting the receipt:
He can issue receipt on behalf of a firm.
(VI)To pledge:
He can pledge property of firm for loan.
(VII)To receive money:
He can receive payment on behalf of firm.
(VIII)Legal services:
He can engage solicitor to defend an action against the firm.
(IX)Settlement of accounts:
He can settle accounts with the persons dealing with the firm.
6. Acts outside implied authority:
A partner can not do the following acts.
(I)Submit a dispute to arbitration:
He cannot submit a dispute relating to the business of the firm for arbitration.
(II)Bank account:
He can not open a bank account on behalf of the firm in his own name.
(III)Compromise:
He can not compromise any claim or portion of any claim by the firm.
(IV)Withdrawal of suit:
He can not withdraw any suit filed by the firm.
(V)Admit any liability:
He cannot admit any liability in a suit against the firm.
(VI)Acquire immoveable property:
He cannot acquire any immovable property on behalf of firm.
(VII)Transfer of immoveable property:
He can not transfer immovable property belonging to firm.
(VIII)Agreement:
He cannot enter in to agreement of partnership on behalf of firm.
7. Conclusion:
implied authority is an authority of partner which binds the firm by his act under law. The scope of implied authority is linked with the nature of business of the firm. A partner’s authority is either implied or express. An act done by a partner which does not fall within the scope of his implied authority does not bind the firm.
Position Of Minor In a Firm
Q. Can a minor become a partner in a firm? Discuss the rights and liabilities of a minor admitted to the benefit of a partnership.
1. Introduction:
A minor is not competent to contract so he cannot enter into a contract. Under partnership act a minor may be admitted to partnership with the consent of all other partners.
According to Sec. 3(i)
“Every partner has a right to prevent the introduction of a partner unless he consents to that.”
2. Definition of minor:
“A minor is a person who has not completed 18 year of age”.
3. Law regarding minor of becoming partner of firm:
According to Sec. 30
“A person who is a minor according to the law which he is subject, may not be a partner in a firm, but with the consent of all partners for the time being, he may be admitted to the benefits of partnership.”
4. Important rules:
(i) There must be a partnership in existence before a minor can be admitted to its benefit.
(ii) Consent of all partners is necessary.
(iii) There can not be a partnership consisting of all minors.
(iv) Minor’s position is limited only to the benefits of partnership.
(v) If a minor is made full fledge partner under the terms of a partnership deed, the deed would be invalid.
5. Position of minor:
(I) Position of minor during minority:
Position of minor during minority is as under.
(i)Right of sharing profit:
He has a right to receive his agreed profit of the firm.
(ii)Inspection of accounts:
He can inspect and take copies of the accounts of the firm.
(iii)Can not conduct business:
A minor can not take part in the management of the business.
(iv)Can not be declared insolvent:
A minor can not be declared insolvent.
(v)Not liable for the acts of firm:
A minor liability is limited and is not liable for the acts of firm.
(vi)Filing suit:
He has right to sue the other partners for his shares in profits or property of the firm when he breaks his relation with the firm.
(II) Position on attaining majority:
On attaining majority he must decide with in six months whether he shall continue in the firm or leave it. He should give public notice about his decision. If he fails to do so, will be considered a major partner.
(a)In case of becoming a partner:
If minor become partner his positions will be as under:
(i)His rights and liabilities will be similar to those of a full fledged partner.
(ii)He becomes personal liable to third parties for the debt and obligations of the firm.
(iii)His share of profits and property remains the same unless altered by agreement.
(b)In case of not becoming partner:
His position will be as under:-
(i)His rights and liabilities continue to “be those of a minor up to the date of giving public notice.
(ii)He is not liable for the acts of firm done after the date of public notice.
(iii)He is entitled to sue the partners for his share of profit in the firm.
6. Disabilities of minor in a firm:
Generally disabilities of minor in a firm are as under:
(i)He may not be a partner.
(ii)He may not sue the partner for accounts, save when serves his connection with the firm.
7. Conclusion:
A minor can be admitted into the benefits of existing firm with the all others members. There can be no partnership of minor with one adult member. There must be at least two major partners before a minor is admitted for the benefits of the firm.
Registrations Of a Firm
Q. What are contents of application for registration of a firm? What are the effects of non-registration.
1. Introduction:
The person who have entered into a partnership with one another are called collectively a firm. So a firm is collective name of the individual forming it. The registration of firm is optional. It does not create partnership rather it is evidence of existence of partnership.
2. Registration of a firm:
The registration of a firm is not compulsory. It is better to register it as soon as it is formed. There is no penalty for non registration.
3. Procedure of registration of firm:
The procedure is as under.
(I)Application: For the registration of a firm application in the prescribed form is filed.
(II)Prescribed fee: Prescribed fee is paid along with application.
(III)Where application is filed: Application for the registration of firm is filed in the office of registrar.
(IV)Time of registration:
Firm can be registered at any time.
(V)Modes of filing application:
Application can be filed through:
(i)By post
(ii)By hand
(VI) Contents of application:
Following are the contracts of application.
(a)Name of firm:
The partners can choose any name according to the following rules.
(i)The name must not be identical or similar to the name of existing firm.
(ii)The name must not contain words government, Jinnah, Quaid-e-Azam, or words showing the approval or patronage of the federal government or any provincial government, without the consent of provincial Govt.
(iii)A firm name must not contain, the name of ‘united nations’ or its subsidiary abbreviations.
(iv)A firm name must not contain the name of the “world health organization or its abbreviations without the sanction of the director general of who.
(v)A firm must not contain any word, which may be declared by the provincial government as undesirable.
(b)Business place: It shall contain name of business place.
(c)Other places: The names of other places where the carries on business.
(d)Date of joining of partner: The application shall contain the date of joining the firm.
(e)Names and addresses of partners:
The names and addresses of the partners firm.
(f)Duration of firm: The duration of firm if any.
(g)Signature: The application shall contains the signature of all the partners.
(h)Verification: Every partner shall verify the application.
(VII)Satisfaction of registrar: The register will examine the application and satisfy about the particulars application.
(VIII)Certificate of registration: After examination if the registrar is satisfied he will register the firm and issue certificate of the registration of a firm.
(IX)Change of particulars: If any change takes place in the particulars, registrar will be informed.
(X)Penalty for false particulars:
A person; who provides false information to the registrar, shall be punishable with imprisonment, which may extends to three months, or with fine or with both.
4. Effect of non-registration:
Following are the effect of non-registration of a firm.
(I)Suit by partner:
A partner of unregistered firm cannot sue the firm or any of the present or past co-partners for the enforcement of any right.
(II)Suit by firm:
An un-registered firm can not file a suit against the third party for the enforcement of any right.
(III)Suit by third party:
A third party can file a suit against the firm or it’s partner to enforce his rights.
(IV)No right of set off:
An un-registered firm or partner can not claim a right of set off in proceedings instituted against third party.
Exceptions:
Non-registration does not effect the following.
(i)Unregistered firm and it partner can sue for the dissolution of the firm.
( ii) The third party can always sue whether registered or not.
(iii)The partner can sue for the accounts of dissolved firm.
(iv)The partners can sue for the realization of the property of a dissolved firm.
(v)The dissolved firm can sue to recover damages for breach of contract.
(vi)The partner can refer a dispute to arbitrator.
(vii)The receiver of an insolvent partner can sue for the realization of insolvent’s share.
6. Importance and advantages of the registration of a firm:
(i) Concession in income tax by tax authorities.
(ii) Settlement of disputed.
(iii) Protection of the right of the partners.
(iv) The firm can use trade mark.
(v ) Firm can files suit against third party.
7. Object:
The object of registration from is to protect the rights of third party.
8. Conclusion:
partnership of a firm is not compulsory. It is only proof a existence of the firm. The procedure of the registration of a firm is very simple. The effect of non-registration of a firm with the register of firm would be that the partnership and its partner would suffer from legal disability in filing suit against any partner and as against one another.
0 comments:
Post a Comment