entrepreneur business law.pptx

7/27/2019 Entrepreneur Business Law.pptx

1/33

Ghulam Murtaza Korai

CED


2/33

Sole Proprietorship

Partnership

Company/ Joint Stock Company/ Incorporated


3/33

Definition of 'Sole Proprietorship' The sole proprietor is an unincorporated business with one

owner who pays personal income tax on profits from thebusiness. With little government regulation, they are the

simplest business to set up or take apart, making thempopular among individual self contractors or businessowners.

Many sole proprietors do business under their own names

because creating a separate business or trade name isn'tnecessary.

Sole proprietorship is also known as "proprietorship".


4/33

There is no separate legal entity created by a soleproprietorship, unlike corporations and limitedpartnerships. Consequently, the sole proprietor is not safefrom liabilities incurred by the entity. The debts of the soleproprietorship are also the debts of the owner. However, allprofits flow directly to the owner of a sole proprietorship.

The benefit of the sole proprietorship is the tax advantage.The disadvantage of a sole proprietorship is obtaining

capital funding, specifically through established channels,such as equity (selling shares) and obtaining bank loans orlines of credit. As a business grows it often transitions to alimited liability company (LLC)


5/33

'"Partnership" is the relation between persons whohave agreed to share the profits of a business carriedon by all or any of them acting for all.

Persons who have entered into partnership with oneanother are called individually "partners" andcollectively "a firm", and the name under which theirbusiness is carried on is called the "firm name".


6/33

Agreement

Association of persons

Business

Profit Sharing

Mutual agency


7/33

Partnership at will:Where no provision is made by contract between thepartners for the duration of their partnership, or forthe determination of their partnership, thepartnership is "partnership at will".

Particular Partnership:A person may become a partner with another personin particular adventures or undertakings.


8/33

Particular partnership duration of.- PartnershipDeed clearly stating formation of Partnership, to runagency acquired by plaintiff at a particular stationfrom a particular company. Partnership, held formedfor a single venture and could continue only as long asagency lasted. Partners if wishing to carry onpartnership on expiry of agency for running someother business, could do so only by a fresh agreement.


9/33

Disadvantages of Unregistered Partnership Firm:

Partners can not sue each other

The firm can not sue third party Third Party can sue partnership firm

The firm can sue the third party for the recovery of Rs.100


10/33

Need of Joint Stock Company The Limitations of sole-proprietorship and partnership forms of

business organizations gave birth to joint stock company. TheIndustrial Revolution coupled with the revolution in the fields ofTransport and Communication brought about radical changes inthe field of production and communication brought about radicalchanges in the field of production and distribution, therebynecessitating large capital investments, better managerial skills andfurther, increased risks.

Sole proprietorship and partnership having the disadvantages oflimited resources, unlimited liability, limited managerial skills, etc

were not suitable for large scale business.


11/33

It denotes joint stock enterprise in which the capital is contributed by a large

number of people. In popular parlance, company denotes an association of

like minded people formed for the purpose of carrying of same business.

Definition

By a company is meant an association of many persons who

contribute money or moneys worth to the common stock and

employ it for a common purpose. The common stock so contributed

is denoted in money and is capital of the company. The persons who

contribute it or to whom it belongs are members. The proportion of

each member is entitled is his share. Shares are always transferable,

although the right to transfer them is often restricted. Lord Justice

Lindley


12/33

Association of Persons: A company is an association of persons and comes into existence only after its registration under

the companys ordinance 1984.

Separate Legal Entity: Artificial Person:

A company can be said to be an artificial person as it is created by law and law only can dissolveit.

Common Seal: Perpetual Succession: Members may come and members may go but

the company goes on forever. Separation of Ownership and Management: Limited Liability: Transferability of Shares: Separate Property Power to Sue and to be Sued:


13/33

The main points of difference between a partnership and a company

PARTNERSHIP

COMPANY

1. A partnership is not a distinct legal person, but is made of the

persons composing it. 1. A company is a distinct legal person.

2. Creation of Partnership is purely a matter of agreement between theparties such an agreement need not even be in writing.

2. Creation of Company involves elaborate legal formalities.

3. In a firm partner can not transfer his interest with the consent of theother partners.

3. Shares in a Company (especially, in a public Company) are generallyfreely transferable.


14/33

4. Each partner is prima facie the agent of others, and can bind themby his contract made in the course of business of the partnership.

4. Shareholders in a Company are not the agents of one another.

5. Each partner is liable in full for the debts of the firm.

5. The liability of Companys shareholders is limited by shams or byguarantee.

6. A partner can not contract with his firm.

6. A share holder in a company can contract with the company.

7. Partners may make any private arrangements among themselves. For

instance a partner may buy his partners share.

7. Arrangements in regard to Companies are regulated by law andstatute for instance a company cannot buy its member's shares, but apartner can.


15/33

8. The Maximum number of partners can be twenty. But in banking

business it is ten.

8. There is no maximum number of share holders laid down by the lawin a public company though the minimum is seven. In a privateCompany, the minimum is two, and the maximum is fifty.

9. The death or retirement of a partner dissolves a firm. 9. Death or retirement of a share holder does not dissolve the company.

10. Property may be the common property of partners.

10. Property belongs to the company and not to its members.

11. Restrictions contained in a partnership deed will not affect third

parties, who are not aware of such restrictions.

11. On the other hand restrictions in the Articles of a Company affectthird parties also.

12. A firm cannot sue and be sued in its own name.

12. A company can sue and be sued in its own name.


16/33

13. Decree against a firm can be executed against the partners.

13. A Decree against a company cannot be executed against itsshareholders.

14. Registration is optional.

14. Registration is compulsory.

15. A firm having no separate legal existence, cannot be shareholder ofcompany.

15. A company on the other hand can be a shareholder of anothercompany.


17/33

For the convenience of general public, promoters anddirectors of companies, SECP has established its eightCROs at Islamabad, Karachi, Lahore, Peshawar,Faisalabad, Multan, Sukkur and Quetta. Online

facilities for incorporation of companies and filing ofreturns have been made available. Besides registrationof companies and monitoring of their workingaccording to law, functions of CROs include providingservices and guidance and also to ensure that thecompanies and their directors comply with thestatutory requirements as provided under theCompanies Ordinance, 1984 (the Ordinance).


18/33

The record of companies maintained by the CROs ispublic record and the investors, shareholders,creditors and general public, may inspect the record ofany company whenever they need and they may also

obtain certified copy of any specific document onpayment of nominal amount of fee.


19/33

Following are the requirements for registration of anew company under the Companies Ordinance, 1984:-

(a)The first step with regard to incorporation of acompany is to seek the availability of the proposedname for the company from the registrar. For thispurpose, an application is to be made and Rs.200/- foronline application and Rs. 500/- for offline applicationis required to be paid for seeking availability certificatefor each name.


20/33

b. Documents for registration of a limited company I. Copy of national identity card or passport, in case of

foreigner, of each subscriber and witness to thememorandum and article of association.

II. Memorandum and articles of association Fourprinted copes of Memorandum and Articles of Associationin case of offline submission and one copy for onlinesubmission, duly signed by each subscriber in the presenceof one witness. In order to facilitate the general public, the

standardized specimen of Memorandum of Association ofvarious sectors has been provided on the CommissionsWebsite.


21/33

III. Form

1 Declaration of compliance with the pre-requisites for the formation of a company

IV. Form 21 Notice of situation of registered office of thecompany

V. Form 29 Particulars of first directors of the company VI. Registration/filing fee Original paid Challan

evidencing the payment of fee as prescribed in Table II, inany of the authorized branches of MCB Bank Limited.

VII.Authorization by sponsors The authorization ofsponsors in favor of a person to make good the deficiencies,if any, in the memorandum and articles of association andother documents as may be pointed out by the registrarconcerned and to collect the certificate of incorporation.


22/33

c.Additional Requirements for the Incorporationof a public Company

In addition to the requirements for incorporation of aprivate limited company as stated above, the publiccompanies are required to file the followingdocuments at the time of incorporation:

i. Form 27 (List of persons consenting to act as

director ii. Form 28 (Consent of Directors)


23/33

d.Additional Requirements for incorporation of aSingle Member Company

Any person may form a single member company andwould file with the registrar at the time ofincorporation a nomination in the form as set out inForm S1 indicating at least two individuals to act asnominee director and alternate nominee director, ofthe company in the event of his death.


24/33

a. Private companies

i. Directors of every company are required to appointthe first chief executive not later than fifteen days fromthe date of incorporation and thereafter withinfourteen days from the date of election.

ii. The first auditor is required to be appointed by thedirectors within sixty days from the date of

incorporation and thereafter in each AGM of thecompany.


25/33

iii. A single member company is also required to appoint acompany secretary within fifteen days of incorporation orof becoming a single member company or of the office ofcompany secretary falling vacant and notify suchappointment on Form 29 within fourteen days of the date

of such appointment. iv. First directors i.e. the directors appointed at the time of

incorporation of the company shall hold office till theelection of directors in the first annual general meeting.The directors so elected shall hold office for a period of

three years. However, casual vacancy occurring on accountof death, resignation or removal of any director may befilled up by the other directors for the remainder period ofthe term.


26/33

v. Any appointment, election or change in theDirectors, Chief Executive, Auditors, ChiefAccountant, legal adviser etc is required to be notifiedto the registrar concerned on Form '29 within 14 days

of the said election, appointment or change (Section205).

vi. A company is required to notify the change in itsregistered office on Form-21 within 28 days from thedate of change. (Section 142)


27/33

vii. First Annual General Meeting (AGM) of thecompany is required to be held within eighteenmonths from the date of incorporation andsubsequent Annual General Meetings are required to

be held once at least in every calendar year, within aperiod of four months following the close of itsfinancial year and not more than fifteen months afterholding of its last preceding AGM (Section 158).


28/33

The company may alter its memorandum of association.

Procedure of Amendment in Memorandum ofAssociation.

NAME CLAUSE: A company may change its name in the

manner: a) pass a special resolution; b) get writtenapproval of the Registrar of Joint Stock Companies; c)analtered certificate of incorporation is to be issued by theRegistrar (Sec 40). The Certificate is called Certificate of

Incorporation on change ofname and d) the write the oldname on all documents.


29/33

THE CAPITAL CLAUSE: The company can increase,decrease or sub-divide its share capital its share capital bypassing an ordinary resolution. The company shall file theregistrar notice of such alteration within 15 days.

Registered Office Clause: a) pass a special resolution; b)obtain permission within 60 days of resolution from SECPby filing a petition; and c) give the certified copies of theOrder of the Commission to the Registrar of the old and

new provinces within 90 days of confirmation of theCommission.


30/33

THE OBJECT CLAUSE: a) pass a special resolution; b)obtain confirmation within 60 days from the SECP by filinga petition; and c) file the certified copy of the Commission

with the Registrar within 90 days.

ALTERATIN IN ARTICLES OF ASSOCIATION. As thearticles are subordinate to the memorandum of associationand the Companies Ordinance, 1984 thus any alterationcan be made if the same is allowed by the Memorandum

and The Ordinance.


31/33

No public company shall except with the priorapproval of commission in writing and subject to suchconditions as may be imposed by the commission inthis regard, convert itself into a private limited

company. A private company can be converted into public

company by the following procedure:


32/33

the Articles of Association shall be altered so that allthe clauses applicable to private company undersection 2(1)(28) will no longer be included; and

Sec 2(1)(28) restricts the rights to transfer the shares, ifany; b) limits the maximum number of its membersto 50; and prohibits any invitation to the public tosubscribe for the share or debentures of the company.

Prospectus or a statement in lieu of prospectus, as thecase may be, shall be filed with the registrar within 14

days after the date of conversion;Further , a private company on conversion into publiccompany would be require to increase the number ofits members and directors.


33/33

This increase, in case of unlisted company to listedcompany would be 3 to 7.

A public company may also be converted into privatecompany with the prior approval of the Commission inwriting. In this case also the company shall have toalter its articles to incorporate all the conditions ofSection 2(1)(28). Further the word (private) wouldstart appearing in its name. It will also have to obtain anew certificate of incorporation.