Introduction

The Companies Act 2017 is the statute that governs company law in Pakistan. Its official name is “Companies Act, 2017” and it was notified to be promulgated with immediate effect on 30.05.2017 and published in the official gazette on 31.05.2017 as Act No. XIX of 2017 (the Act).

Previously the company law in Pakistan was governed through the Companies Ordinance, 1984 (1984 Ordinance), now repealed except for the provisions related to Non-banking finance companies (NBFC) contained in Part VIIIA. For provisions related to NBFCs, the 1984 Ordinance is still in force.

The Act came into force with immediate effect except for Section 456. This section deals with the acceptance of advances by real estate companies engaged in real estate projects. It will come into force upon notification by the Federal Government or any authority or person authorized by the Government. Later this section was omitted through an amendment ordinance in 2020. However, the omission was not approved by the Parliament, therefore the section is still part of the law but not effective.

Continue reading
Download PDF
companies act 2017

The objective of the Companies Act 2017 SECP

The main objective to replace the previous law with this new law was to:

  • facilitate corporatization and promote the development of the corporate sector
  • encourage the use of technology and electronic means in the conduct of business and regulation
  • regulate corporate entities to protect the interests/rights of shareholders, creditors, other stakeholders, and the general public
  • promote principles of good governance and safeguarding minority interests in corporate entities
  • provide an alternate mechanism for expeditious resolution of corporate disputes and matters arising out of or connected therewith

The Act provides for all aspects of company law, from the formation of a company to winding. It also contains provisions for the management, conduct, and governance of companies. Further, the Act provides guidance and mechanism for dispute resolution through mediation, arbitration, and the courts. The Act has an overriding effect concerning all matters of companies.

Scheme of Companies Act 2017 Pakistan

The Act has been divided into Thirteen (13) parts, each discussing a different aspect related to companies.

The Act also contains or provides through rules and regulations (subordinated legislation) certain schedules, tables, forms, and general rules to govern the law and regulate the companies.

Division of the Companies Act 2017

As discussed, the Act has 13 parts containing legal provisions on different aspects. A brief of the contents of each part is given below:

An outline of the Companies Act 2017 Pakistan

Part I – Preliminary

  • Title of the Act
  • Definitions used in various provisions
  • Overriding effect

Part II – Jurisdiction of Court

  • Which court has jurisdiction?
  • Company benches
  • Procedure for Petition, Application, and Appeals

Part III – Powers and Function of the Securities and Exchange Commission of Pakistan

  • Power and function of SECP under the Act read with Securities and Exchange Commission of Pakistan Act, 1997
  • Reference by Federal Govt. or SECP to Court on significant matters

Part IV – Incorporation of Companies and Incidental Matters

  • Obligation to register certain associations, and partnerships as companies
  • Provisions related to the company name, use of prohibited words in names, and change of name by companies
  • Mode of forming companies and working with less than the required number of members
  • Company incorporation/registration procedure
  • Registration of Memorandum of Association (MOA) and Articles of Association (AOA) and the effect of their registration
  • Commencement of business by public companies
  • Registered office and its publication
  • Capital of a company & its publication
  • Business objects of the company
  • Contents of memorandum of a company limited by shares, a company limited by guarantee, and unlimited company
  • Alteration of MOA
  • Contents of articles of a company limited by shares, a company limited by guarantee, and an unlimited company
  • Alteration of AOA
  • Conversion of a company of one class to another issuance of the certificate of change of status
  • Formation of Not for Profit entities
  • Service and Authentication of documents (company, registrar, member & proceedings)

Part V – The prospectus, Allotment, Issue, and Transfer of Shares and Other Securities

  • Prospectus
  • Classes and kinds of shares (share capital)
  • Variation of rights of shareholders
  • Nature of shares and other securities
  • Certificate of shares and number of shares certificates
  • Debentures
  • Charge on assets of companies
  • Powers and liabilities of trustees
  • Issuance of non-interest-based redeemable capital
  • Procedure for Allotment
  • Return of money for unallotted shares
  • Transfer of shares
  • Board’s power to refuse the transfer of shares and notice of refusal
  • Issuance of shares on commission, premium, and discount
  • Further issue of capital
  • Right Issue of shares
  • Alteration of share capital
  • Invitation to deposits
  • Procedure for Reduction of share capital
  • Unlimited liability of directors in limited company