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Articles of Association

M. SAQIB BHATTI
Advocate High Court saqibalibhatti@yahoo.com

03335193933

Definition of AOA
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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 AOA
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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 MOA
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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. 2. 3. 4.

Business clause as to when the business is going to start, The transfer of shares, Alteration in share capital Rules regarding General meetings

6.

7.
8. 9.

10. 11.

Procedure for voting Powers and duties of directors Proceedings of directors The qualification and dis-qualification of directors Accounts Winding up

Registration of AOA
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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
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The AOA shall be:


Printed
Divided

into paragraphs, It must be numbered Signed by each subscriber

Effects of AOA
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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.

Alteration of AOA
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The AOA of a company may be altered but subject to the provisions of:
Companies

Ordinance Conditions contained in the MOA

Procedure of Alteration
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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 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
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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
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Definition
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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.

Importance of Prospectus
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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

Exemption from civil-liability


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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.

Contents of Prospectus
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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.