This document provides an overview of corporate law in Pakistan. It discusses the history of corporate law from its origins in the East India Company in the 16th century through various British acts that established the legal framework. When Pakistan gained independence in 1947, it adopted and amended British corporate law. The document then outlines the current legal framework for companies in Pakistan established through acts and ordinances since independence. It also previews the topics to be covered in the next chapter on corporate governance mechanisms in Pakistan, including the code of corporate governance, responsibilities of boards of directors, related party transactions, and audit requirements.
2. LEARNING
OUTCOMES
After reading this chapter you should be able to:
5.1 History of Corporate Law.
5.2 Legal Frame for Companies in Pakistan
5.3 Companies Act 2017
5.4 Defining a Company
5.5 Types of Companies
5.6 Directors, Appointment and Qualifications
5.7 Audit Process and its Types
5.8 Auditors, Qualification and Appointment
5.9 Types of Meetings in Companies
5.10 Financial Disclosure and Reporting
Requirements
3. 5.1 HISTORY OF CORPORATE LAW
• The history of corporate law can be traced back to several centuries in sub-
continent. During the era of Queen Elizabeth I, the famous East India Company was
incorporated in 16th century. In United Kingdom, Royal Charter or by Special Acts
of Parliament were used to incorporate business organizations till 1844. Later on, in
1844, business organizations were allowed to incorporate without a Royal Charter
or Special Act of Parliament. The Limited Liability Act 1855 was an Act of the
Parliament of the United Kingdom that first allowed limited liability for corporations
that could be established by the general public in the UK. Later, this law kept on
amended keeping in view the requirements of the economy. However, in 1908,
Companies (Consolidation) Act, 1908 was enacted by consolidating all amendments
made during the period 1862 to 1908.
• Under British rule, English Companies Act, 1844 was used in Sub-continent to run
the affairs of the companies. In 1850, this act was further enhanced and said to be
the core legislation around which subsequent Companies Acts further developed. In
1857, to incorporate the Joint Stock Companies, with or without limited liability, an
act was passed. However, the companies formed for the purpose of banking or
insurance were not allowed use limited liability shelter under this act. After various
amendments in 1860 and in 1862, a comprehensive Act, in 1866, was enacted for
consolidating and amending the laws relating to the incorporation, regulation and
winding up of Trading Companies and other Associations.
• Following the English Companies (Consolidated) Act, 1908, the Companies Act,
1913 was passed in the sub-continent, which was almost the reproduction of the
English Act. However, some amendments were made in this Act in 1914, 1915,
1920, 1926, 1930 and 1932. Companies (Amendment) Act, 1936 came into
4. 5.2 LEGAL FRAME FOR COMPANIES IN PAKISTAN
• After gaining independence from British Raj in 1947, Pakistan
adopted the Companies Law by an order in 1947, by making
amendments in various sections of the Act and finally Ordinance
Order, 1949 came into force on 26th March 1949.In January 1972,
the President's Order No. 2 of 1972 was issued, which abolished the
system of managing agents in company administration and
introduced a sort of corporate democracy, directing the election of
directors by cumulative system of voting. On 26th September 1973,
the Companies (Amendment) Act, 1973 was passed to conform to the
new constitutional pattern and also made some amendments in
Section 248 and 277. On 1st March 1974, the Companies
(Appointment of Legal Advisors) Act, 1974 was passed, which made it
compulsory for every company to appoint one legal advisor on
retainership basis. The Companies Act, 1913 was further amended by
the Companies (Amendment) Ordinance LXII of 1979.
15. LEARNING
OUTCOMES
After reading this chapter you should be able to:
6.1 Code of Corporate Governance 2012
6.2 Composition of the Board
6.3 Responsibilities, powers and functions of board of directors
6.4 Directors’ Training Program
6.5 Separation of CEO and Chairperson
6.6 Meetings of the board of directors
6.7 Related party transactions
6.8 Chief Financial Officer (CFO), Company Secretary and Head of Internal Audit
6.9 Framework for corporate and financial reporting
6.10 Financial reporting frequency
6.11 Financial reporting responsibility
6.12 Corporate compliance responsibility
6.13 Statements annexed with Directors Report u/s 236
6.14 Additional voluntary information annexed with Directors Report
6.15 Directors’ remuneration
6.16 Disclosure of interest by a director holding company’s shares
6.17 Committees of the board
6.18 Audit Committee meetings frequency
6.19 Terms of reference of Audit Committee
6.20 Internal audit
6.21 External auditors
6.22 Conclusion
