Company Law Administration Division

Overview
The Company Law Administration Division (CLAD) is primarily responsible for administration of the Companies Ordinance, 1984 and the Companies (Appointment of Legal Advisors) Act, 1974. It discharges its functions with the objective of achieving healthy growth of corporate enterprises, providing protection to investors and creditors and creating incentives for investment. Incorporation and registration of companies is carried out at the CROs located in seven major cities of Pakistan, i.e. Karachi, Lahore, Islamabad, Peshawar, Quetta, Multan and Faisalabad. These offices also function as registrars of company records. The CLAD also grants licenses and issues approvals in certain matters, as provided in the Companies Ordinance, 1984. Additionally, to improve corporate governance, a system has been put in place to ensure that companies comply with all statutory requirements, particularly with regard to disclosure and fulfillment of obligations towards their members. During the period under review, the CLAD's main activities included proposing amendments in the corporate laws and introducing information technology in all its functions for facilitating the general public.

The CLAD's main functions include the following:
i. Supervision of the working of all CROs.
ii. Coordination and liaison with other Divisions within the Commission through periodic reports.
iii. Framing of rules/regulations and recommending amendments in the relevant laws.
iv. Regulation and supervision of non-listed and private companies, the responsibilities for which include:
a. Ensuring corporate compliance with statutory requirements.
b. Encouragement of practices towards better corporate governance.
c. Penal actions against management of companies which were non-compliant with the provisions of law.
d. Disposal of complaints from investors and general public.
e. Protection of the rights of investors and creditors.

The CLAD supervises and coordinates the working of the CROs and issues them instructions relating to the administration of the Companies Ordinance and the Legal Advisors Act.

The CROs are responsible for performing the following functions:
i. Public Facilitation Work
a. Availability of name certificate.
b. Incorporation of companies.
c. Registration of mortgages/charges.
d. Inspection of documents.
e. Supplying certified copies of documents.

ii. Regulation and Enforcement
a. Filing of annual returns by companies to give proper disclosure of their respective authorized capital, paid-up capital, financial statements, auditors, chief executive, directors, shareholding pattern, etc.
b. Filing of returns regarding change in directors, auditors, legal advisors, etc.
c. Filing of returns regarding allotment of shares, further issue of capital, etc.
d. Holding of Statutory Meetings/AGMs/EGMs.
e. Filing of accounts by public companies.
f. Monitoring of non-compliance with statutory requirements and other irregularities.

iii. Investigation and Prosecution
a. Recommendations to the Commission for investigation into the affairs of companies.
b. Court cases and winding up petitions.

During the period under review, 1,169 companies were registered under the Companies Ordinance, 1984. These included 27 public and 1,099 private companies limited by shares. 14 companies were incorporated as not-for-profit associations and 29 as foreign companies. This brought the total number of companies registered in Pakistan to 42,863, as at June 30, 2001. Province-wise particulars of companies registered up to June 30, 2001 is given in Table 12 as follows:

During the period under review, 1,169 companies were registered under the Companies Ordinance, 1984. These included 27 public and 1,099 private companies limited by shares. 14 companies were incorporated as not-for-profit associations and 29 as foreign companies. This brought the total number of companies registered in Pakistan to 42,863, as at June 30, 2001. Province-wise particulars of companies registered up to June 30, 2001 is given in Table 12 as follows:

Nature of Companies	Punjab and Islamabad	Sindh	Baluchistan	NWFP	Total
Companies limited by shares Public Private	1,435 20,848	1,280 15,232	56 331	124 2,475	2,895 38,886
Companies limited by guarantee and associations not for profit	167	231	13	14	425
Foreign companies	311	328	3	9	651
Companies with unlimited liability	5	-	1	-	6
Total	22,766	17,071	404	2,622	42,863

Of the total 1,126 companies limited by shares, incorporated during the financial year 2001, 45.6 percent had authorized capital ranging between Rs. 1.0 and Rs. 2.5 million while 21.7 percent companies had authorized capital of Rs. 10 million and above, indicating that these companies intended to transact business on a larger scale. The pattern of authorized capital of incorporated companies is presented below:

Chart 7 - Pattern of Authorized Capital
The sector-wise classification of companies, limited by shares, incorporated during the financial year 2001 is presented below:

Auto and Allied	6
Brokerage Houses	54
Chemical & Pharmaceuticals	82
Communication	187
Construction	18
Electrical & Electronics	15
Engineering	10
Food & Allied	51
Fuel & Energy	24
Ghee & Cooking Oil	7
Housing & Real Estate	1
Investment Advisory Companies	2
Investment Banks/Companies	1
Leather & Tanneries	12
Miscellaneous	522
Modaraba Management Cos.	2
Mutual Funds Management Companies	3
Paper & Board	8
Sugar & Allied	4
Synthetic Rayon	1
Textile Composite & others	58
Textile Spinning	18
Textile Weaving	12
Tobacco	2
Transport	25
Woolen	1
Total	1,126

Improvements in the Administration of Company Law
During the year under review, the CLAD took several steps to create a congenial and investor friendly atmosphere at the CROs through direct interaction with the general public and sponsors of companies.

Availability of Company Name Through Web Access
Detailed information about availability of companies' names has been put on the Commission's website. This facility allows sponsors to confirm availability of the name of a company electronically.

Information about Incorporation of Companies on the Commission's Website
Detailed guidelines on procedure for company incorporation and fee structure has been placed on the Commission's website. Dissemination of this information is expected to create awareness among sponsors/consultants regarding procedure for incorporation of new companies.

5.2.3 Fast Track Incorporation of Companies and Other Facilities
The Commission set up an information desk at the ITCN Conference in Karachi in March 2001 for providing information to the general public about incorporation of companies. At the counter, 15 applications for incorporation of companies were received and these companies were incorporated on the same day. General information regarding procedure for incorporation of companies and benefits of establishing limited companies was also provided to a large number of people who attended the Conference. Encouraged by the results of the Conference, the Commission is actively considering sending out Mobile Teams of its officers to remote areas for incorporation of companies on the spot. It is expected that this measure will result in increasing the number of incorporated entities.

5.2.4 Creation of Database of Incorporated Companies
An exercise has been undertaken to create a central database of essential information relating to all companies registered at the various CROs. The information includes name of the company, its board of directors, authorized capital, paid-up capital, loans taken by the company, name of the auditors/company secretary, etc. Easy access to such information is expected to improve significantly the monitoring of company affairs.

5.2.5 Other Improvements
A number of other steps were taken during the year by the CLAD. These included:
i) Allowing fee payments at any authorized branch of Habib Bank Limited.
ii) Substantial reduction in stamp duty on Memorandum and Articles of Association of companies registered in the province of Sindh. Other provinces are likely to follow Sindh's example.

5.3 Regulatory Actions
5.3.1 Amendments in the Companies Ordinance, 1984
The CLAD continued its efforts to update and refine the provisions of the Companies Ordinance, 1984 to improve corporate governance and accountability among corporate managers and sponsors and to ensure healthy growth of the corporate sector. In this regard, a committee was constituted, which after a careful review of the Companies Ordinance, 1984 proposed comprehensive amendments in 92 sections of the Ordinance. These amendments are expected to substantially strengthen the framework of law and also encourage compliance with statutory provisions.

5.3.2 Amendments in Companies (Appointment of Legal Advisors) Act, 1974
The Companies (Appointment of Legal Advisors) Act was promulgated in 1974 to ensure that companies registered under the Companies Ordinance, 1984, with paid-up capital of Rs. 500,000 and above, appoint at least one legal advisor to advise such companies in the performance of their functions and duties. With the passage of time, the limit of minimum capital has become too low. The Commission has, therefore, proposed that this limit be raised to Rs. 2.5 million. Further, the manner of taking cognizance of default (by a Court not inferior to that of a magistrate of First Class) is cumbersome and expensive. For proper enforcement of this law, the default is proposed to be made cognizable by the Registrar of Companies with a right of appeal to the Commission.

5.3.3 Approvals, Permissions and Extensions Granted
The Companies Ordinance, 1984 provides for approvals to be accorded by the Commission, the Registrar and the concerned officers in charge of the CROs in various matters pertaining to the incorporation of companies. During the period under review, 1,169 companies were incorporated, 2,810 certificates for availability of name under Section 37 of the Companies Ordinance, 1984 were issued, 3,072 mortgage/charges were registered, 16,292 certified copies of documents were supplied and 6,916 inspections of records were permitted.
An important function of the CROs is to ensure that the companies registered with them comply with all statutory requirements under the Companies Ordinance, 1984. Public companies are required to hold their AGM once in a calendar year. During the period under review, the Registrar of Companies allowed extension in 40 cases for holding AGMs. Further, for holding overdue meetings, the Registrar gave directions under Section 170 of the Companies Ordinance, 1984 to 19 companies.

During the year, the Commission received 203 applications for amendments in Memorandum of Association, of which 153 cases including two rejections were disposed of. At the year end, 50 cases were pending owing to shortcomings already pointed out to the companies concerned. Approval was also granted in one case for appointment of sole purchase and sale agent under Section 206 of the Companies Ordinance, 1984.

5.4 Monitoring and Enforcement
5.4.1 Notifications, Circulars and Press Releases
To streamline the working of local registration offices, several notifications and circulars relating to administrative, legal and other matters were issued during the period under review. Among these, the salient ones are as follows:
1. Order No.600(33)RCP/2000 dated 25.7.2000 - Non-holding of AGM by non-listed public companies, cases to be sent to Headquarter for issuance of direction under Section 170 of the Companies Ordinance, 1984.

2. Order No.21(1)A.ACR/96-305 dated 19.9.2000 - Instructions regarding change of management in the companies providing security services.

3. Order No.602(6)RCP/88-585 dated 21.11.2000 - Disposal of complaints on priority basis.

4. Order No.470(1)RCP/90-646 dated 28.11.2000 - Revision of Sixth Schedule to the Companies Ordinance, 1984 (notification).

5. Order No.37(14)RCP/2000-734 dated 13.12.2000 - Availability of name with the word "Pakistan" in certain cases.

6. Order No.602(6)RCP/88 dated 10.1.2001 - Instructions regarding winding up of companies.

7. Order No.470(1)RCP/90-215 dated 9.2.2001- Clarification regarding Sixth Schedule to the Companies Ordinance, 1984.

8. Order No.5-69/73-CL/99 dated 21.2.2001- Adjudication of default in filing of statutory forms/returns under the Companies Ordinance, 1984.

9. Order No.13(72)RCR/42/2000 dated 15.3.2001- Information about associations registered under Sections 42 and 43 of the Companies Ordinance, 1984.

10. Order No.600(2)RCP/2001 dated 10.5.2001- Revised statements to be furnished by the CRO to Headquarter. The number of monthly statements was reduced from 31 to 13 only.

11. Order No.602(82)RCP/2001 dated 1.6.2001- Instructions regarding arrangements/procedures for data entry for Corporate Registration System at the CROs.

12. Order No.470(1)RCP/90 dated 15.6.2001- Clarification regarding registration of particulars of mortgages/charges and related documents.

13. Order No.600(2)RCP/2001 dated 25.6.2001- Instructions regarding furnishing of relevant data pertaining to new incorporations and investment made by foreign investors to Board of Investment.

14. Order No.602(6)RCP/88 dated 27.6.2001-Instructions regarding approval of Headquarter for filing Court cases.

5.4.2 Imposition of Penalties
Under various provisions of the Companies Ordinance, 1984, companies registered at the respective CROs are required to file documents relating to change in directors, change in authorized/paid-up capital, change in registered office and election of directors. A large number of notices were issued for late filing of these documents and in certain cases, penalties were eventually imposed by the concerned Registrars. Penalties were imposed in 88 cases for late submission of Form-III relating to allotment of shares and non-holding of Statutory Meetings under Section 157 of the Companies Ordinance, 1984.

5.4.3 Investigation into the Affairs of Companies
In several cases where affairs of companies were not being managed in accordance with prudent commercial practices, investigations were ordered and inspectors appointed. The cases of National Technology Development Corporation Limited, Shaheen Pay T.V. Limited and Barex Limited are mentionable in this regard. Investigations were ordered on the following grounds:

i) Mismanagement and oppression of minority shareholders.
ii) Irregularities in shareholding and election of directors.
iii) Non-compliance with statutory provisions and disputes regarding shareholding.

5.4.4 Amalgamation/Merger of Companies
Amalgamations/mergers of companies are approved by the High Courts under Sections 284 to 287 of the Companies Ordinance, 1984 after filing of comments by the Registrar of Companies. Written representations were filed and verbal comments made in Courts in a number of cases. A total of 16 merger applications are pending in various High Courts.

5.4.5 Striking off the Names of Companies
Section 439 of the Companies Ordinance, 1984 provides that where the Registrar has reasonable cause to believe that a company is not carrying on business or is not in operation, he may, by following the procedure prescribed in the Ordinance, strike off the names of such companies from the Register of Companies maintained by him. During the year, a large number of notices were issued to companies that were found non-operational. After completion of legal formalities, the concerned Registrars struck off 29 companies from the Register of Companies.

5.4.6 Liquidation of Companies
Out of 725 companies under liquidation at the beginning of the period under review, 125 companies were finally wound up during the year. The break-up of the remaining 600 companies in various stages of liquidation is as follows:

Under voluntary winding up 429
Under winding up by Court 171
Total 600

The Commission is actively following up the issue of slow liquidation process and has initiated a dialogue with the respective Courts in this regard.

5.4.7 Expeditious Disposal of Court Cases
To expedite the cases of companies pending in the Courts for adjudication, senior officials of the Commission held a series of meetings with the authorities at the Lahore High Court drawing attention to Companies (Court) Rules, 1997 that needed to be fully implemented. As a consequence of these parleys, there has been a noticeable improvement in the pace of court decisions.