Articles of association PRESENTATION.ppt

Articles of Association1

M. SAQIB BHATTIAdvocate High Court

saqibalibhatti@yahoo.com

03335193933

Definition of AOA2

The Articles of association of a company, often simply called the Articles is the document that governs the relationship between the company and its employees

Articles of Association is a statutory document which effectively governs company's relations with the insiders.

Importance of AOA3

Constitution of the company The incorporation of the company, is infact the

registration of its Memorandum, and its Articles and the certificate of incorporation is granted on the basis of these two documents.

Main document which is required for forming a company.

Nature of a contract between the company and its employees.

CONTENTS/CLAUSES OF MOA4

The articles of Association of a company sets out the regulations of the company, therefore it may adopt all or any of the regulations contained in Table A of the First Schedule.

The Table A of the first schedule has the regulations covering the following areas:

1. Business clause as to when the business is going to start,

2. The transfer of shares,

3. Alteration in share capital

4. Rules regarding General meetings

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6. Procedure for voting7. Powers and duties of directors8. Proceedings of directors9. The qualification and dis-qualification of

directors10. Accounts11. Winding up

Registration of AOA6

Procedure provided for the registration of AOA in Companies Ordinance 1984. If the Company is limited by shares, there

may be along with the MOA Articles must be signed and got registered by the Company.

In case of Company Limited by shares and by guarantee, it is mandatory requirement that AOA is registered along with MOA.

OTHER REQUIRMENTS 7

The AOA shall be: Printed Divided into paragraphs, It must be numbered Signed by each subscriber

Effects of AOA

The AOA have certain legal effects to the member and the company:

Binding on members in relation to the company.

Binding on company in relation to members.

Binding on members inter se(in their relation to one another).

Not binding on company in relation to outsider.

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Alteration of AOA9

The AOA of a company may be altered but subject to the provisions of: Companies Ordinance Conditions contained in the MOA

Procedure of Alteration10

Step 1.the alteration is to be discussed in BOD and approved through a resolution.

Step 2.days notice along with the copy of proposed special resolution is to be sent to the members.

Step 3. resolution is passed in general meeting supported by ¾ majority.

Step 4. copy of the resolution is to be filled with the registrar within 15 days.

Step 5. Approval is accorded from the registrar. And thereafter the registrar concern issues filing certificate.

Approval of alteration 11

According to Ordinance it is necessary to obtain approval of the Commission of any alteration made in the AOA. Upon receiving an application for

confirmation the commission will send a notice to; Every class of members who are effected by

such alteration.

Prospectus 12

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Definition

Prospectus is a document, containing the advertisement for invitation of subscription from the public.

It is a legal document that institution and business use to describe the securities they are offering for participants and buyers.

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Importance of Prospectus

It provides the investor with material information about mutual funds, stocks of the company, bond issued by the company and other investments made by the company.

It also tells the investor about the financial position of the company, the biography of the officers, directors, the CEO and other key information which an investor required before making the investment.

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Matters to be stated in Prospectus Following matters and reports are to be

set out in a prospectus:- The contents of MOA and AOA The name, addresses, description and

occupation of the signatories to the MOA and number of shares subscribed by them.

The number and values of shares. Description of business to be undertaken.

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Any provision in the AOA as to remuneration of directors.

The names, occupation and description of directors.

The time and date of the opening of subscription.

The financial statement of the company. The profit and loss statement of the

company.

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Approval, issue and registration of Prospectus The prospectus of every company shall

not be issued, circulated, or published unless prior approval of SECP, and for the purposes of obtaining permission from SECP the company must required to submit the prospectus sixty days prior to subscription.

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Penalty for wrongly issuance of Prospectus If a prospectus is issued in contravention

of the Ordinance, the company and every person, shall be punishable with fine which may be extended to five thousand rupees.

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Terms in prospectus cannot be changed A company shall not, very the terms of

the contract specified in the prospectus, except prior approval form the SECP.

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Civil Liability for mis-statement in prospectus If a prospectus invites persons to

subscribe for shares or debentures of a company, and the persons purchase such shares or debentures while relying on the faith of the prospectus, thereafter he sustain loss or damage then following persons are liable for the loss: Every person who is director of the company

when the prospectus was issued Every person who is named in the prospectus Every person who is a promoter of the company Every person who has given consent in the

issuance of the prospectus

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Exemption from civil-liability Following persons are exempted from the

Civil Liability:- Any person who is a director and he withdrew

his consent before the issue of the prospectus, The prospectus was issued without his

authority and consent The prospectus was issued without his

knowledge and consent That after the issue of prospectus, but before

the allotment he withdrew his consent.

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Criminal liability for misstatement If a prospectus includes any untrue

statement every person who signed or authorized the issue of the prospectus shall be punishable: With imprisonment for a term of two years With fine which may extent to ten thousand With both

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Newspaper advertisement of Prospectus Every prospectus for the public

subscription shall be published in the newspaper advertisement.

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Contents of Prospectus

Name of the company Address of Registered office Main business Capital of the company Existing paid up share capital New paid up share capital Capital to be raised Sponsors and directors

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Associate and Subsidiary/ Holding Companies

Financial information and operational results

Management i.e. Chief Executive, Directors, Company Secretary, Chief Accountant etc.

Feasibility Report Plans and Future prospects.

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Detailed process of Public Subscription Approval by BOD Application for obtaining permission for Public

Subscription from SECP. When the permission is granted by the SECP the

stock exchange concerned is contacted for providing the date for subscription and the bankers are contracted for the purpose.

The approval remain valid for 60 days. After the above process the Prospectus is

published in at least two dailies one English and other Urdu newspaper, circulated in the province in which the stock exchange is listed, exists.