Companies Act 2017 (Pakistan) Study Flashcards

A set of vocabulary-style flashcards covering the key definitions, regulatory requirements, meeting protocols, and director-related provisions of the Companies Act 2017 of Pakistan.

Level 1 Penalty

A general default penalty of up to $Rs.\,25,000$ applicable to the company and its officers.

Alter / Alteration

Includes additions or omissions to a document without substituting or destroying the main scheme of the document.

Associated Companies / Undertakings

Interconnected companies where an owner, partner, or director holds $\geq 20\%$ voting power in another; are under common management; or one is a subsidiary of the other.

Associated Person

A person who holds or controls $\geq 10\%$ voting power in a company.

Authorised / Nominal Capital

The maximum share capital authorised by the company's memorandum.

Commission

The Securities and Exchange Commission of Pakistan (SECP).

Court

The High Court having jurisdiction where the company's registered office is situated.

Officer

Includes a director, chief executive, secretary, and any person whose directions the Board is accustomed to follow.

Private Company

A company that restricts the right to transfer shares, limits its members to $50$, and prohibits public invitations for share or debenture subscriptions.

Subsidiary

A company where another company controls the board, holds $>50\%$ equity, or holds a subsidiary of another subsidiary.

Supremacy Clause (Section 4)

The provision stating the Companies Act 2017 overrides any contrary provisions in other laws, memorandum, articles, contracts, or resolutions.

Principal line of business

The business in which substantial assets are held or likely to be held, or from which substantial revenue is earned or likely to be earned, whichever is higher.

Special Resolution

A high-level formal decision required for major actions like changing a company name or altering the memorandum.

Section 42 Licence

A licence granted by the Commission for public limited companies with charitable or not-for-profit objects to register without the word 'Limited'.

Pre-emption Rights (Section 83)

The requirement that new shares must first be offered to existing members pro-rata to their existing holdings before being offered to others.

Deposit (Section 84)

Any deposit of money or amount borrowed by a company, excluding loans from banking institutions, debenture issues, or advances for goods/services.

Ultimate Beneficial Owner (UBO)

A natural person who ultimately owns or controls a company through $\geq 25\%$ shares or voting rights, or through effective control.

Statutory Meeting (Section 131)

A meeting required for public companies with share capital, held within $180$ days of commencing business or $9$ months of incorporation, whichever is earlier.

Annual General Meeting (AGM)

A meeting held once every calendar year within $120$ days following the close of the financial year (first one within $16$ months of incorporation).

Extra-ordinary General Meeting (EGM)

Any general meeting of the members other than the statutory meeting or the Annual General Meeting.

Ordinary Business

Items at an AGM such as considering financial statements, declaring dividends, electing directors, and appointing auditors.

Quorum for Listed Public Company

Unless articles provide otherwise, not less than $10$ members present representing $\geq 25\%$ of the total voting power.

Cumulative Voting

A voting system for electing directors where each member's votes equal the number of shares held multiplied by the number of directors to be elected.

Independent Director

A director selected from a databank who has no pecuniary relationship with the company and exercises independent judgment without conflicts of interest.

De facto Director Doctrine (Section 168)

The principle that the acts of a person acting as a director are valid even if a defect in their appointment or qualification is later discovered.

Disqualification Order (Section 172)

An order by the Commission debarring a person from being a director for up to $5$ years due to misconduct, fraud, insolvency, or persistent defaults.