Section 002

Definitions. — (1) In this Act, unless there is anything repugnant in the subject or context, —

(1) “advocate” shall have the same meaning as assigned to it in section 2 of the Legal Practitioners and Bar Councils Act, 1973 (XXXV of 1973);

(2) “alter” or “alteration” includes making of additions or omissions without substituting or destroying main scheme of the document;

(3) “articles” mean the articles of association of a company framed in accordance with the company law or this Act;

(4) “associated companies” and “associated undertakings” mean any two or more companies or undertakings, or a company and an undertaking, interconnected with each other in the following manner, namely: —

(a) if a person who is owner or a partner or director of a company or undertaking, or who, directly or indirectly, holds or controls shares carrying not less than twenty percent of the voting power in such company or undertaking, is also the owner or partner or director of another company or undertaking, or directly or indirectly, holds or controls shares carrying not less than twenty percent of the voting power in that company or undertaking; or

(b) if the companies or undertakings are under common management or control or one is the subsidiary of another; or

(c) if the undertaking is a modaraba managed by the company; and a person who is the owner of or a partner or director in a company or undertaking or, who so holds or controls shares carrying not less than ten percent of the voting power in a company or undertaking, shall be deemed to be an “associated person” of every such other person and of the person who is the owner of or a partner or director in such other company or undertaking, or who so holds or controls such shares in such company or undertaking:

Provided that—

(i) shares shall be deemed to be owned, held or controlled by a person if they are owned, held or controlled by that person or by the spouse or minor children of the person;

(ii) directorship of a person or persons by virtue of nomination by concerned Minister-in-Charge of the Federal Government or as the case may be, a Provincial Government or a financial institution directly or indirectly owned or controlled by such Government or National Investment Trust; or

(iii) directorship of a person appointed as an “independent director”; or

(iv) shares owned by the National Investment Trust or a financial institution directly or indirectly owned or controlled by the Federal Government or a Provincial Government; or shares registered in the name of a central depository, where such shares are not beneficially owned by the central depository;

shall not be taken into account for determining the status of a company, undertaking or person as an associated company, associated undertaking or associated person;

(5) “authorised capital” or “nominal capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company;

(6) “banking company” means a banking company as defined in clause (c) of section 5 of the Banking Companies Ordinance, 1962 (LVII of 1962);

(7) “beneficial ownership of shareholders or officer of a company” means ownership of securities beneficially owned, held or controlled by any officer or substantial shareholder directly or indirectly, either by—

(a) him or her;

(b) the wife or husband of an officer of a company, not being herself or himself an officer of the company;

(c) the minor son or daughter of an officer where “son” includes step-son and “daughter” includes step-daughter; and “minor” means a person under the age of eighteen years;

(d) in case of a company, where such officer or substantial shareholder is a shareholder, but to the extent of his proportionate shareholding in the company:

Provided that “control” in relation to securities means the power to exercise a controlling influence over the voting power attached thereto:

Provided further that in case the substantial shareholder is a non-natural person, only those securities will be treated beneficially owned by it, which are held in its name.

Explanation. —For the purpose of this Act “substantial shareholder”, in relation to a company, means a person who has an interest in shares of a company-

(a) the nominal value of which is equal to or more than ten per cent of the issued share capital of the company; or

(b) which enables the person to exercise or control the exercise of ten per cent or more of the voting power at a general meeting of the company;

(8) “board”, in relation to a company, means board of directors of the company;

(9) “body corporate” or “corporation” includes—

(a) a company incorporated under this Act or company law; or

(b) a company incorporated outside Pakistan, or

(c) a statutory body declared as body corporate in the relevant statute, but does not include—

(i) a co-operative society registered under any law relating to cooperative societies; or

(ii) any other entity, not being a company as defined in this Act or any other law for the time being which the concerned Minister-in-Charge of the Federal Government may, by notification, specify in this behalf;

(10) “book and paper” and “book or paper” includes books of account, cost accounting records, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form;

(11) “books of account” include records maintained in respect of—

(a) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;

(b) all sales and purchases of goods and services by the company;

(c) all assets and liabilities of the company; and

(d) items of cost in respect of production, processing, manufacturing or mining activities;

(12) “central depository” shall have the same meaning as assigned to it under the Securities Act, 2015 (III of 2015);

(13) “chartered accountant” shall have the same meaning as assigned to it under the Chartered Accountants Ordinance, 1961 (X of 1961);

(14) “chief executive”, in relation to a company means an individual who, subject to control and directions of the board, is entrusted with whole, or substantially whole, of the powers of management of affairs of the company and includes a director or any other person occupying the position of a chief executive, by whatever name called, and whether under a contract of service or otherwise;

(15) “chief financial officer” means an individual appointed to perform such functions and duties as are customarily performed by a chief financial officer;

(16) “Commission” shall have the same meaning as assigned to it under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);

(17) “company” means a company formed and registered under this Act or the company law;

(18) “company law” means the repealed Companies Act, 1913 (VII of 1913), Companies Ordinance, 1984(XLVII of 1984), Companies Ordinance, 2016 (VI of 2016) and also includes this Act unless the context provides otherwise;

(19) “company limited by guarantee” means a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the company in the event of its being wound up;

(20) “company limited by shares” means a company; having the liability of its members limited by the memorandum to the extent of amount, if any, remaining unpaid on the shares respectively held by them;

(21) “company secretary” means any individual appointed to perform secretarial and other duties customarily performed by a company secretary and declared as such, having such qualifications and experience, as may be specified;

(22) “cost and management accountant” shall have the same meaning as assigned to it under the Cost and Management Accountants Act, 1966 (XIV of 1966);

(23) “Court” means a Company Bench of a High Court having jurisdiction under this Act;

(24) “debenture” includes debenture stock, bonds, term finance certificate or any other instrument of a company evidencing a debt, whether constituting a mortgage or charge on the assets of the company or not;

(25) “director” includes any person occupying the position of a director, by whatever name called;

(26) “document” includes any information or data recorded in any legible form or through use of modern electronic devices or techniques whatsoever, including books and papers, returns, requisitions, notices, certificates, deeds, forms, registers, prospectus, communications, financial statements or statement of accounts or records maintained by financial institutions in respect of its customers;

(27) “e-service” means any service or means provided by the Commission for the lodging or filing of electronic documents;

(28) “electronic document” includes documents in any electronic form and scanned images of physical documents;

(29) “employees’ stock option” means the option given to the directors, officers or employees of a company or of its holding company or subsidiary company or companies, if any, which gives such directors, officers or employees, the right to purchase or to subscribe for shares of the company at a price to be determined in the manner as may be specified;

(30) “expert” includes an engineer, a valuer, an actuary, a chartered accountant or a cost and management accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force or any other person notified as such by the Commission;

(31) “financial institution” includes—

(a) any company whether incorporated within or outside Pakistan which transacts the business of banking or any associated or ancillary business in Pakistan through its branches within or outside Pakistan and includes a government savings bank, but excludes the State Bank of Pakistan;

(b) a modaraba or modaraba management company, leasing company, investment bank, venture capital company, financing company, asset management company and credit or investment institution, corporation or company; and

(c) any company authorised by law to carry on any similar business, as the concerned Minister-in-Charge of the Federal Government may by notification in the official Gazette, specify;

(32) “financial period” in relation to a company or any other body corporate, means the period (other than financial year) in respect of which any financial statements thereof are required to be made pursuant to this Act;

(33) “financial statements” in relation to a company, includes—

(a) a statement of financial position as at the end of the period;

(b) a statement of profit or loss and other comprehensive income or in the case of a company carrying on any activity not for profit, an income and expenditure statement for the period;

(c) a statement of changes in equity for the period;

(d) a statement of cash flows for the period;

(e) notes, comprising a summary of significant accounting policies and other explanatory information;

(f) comparative information in respect of the preceding period; and

(g) any other statement as may be prescribed;

(34) “financial year” in relation to a company or any other body corporate, means the period in respect of which any financial statement of the company or the body corporate, as the case may be, laid before it in general meeting, is made up, whether that period is a year or not;

(35) “foreign company” means any company or body corporate incorporated outside Pakistan, which—

(a) has a place of business or liaison office in Pakistan whether by itself or through an agent, physically or through electronic mode; or

(b) conducts any business activity in Pakistan in any other manner as may be specified;

(36) “Government” includes Federal Government or, as the case may be, Provincial governments unless otherwise expressly provided in this Act;

(37) “holding company”, means a company which is another company’s holding company if, but only if, that other company is its subsidiary;

(38) “listed company” means a public company, body corporate or any other entity whose securities are listed on securities exchange;

(39) “listed securities” means securities listed on the securities exchange;

(40) “memorandum” means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of company law or of this Act;

(41) “modaraba” and “modaraba company” shall have the same meaning as assigned to it in the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980);

(42) “mortgage or charge” means an interest or lien created on the property or assets of a company or any of its undertakings or both as security;

(43) “net worth” means the amount by which total assets exceed total liabilities;

(44) “notification” means a notification published in the official Gazette and the expression “notify” shall be construed accordingly;

(45) “officer” includes any director, chief executive, chief financial officer, company secretary or other authorised officer of a company;

(46) “ordinary resolution” means a resolution passed by a simple majority of such members of the company entitled to vote as are present in person or by proxy or exercise the option to vote through postal ballot, as provided in the articles or as may be specified, at a general meeting;

(47) “postal ballot” means voting by post or through any electronic mode:

Provided that voting through postal ballot shall be subject to the provision in the articles of association of a company, save as otherwise provided in this Act;

(48) “prescribed” means prescribed by rules made by the Federal Government under this Act;

(49) “private company” means a company which, by its articles-

(a) restricts the right to transfer its shares [1][, save as otherwise provided under this Act];

(b) limits the number of its members to fifty not including persons who are in the employment of the company; and

(c) prohibits any invitation to the public to subscribe for the shares, if any, or debentures or redeemable capital of the company:

Provided that, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member;

(50) “promoter” means a person—

(a) who is named as a subscriber to the memorandum of association of a company; or

(b) who has been named as such in a prospectus; or

(c) who has control over affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

(d) in accordance with whose advice, directions or instructions the board of the company is accustomed to act:

Provided that—

(i) nothing in sub-clause (d) shall apply to a person who is acting merely in a professional capacity; and

(ii) nothing contained in sub-clause (d) shall apply to the Commission, registrar or any authorised officer by virtue of enforcement or regulation of the provisions of this Act or any rules, regulations, instructions, directions, orders thereof;

(51) “prospectus” shall have the same meaning as assigned to it under the Securities Act, 2015 (III of 2015);

(52) “public company” means a company which is not a private company;

(53) “public interest company” means a company which falls under the criteria as laid down in the Third Schedule to this Act or deemed to be such company under Section 216;

(54) “public sector company” means a company, whether public or private, which is directly or indirectly controlled, beneficially owned or not less than fifty-one percent of the voting securities or voting power of which are held by the Government or any agency of the Government or a statutory body, or in respect of which the Government or any agency of the Government or a statutory body, has otherwise power to elect, nominate or appoint majority of its directors and includes a public sector association not for profit,

licenced under Section 42:

Provided that nomination of directors by the Commission on the board of the securities exchange or any other entity or operation of any other law shall not make it a public sector company;

(55) “redeemable capital” includes sukuk and other forms of finances obtained on the basis of participation term certificate (PTC), musharika certificate, term finance certificate (TFC) or any other security or obligation not based on interest, representing an instrument or a certificate of specified denomination, called the face value or nominal value, evidencing investment of the holder in the capital of the company other than share capital, on terms and conditions of the agreement for the issue of such instrument or certificate or such other certificate or instrument as the concerned Minister-in-Charge of the Federal Government may, by notification in the official Gazette, specify for the purpose;

Explanation.: “sukuk” represents redeemable investment in certificates of equal nominal value representing undivided shares in ownership of tangible assets of a particular project or specific investment activity, usufruct and services;

(56) “register of companies” means the register of companies maintained by the registrar on paper or in any electronic form under this Act;

(57) “registrar” means registrar, an additional registrar, an additional joint registrar, a joint registrar, a deputy registrar, an assistant registrar or such other officer as may be designated by the Commission, performing duties and functions under this Act;

(58) “regulations” means the regulations made by the Commission under this Act;

(59) “rules” means rules made by the Federal Government under this Act;

(60) “scheduled bank” shall have the same meaning as assigned to it under the State Bank of Pakistan Act, 1956 (XXXIII of 1956);

(61) “securities” include the securities as provided in sub-clauses (a) to (i) of clause (lII) of section 2 of the Securities Act, 2015 (III of 2015) whether listed or not;

(62) “securities exchange” means a public company licenced by the Commission as a securities exchange under the Securities Act, 2015 (III of 2015);

(63) “share” means a share in the share capital of a company;

(64) “Shariah compliant company” means a company which is conducting its business according to the principles of Shariah;

(65) “single member company” means a company which has only one member;

(66) “special resolution” means a resolution which has been passed by a majority of not less than three-fourths of such members of the company entitled to vote as are present in person or by proxy or vote through postal ballot at a general meeting of which not less than twenty-one days’ notice specifying the intention to propose the resolution as a special resolution has been duly given:

Provided that if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days’ notice has been given;

(67) “specified” means specified through regulations made under this Act;

[2][(67A) “Startup Company” means a company that: -

(a) is in existence or not more than ten years from the date of its incorporation or such other period or periods as may be specified;

(b) has a turnover for any of the financial years since incorporation that is not greater than five hundred million rupees or such other amount or amounts as may be specified;

(c) is working towards the innovation, development or improvement of products or processes or services or is a scalable business model with a high potential of employment generation or wealth creation or for such other purposes as may be specified; or

(d) such other companies or classes of companies as may be notified by the Commissioner:

Provided that a company formed by the splitting up or re-construction of an existing company shall not be considered as a startup company:"]

(68) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company:

(a) controls the composition of the board; or

(b) exercises or controls more than one-half of its voting securities either by itself or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies shall not have layers of subsidiaries beyond such numbers, as may be notified,

Explanation.: For the purposes of this clause:

(i) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (a) or sub-clause (b) is of another subsidiary company of the holding company;

(ii) the composition of a company’s board shall be deemed to be controlled by another company if that other company by exercise of power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(iii) the expression “company” includes anybody corporate;

(iv) “layer” in relation to a holding company means its subsidiary or subsidiaries;

(69) “Table” means Table in a Schedule to this Act;

(70) “turnover” means the aggregate value of sale, supply or distribution of goods or on account of services rendered, or both, net of discounts, if any, held by the company during a financial year;

(71) “unlimited company” means a company not having any limit on the liability of its members;

(72) “valuer” means a valuer registered with the Commission;

(73) “voting right” means the right of a member of a company to vote on any matter in a meeting of the company either present in person or through video-link or by proxy or by means of postal ballot:

Provided that attending of meeting through video-link shall be subject to such facility arranged by the company and in the manner as may be specified, save as otherwise provided in this Act; and

(74) “wholly owned subsidiary” a company shall be deemed to be a wholly owned subsidiary of another company or the statutory body if all its shares are owned by that other company or the statutory body.

(2) The words and expressions used and not defined in this Act but defined in the Securities Act, 2015 (III of 2015) or the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) or the Central Depositories Act, 1997 (XIX of 1997) shall have the meanings respectively assigned to them in those Acts.

[1] Inserted through Companies Amendment Act, 2021 dated 03-12-2021

[2] Inserted through Companies Amendment Act, 2021 dated 03-12-2021