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v. ADMINISTRATION OF COMPANY LAW

Administration of Company Law is an important function of the Commission, which is being carried out by the Companies Law Administration Division (CLAD). This Division supervises and coordinates the working of all regional offices of the Commission, called Company Registration Offices (CROs), which are located at Karachi, Lahore, Peshawar, Quetta, Multan, Faisalabad and Islamabad.  This is done through the Regulation of Companies at headquarters.  Each officer heading a regional office exercises powers of Registrar under the Companies Ordinance, 1984.  CLAD has issued standing instructions to the CROs with regard to important policies relating to administration of the Companies Ordinance.  It also issues guidance as and when necessary, on important policy and operational issues.  In addition to facilitating the incorporation of companies, CLAD has put in place a system to ensure that companies comply with the statutory requirements, particularly with regard to disclosure and fulfilment of obligations towards their members.  The main functions of CLAD as per the Corporate Plan are summarized below:

q  supervision of working of all CROs;
q  effective coordination and liasing through periodical reports;
q  grant of approvals in matters within the jurisdiction of the Commission and the Registrar at Headquarters;
q  identifying non-compliance with the provisions of the Companies Ordinance and issuance of notices to defaulting companies;
q  penal action against the managements of companies in default of compliance with the law; and
q  speedy disposal of complaints from investors and the general public; and
q  framing of rules/regulations and recommending amendments in the Ordinance.

MAIN CATEGORIES OF COMPANIES

The companies incorporated under the Companies Ordinance, 1984 can be classified into two main categories:
(i) Private companies; and
(ii) Public companies.

Companies Ordinance, 1984 also provides for following kinds of companies:
(i) a company limited by shares;
(ii) a company limited by guarantee;
(iii) a company having unlimited liability;
(iv) companies, which are incorporated for non-profit purposes;
(v) foreign companies, which are not formally incorporated under the Companies Ordinance, 1984 being incorporated in a foreign country but engaged in business in Pakistan.

INCORPORATION OF COMPANIES

All companies are incorporated in the CROs.  Each CRO has its own jurisdiction under the regulations framed by the Commission. A company may seek registration with a CRO in whose jurisdiction it proposes to maintain its registered office.

INCORPORATION OF COMPANIES DURING THE PERIOD

During the period under review, 1,628 companies were registered under the Companies Ordinance, 1984.   These include 37 public companies and 1,541 private companies limited by shares, 15 companies limited by guarantee and not for profit associations and 35 foreign companies.  However, no company with unlimited liability was registered during the period.  The number of new companies registered during the period was equivalent to 3.87% per cent of the companies in operation as on 30th September, 2000.  The authorized capital of 1,578 companies limited by shares registered during the period aggregated to Rs. 22,208.57 million.  Details of companies registered during the period is given in the table below:-

POSITION OF EXISTING COMPANIES
It can be observed from the table below that the province of Punjab with 22,116 companies has the largest concentration of companies.  Next is the province of Sindh, which accounts for 16,910 companies followed by NWFP with 2,590 and the province of Baluchistan with 403.   Thus out of 42,019 companies registered in Pakistan on 30th June, 2000, 52.63% companies were registered in the Punjab province, 40.24% in Sindh province, 6.16% in NWFP and 0.97% in Baluchistan province.

Total number of existing companies at the end of the report period was 42,019.  Province-wise position is shown in the table below:

PATTERN OF AUTHORIZED CAPITAL OF NEWLY REGISTERED COMPANIES
Companies seeking incorporation under the Companies Ordinance, 1984 indicate the amount of their authorized capital as determined by them keeping in view the size of their intended business.  During the period under review, the total authorized capital of newly incorporated companies was Rs. 22,209 million out of which 313 companies had authorized capital of Rs. 10 million and above.  The pattern of authorized capital is shown in the table below:

The companies incorporated during the period can be classified into various industrial sectors.  The sectoral pattern of such companies is shown in the table below.  It would appear that majority of the companies incorporated were in Textiles, Communications, Transport, Chemical & Fertilizer, Fuel and Energy and Food & Allied sectors.

AMALGAMATION/ MERGER OF COMPANIES
Amalgamation, merger or takeover of companies is regulated under the Companies Ordinance, 1984, the requisite power of approval being vested with the High Court.  The draft schemes of amalgamation are submitted by the management of the respective companies under sections 284 and 287 and the related petitions are disposed of by the High Court duly considering the representation of the Registrar of Companies as well as the interests of minority shareholders.  During the period under review, 13 cases were submitted to the Court, out of which following four were disposed of:

1. (i) Latif Weaving Mills (Pvt) Ltd.
(ii) Chenab Finishing Mills (Pvt) Ltd.
(iii) Faisal Weaving (Pvt) Ltd. into Chenab Fabrics & Processing Mills Limited
2. Al-Atta Leasing Modaraba into Crescent Modaraba
3. D.G. Khan Electric Co. Ltd. into D.G.Khan Cement Co. Ltd.
4. Sitara Spinning Mills Ltd. into Sitara Chemicals Industries Ltd.

Brief particulars of all cases submitted to the Court are given in the table below:

SUPERVISION & CONTROL OVER CROs
As stated earlier, supervision and control over the CROs is exercised by the Registrar of Companies at Headquarters.  Besides regular visits by the Registrar, certain periodical reports as listed below have been prescribed for effective control over the working of the CROs to ensure efficient and prompt service to the general public.

GUIDANCE AND ASSISTANCE PROVIDED TO CROs FOR THE ENFORCEMENT OF COMPANY LAW CLAD maintains close relationship with the CROs and issues instructions and provides guidance on important policy issues and interpretation of the law.  Major directives issued during the period under review are:

1. Circular No. 15/1999, dated 31.8.1999 – Instructions regarding payment of fees in the head of accounts of the Securities and Exchange Commission of Pakistan.
2. Order dated September 17, 1999 regarding Board of Investment instructions for registration of foreign companies in terms of section 451 of the Companies Ordinance, 1984.
3. Order dated September 20, 1999 on the behest of Board of Revenue, Sindh for discharging duties and performing functions ensuring affixation of proper adhesive, revenue and Court fee stamps under the Stamp Act, 1899.
4. Order dated October 30, 1999 directing that written comments to be filed in the Court on winding up petitions should be immediately prepared and submitted to Headquarters for vetting.
5. Order dated February 1, 2000 advising CROs regarding the time limit for registration of particulars of mortgages, charges, etc.
6. Order dated February 2, 2000 advising CROs to examine the annual accounts of the non-listed companies and to furnish a list of such companies that have been found to be violating the provisions of the Companies Ordinance.
7. Order dated March 11, 2000 containing instructions regarding para-wise comments to be filed in the Court.
8. Order dated May 6, 2000 conveying further instructions about incorporation of new companies as per new policy of the Commission.
9. Order dated June 2, 2000 advising CROs to examine cases of dormant companies and forward a list of such companies to Headquarters Office for necessary action.
10. Order dated June 29, 2000 regarding action to be taken in cases of non-compliance with statutory requirements.

Specific instructions have been issued to the CROs to provide prompt service to investors, promoters and managements of companies. It has now been ensured that:
q  names of the companies can be allowed  the same day;
q  companies can be incorporated within a maximum period of three days;
q  record can be made available for inspection immediately on the visit of interested parties and attested copies of documents are provided  the same day; and
q  registration of mortgages can be completed within one day.

Besides, counters have been opened in every CRO to provide general guidance to the visiting public. There is a visible improvement in the efficiency of CROs which is being acknowledged by the public.

WINDING UP OF COMPANIES
A company may be wound up by the members or creditors voluntarily or it can be wound up compulsorily by the High Court pursuant to petitions filed by the Registrar, the Commission, and other interested parties.  Names of companies, which have no assets and liabilities and have not been in operation can be struck off the register by the Registrar under the Companies Ordinance, 1984.  The number of companies which were liquidated voluntarily through the Court and those whose names have been struck off the register during the period under review are given below along with their paid up capital:

INVESTIGATIONS INTO AFFAIRS OF PRIVATE AND NON-LISTED COMPANIES
Section 263 of the Companies Ordinance, 1984 provides that members with interest aggregating not less than one-tenth of the total voting power in a company and in compliance with the requirements of rule 18 of the Companies (General Provisions & Forms) Rules, 1985 can make an application to the Commission for investigation of the affairs of any company.  Section 265 provides that the Commission may appoint one or more competent persons as Inspectors to investigate the affairs of a company on the basis of a resolution passed in a general meeting or by order of the High Court.  During the period under review, investigations were ordered in the case of eight non-listed companies.

APPROVALS AND PERMISSIONS
The Companies Ordinance, 1984 provides for approval to be accorded by the Commission and by the Registrar in various matters.  A large number of applications submitted by companies were processed and approved during the period under review as given in the following table:

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