Summary of New Companies Act 2017

Submitted To

Professor Syed Labib Shah Sb

Submitted by
Syed Tahseen Raza
M.com-3rd
Roll No. 01

Department of commerce
 1. JURISDICTION OF COURT (Section 5)
Now Federal Government cannot empower any civil court to exercise power of high
court according to section 5(2).A new sub section (3) is introduced in the Act for the winding
up companies, whereby the registered office of company immediately preceding the
presentation of petition of winding up. In each High Court there shall be one or more
company benches on permanent basis. A new registrar of the company Bench shall also be
established and it will perform all function assigned under Act and will have power of civil
court for the summoning of deponents and cross examination.
2. PROCEDURE OF COURT (Section 6)
Any petition to the court shall be submitted to the registrar of company bench. Detailed
procedure & contents is given in Section 6(2). Time period to decide any petition is 120 days.
Any person who doesn’t agree the final decision may move to Supreme Court of Pakistan in
60 days for.
3. PROHIBTION OF CERTAIN NAMES (Section 10)
In this section, certain regulatory restriction regarding reservation of names of companies
and other matters such as validity period, rectifying a name is given. Commission may restrict
the use of any name if it find against the business ethics & principle line of business of company.
4. REGISTRATION OF MEMORANDUM AND ARTICLES OF
ASSOCIATION (Section 16)
In this section all the requirements regarding memorandum of association and articles of
association are now combined. Now a subscriber of memorandum article of association is
required to deposit the subscribe money in cash within 30 days from the date of
incorporation. Company will also inform the registrar in 45 days from the date of
incorporation together with verified receipts of subscribe money.
5. BUSNIESS AND OBJECTIVE OF A COMPANY (Section 26)
To carry on any business or enter in to a transaction, the principle line of business will
be mentioned in memorandum of association. For existing companies the object stated at
Serial number of 1 of object clause shall be treated as Principle line of business. If it is not
the principle line of business then company will have to inform registrar about their principle
line of business within time of commencement of this Act.
Principle line of business is the business in which the substantial assets are held or substantial
revenue earned by company, whichever is greater
6. SIMPLE MEMORANDUM ALLOWING ALL LAWFUL
BUSINESSES (Section 27)
Simple memorandum of association is one pager and companies are required to mention
their principle line of business. Simple memorandum allows all lawful business except
restricted business.
7. ASSOCIATIONS NOT-FOR-PROFIT (Section 42)
 In the wake of subversive interventions, terrorisms in region and National Action Plan,
the new law regarding NGOs provides a ample and comprehensive regulatory mechanism.
8. CONVERSION OF STATUS OF COMPAMIES (Sections 47.48.49)
Enabling provisions have been added for the conversion of a:
a) Limited company to unlimited company and vice versa;
b) Limited by guarantee into company limited by shares and vice versa;
c) Private company in single member (SMC) and vice versa.

9. RETURN AS TO ALLOTMENTS (Section 70)

In 45 day of allotment of shares it is necessary for companies to file a return on allotment
of shares with a report verified by auditor if shares are allotted as paid up in cash, other than
as paid up in cash the document evidencing the transfer of non-cash asset or copy of contract
of something with valuation report will be filed by company.

10.RESTRICTION ON TRANSFER OF SHARES BY THE MEMBERS

OF A PRIVATE COMPANY (Section 76)
Now members of a private company are bound to transfer their shares to existing
members if the members refuses to buy shares then it is allow selling shares to anyone. The
pricing of offer will be subject to commission in this respect. Two new provisions have been
introduced whereby private company may transfer according to the articles of association and
agreement among shareholders.
11.TRANSFER TO NOMINEE OF A DECEASED MEMBER (Section 79)
If the shareholder dies the nominee of a shareholder will act as a trustee and will be
responsible to transfer the shares to the legal hires under the religious law to which
shareholder belong. If the deceased shareholder was a director then his nominee in case of
unlisted company shall act as director to protect the rights of legal hires.
12.POWER TO ISSUE SHARE AT DISCOUNT (Section 82)
The special resolution must be passed in general meeting to issue share at discount, at
meeting discount rate, number of shares to be issued, price of share is specified. Listed
companies are allowed to do so if the market price of share is lower than par value for
continuous past trading 90 days. The issue of shares at discount must be sanctioned by
Commission if discount is up to 10%.
13.FURTHER ISSUE OF CAPITAL (Section 83)
Procedure and terms conditions of Employees Stock Option Scheme will be prescribed
by Commission. It is allowed by this section to issue shares either in cash or other than cash
on basis of special resolution provided approval from commission is obtained. Now issue of
right shares is mandatory.
Employee Stock Option is, through which shares of holding company or subsidiary company are
eligible to form part of scheme.
14.UNCLAIMED LIABILITY OF DIRECTORS (Section 98)
A shareholder having unlimited liability can now become director of company if
provided in memorandum articles of association.
15.ANNUAL GENERAL METING (AGM) (Section 132)
Now the period of first AGM is 16 months instead of 18 months.

16.RESTRICTION ON NON-CASH TRANSACTION INVOLVING

DIRECTORS (Section 211)
By this section a company cannot sell or buy any asset from/to directors for non-cash
consideration without approval of members of AGM.
17.RELATED PARTY TRANSACTION (Section 208)
A company may now enter into any contract or agreement with related party according
to the policy approved by the board. This section is not applicable in ordinary business of
company. Contract agreement with related party shall be referred to shareholders in board’s
report with justification. The commission may ask to maintain the transaction record with
related party. A contract or agreement by a director or employee without approval of board or
by special resolution in AGM or not ratified by board within 90 days shall be voidable at the
option board. If the contract or agreement is with related party to any director or
authorizations of director, the director shall be indemnify the company against any loss
incurred.
18.FINANCIAL STATEMENTS (Section 223)
The financial statements of the company must be presented to AGM within 16 days from
the date of incorporation. There is no change in period for subsequent period’s financial
statement. No need for audit for private company having capital not exceeding
Rs.1000000.For listed companies, chairman review report on company affairs will be
circulated to shareholders.
19.CLASSIFICATION OF COMPANIES (Section 224)
Companies are classified on the basis of preparation of financial statements as specified
in 3rd schedule.
a) Public interest company & large sized company (PILSC)
b) Medium sized company (MSC)
c) Small sized company (SSC)
20.CONTENTS OF FINANCIAL STATEMENTS (Section 225)
The company will prepare financial statements which comply with the financial reporting
standards notified by commission and requirements given in 3rd schedule for different classed
of company. Commission may exempt any or all requirements for a company or classes of
companies if it is in public interest. The companies which want to unreserved compliance
with IRFS issued by IASB are allowed to do so.
21.CONTENTS OF DIRECTORS REPORT & STATEMENT OF
COMPLIANCE (Section 227)
a) State of company’s affairs and fair review of a company business.
b) Matter of adequacy of internal financial control.
Director report is now signed by CEO and a director of company.
22.CONSOLIDATED FINANCIAL STATEMENTS (Section 228)
For the private companies and its subsidiary companies having capital not exceeding
1 million rupees the consolidated financial statement is not required now. For holding
companies and its subsidiary companies this requirement is retained.
23.APPROVAL AND AUTHENTICATION OF FINANCIAL
STATEMENTS (Section 232)
For listed companies approval of chief financial officer of the company is required.
For other companies only chief executive and one director is required to sign.
24.FILING OF UNAUDITED FINANCIAL STATEMENTS (SECTION
234)
Private companies not being subsidiary of public company having capital up to 1
million rupees are allowed to file unaudited financial statements within 30 days of such
meeting.
25.DIVIDEND TO BE PAID ONLY OUT OF PROFITS (Section 241)
Dividend paid by company will be in cash or in kind only out of profits. The payment
of dividend in kind shall only be in shape of shape of shares of listed company held by
distributing company.
26. APPLICATION TO COURT (Section 286)
Shareholders are also allowed to apply to commission in addition to creditors with the
same threshold as for creditors.
27.VALIDATION OF LAW (Section 514)
All the amendments in companies’ ordinance 1984 and administrative legislation
thorough various finance Act are valid from the date of commencement of such Acts.
28.EASY EXIT OF A DEFUNCT COMPANY (Section 426)
A defunct company which has known asset and liability may apply for registration in
specific manner to operate as prescribed in 17 schedules of Act and paying charges and
fees.