BUSINESS LAW? WHAT DOES IT MEAN TO YOU?

RESPONSES:
rules governing business interaction
laws relating to business organization
guidelines governing business organization
set of rules and regulation for conducting business
boundaries within which business can operate
penalties for violating rules and regulation
legislations and legalities regarding the entire business structure
sets of rules and regulation for setting up, starting and conducting business
rights and responsibilities of business
 ?????

• WHAT IS LAW?

• MEANING?

• DEFINITION?
 WHAT DO YOU SAY?
• Set of rules and regulations
• Obligations
• Justice and equality
• Policies that restrict and govern actions of
individuals
• Least amount of rules that you need to follow
• Rules which govern and bind a society
VARIOUS MEANINGS AND DEFINITIONS
• One view is that it is not capable of definition
• But this cannot be the answer nor solve the problem
• The confusion in defining law arises out of the different
purposes to be achieved e.g.:
• Law has been defined by various individuals from different
points of view
• Various schools of law define it from different angles:
-basis of nature
-on source
-terms of effect on society
-end or purpose of law
 MEANINGS AND DEFINITIONS—Contd.

A universal and uniform definition is difficult.

The evolution of society is of a dynamic nature
and hence the difficulty in accepting a
definition by all. One reason in defining law is
the different types of purpose sought to be
achieved:
HORSE to a zoologist, a traveller, polo player, for
some article of food etc.
 DEFINITIONS---Contd.
There have been and will continue to be
different definitions of law:
• ARISTOTLE (384-322 B.C.) ‘a pledge that citizens of a state will
do justice to one another’
• PLATO ( 427-347 B.C.) believed that law was a form of social
control.
• SIR WILLIAM BLACKSTONE (1723-1780) ‘ a rule of civil conduct
prescribed by the supreme power in a state, commanding
what is right, and prohibiting what is wrong’
 MEANINGS AND DEFINITIONS: Contd.
• Generally and the most commonly accepted
definition is “ A rule of action to which men are
obliged to make their conduct comfortable”
• “Law is the command of the sovereign. It
imposes a duty and is backed by a sanction.
Command, duty and sanction are three elements
of law”
All these definitions vary but all are based on law consists of
enforceable rules governing relationships among individuals
and between individuals and their society.
LAW MAKING:PROCESS

LEGISLATION: The making of law. The act of

enacting or legislating laws.

• Difference between Law and Ordinance

• Bill----Proposal
• Committees of the House
• Approval by the Legislature
• Assent by the President.
 WHY STUDY LAW?
• Obvious! Course Requirement
• Study of law improves powers of reasoning, clarity of thought
and the ability to analyze and express complicated ideas
• A greater appreciation of the workings of the system and the
parts that ensure it’s functioning.
• Law forms the foundation on which any civilized society is
based. Nature has its own laws. So does society.
• Law effects all aspects of life and society and is the mechanism
for change employed by governments across the globe.From
the protection of life and liberty, through corporate law to
international relations, the law is the central stage.
 PURPOSE OF LAW
• Object of law is to maintain law and order in the
country i.e. police functions
• Another view ‘limit natural liberty’; Man is born free
but is in chains everywhere.
• Hindu view , purpose of law is the welfare of the
people in the world and also salvation after death.
• Muslim: ‘ the end of the law is to promote the welfare
of man both individually and socially, not merely in
respect of life on this earth but also life hereafter.
 KINDS OF LAW
1. IMPERATIVE LAW. Imposed upon on men by some authority. Emphasis on the
will and physical force of the organized political community.
2. PHYSICAL OR SCIENTIFIC LAW . Laws of science e.g. law of gravity
3. NATURAL or MORAL LAW. Universal rules of governance. Principles of natural
justice. Divine Law.
4. CONVENTIONAL LAW. Rules or regulations of voluntary organizations e.g.
associations, clubs etc.
5. CUSTOMARY LAW. Customs, practices, traditions with historical sanction and
support e.g. jirga
6. TECHNICAL LAW. For efficient conduct of business e.g building laws, laws of
health
7. INTERNATIONAL LAW. Sum of laws and rules recognized by civilized in their
dealings with each other
8. CIVIL LAW. Municipal Law.
ADVANTAGES AND DISADANTAGES.
• Uniformity and certainty to the administration of justice.
• Avoids the dangers of arbitrary, biased and dishonest decisions.
• Fixed principles protect the administration of justice from the
errors of individual judgment
• More reliable than whims, wishes and desires.

1. Rigidity.
2. Conservative
3. Formalism
4. Complex.
ADVANTAGES AND DISADVANTAGES—Contd.

Law is of interest to all persons, not just to

lawyers. Those entering the world of business
will find themselves subject to numerous laws
and government regulations. A basic knowledge
of these laws and regulations is beneficial—if
not essential—to anyone contemplating a
successful career in the business world of today.
 STARTING BUSINESS
Purpose in starting business is to be successful. Every
business venture contains certain inherent risks, and
any number of alternatives. Before starting the first
thing to consider the legal form operating under
because has a number of advantages and
disadvantages e.g.:
COMPANY: has a higher tax rates, stricter laws,
elaborate accounting procedures, legality, forms,
statements etc.
PARTNERSHIP require registration of business
 STARTING BUSINESS—Contd.
Successful business is a tight hold on
expenditures; anything that does not make
money, protects investment should not be
ventured to especially in the beginning. The
most important element of eventual success
will be the soundness of planning before
starting business. Success takes planning and
planning involves and includes an
understanding and grasp of Business Laws
 STARTING BUSINESS
ENTREPRENEUR: One who initiates and assumes the
financial risks of a new enterprise and undertakes
to provide or control its management.
Question before entrepreneur what form of
business organisation choose for his business
endeavour: OPTIONS:
1. Sole Proprietorship
2. A Partnership
3. A Corporation (Limited Company)
 SOLE PROPRIETORSHIP
• Simplest form
• Owner is the business
• Business without creating a separate business organisation
ADVANTAGES:
1. Proprietor receives all the of the profits (all risks assumed)
2. Easier, less costly than to start any other kind of business
3. Entails more flexibility compared to other organistations
4. Free to make any decision concerning the business
5. Pays only personal income tax (relatively less)
 SOLE PROPRIETORSHIP
DISADVANTAGES:
1. Alone bears losses or liabilities incurred by the business
2. Unlimited liability or legal responsibility for business
obligations incurred
3. Opportunity to raise capital is limited mostly to personal
funds
4. Lack of continuity upon death of proprietor. Automatically
dissolved
5. If transferred to family members new proprietorship created
 BUSINESS
BUSINESS LAW IN PAKISTAN

• Legal form under which operating

• Main forms of business organizations by PRIVATE sector in Pakistan:
• Sole Proprietorship
• Partnership
• Limited Liability Company
• Joint venture: Created in contemplation of a limited activity or a
single activity.
• PUBLIC SECTOR. Where the Government undertakes an enterprise
either a statutory corporation or limited company.
• For medium and large scale business in Pakistan limited company
is the preferred form
 PRELIMINARY
PURPOSE:
Every Act (law) has a purpose for which it is enacted (made).
CHAPTERS AND SCHEDULES:
Every Act is divided in Chapters. Every Chapter deals with a
particular subject. Schedules are part of the Act; often containing
rules dealing detail a subject dealt summarily within the Act.
SECTIONS,SUB-SECTIONS, CLAUSES AND SUB-CLAUSES
Every Chapter has a subject. Each aspect of this subject is dealt with
in a separate section. Each section deals with a particular topic.
Its various aspects are then dealt in separate sub-sections which
is further divided into clauses and sub-clauses
 PRELIMINARY—Contd.
DEFINITIONS:
Where and when a word is specifically defined it has a special
meaning otherwise it has ordinary dictionary meaning. A
specific meaning over rules the ordinary dictionary meaning
TWO TYPES:
1. EXCLUSIVE DEFINITION: Gives a precise meaning completely
replacing ordinary meaning. Excludes all other meanings.
Begins with the word ‘MEANS’
2. INCLUSIVIVE DEFINITION: Expansive definition. Begins with
‘INCLUDES’. Has both elements
 PRELIMINARY—Contd.
PROVISO:
Normally varies the meaning or operation of a section, sub-
section. Makes an exception to the main provision

EXPLANATION:
Specifies the meaning of a word, term or phrase which is
ordinarily capable of signifying more than one meaning or
interpretation
 CONTD.
• Law divided into PARTS and each deals with a particular
subject e.g. Part II Jurisdiction of Courts.
Part III SECP, Part IV Incorporation of Companies
• Sections
• Sub Sections
• DEFINITIONS: The word or a term specifically defined has
a special meaning assigned to it and replaces its ordinary
meeting. Otherwise have their ordinary dictionary
meaning e.g.
• Proceed in alphabetical order
• Section 2 (7) “Company” means a company formed and
registered under this Ordinance or an existing Company
 COMPANIES ORDINANCE, 1984
• COMPANIES ORDINANCE. Legal regime for establishment and regulation
of companies in Pakistan
• SECP. Securities and Exchange Commission of Pakistan for administration
of companies and Registrar of Companies appointed by SECP.
• COMPANY LAW IN PAKISTAN:

1. Companies Act 1913 was adopted in Pakistan in Pakistan after 1947

2. Administered by Provinces till 1973 (new Constitution) and then taken
over by Federal Government.
3. New law promulgated on October 8, 1984 . Previous law repealed.
4. To cater for needs of expanding sectors the law amended in 1991, 1999
and 2002
 CONTD:
A company is an artificial person created by law, endowed with a perpetual succession and an
entity apart from its members. It signifies assent by means of common seal. It is capable of
holding property, incurring debts, and suing and being sued in the same manner as an individual
Under the law three different types of companies:

Limited by shares

Limited by Guarantee

Unlimited liability

Two types of limited companies:

A Private Limited

A Public Limited (Listed and Unlisted)

 CONTD:
OBJECTIVES OF COMPANIES ORDINANCE:

• Healthy growth of the

corporate enterprises
• Protection of investors and
creditors
• Promotion of investment
• Development of economy.
 COMPANY: CHARACTERISTICS

Five core characteristics:

1. Legal personality/entity
2. Limited Liability
3. Transferable Shares
4. Centralized management under a board
structure
5. Shared ownership by contributors of capital
 CONTD:
• Granted a charter/permission (incorporated) by the
competent authority (SECP/Registrar of Companies)
• A separate legal entity distinct from its members is created
with its own privileges and liabilities
• It can sue and can be sued
• Creation of a specific law safeguarding the interests of the
stakeholders. Not to put their interest at risk by interim
arrangement
• Management operate the company
• As they are ‘born when issued a certificate of incorporation
they also ‘die’ when they go bankrupt
 LIMITED LIABILITY
• If the company fails shareholders normally
only stand to lose their investment and the
employees their jobs but neither will be
further liable for debts that are outstanding
against the company’s creditors.
• Can be convicted of criminal offence like
fraud, misstatements etc.
 KINDS OF COMPANIES
• THREE:
1. Company Limited by Shares. Each person becoming a member
(shareholder) of the company acquires one or more shares in
which the Company’s capital is divided. His liability is limited to his
share holding.
2. Company Limited by Guarantee. Liability limited by Memorandum
of Association to such amount as members may respectively
undertake to contribute to the assets on being wound up .
3. Unlimited Company. More akin to a partnership where each
member liable to all the debts of the company. He is free from his
liability at the end of the year from his ceasing to be a member.
 CONTINUED
• May be registered under the Law as:
• Private: restricts number of members to 50, invitation to public to
subscribe and right to transfer its shares
• Public: Three or more persons associate to form. Not Private
deemed to be public
Listed/Quoted
Unlisted/Unquoted.
A company limited by shares, whether private or public, is the most
common vehicle for carrying out business in Pakistan.
Single Member: Only one subscriber to the Memorandum of
Association. A private limited company for all intents and purposes
of the Company Ordinance
 PRIVATE vs. PUBLIC
Differences:
1. Subscription
2. Transfer of shares
3. Members
4. Upper Limit of Members
5. Certificate of Commencement
6. Min. subscription
7. Prospectus or statement in lieu of
8. Filing of Accounts
9. Qualification of Auditors
10.Investment in associate company
 PRIVATE vs. PUBLIC -Contd:
11. Restriction on CEO
12.Statutory Meeting and Report

ADVANTAGES OF PRIVATE COMPANY

 FORMATION OF COMPANIES
Generally discussed the general characteristics of a
company
Now look at the process in which companies come
into existence
Process, generally, involves two steps:
1. Preliminary organisational and promotional
undertakings--- particularly obtaining capital for
the future/proposed company
2. The legal process of incorporation.
 FORMATION OF COMPANIES—Contd.
1. File an application to the Registrar of Companies for availability of
name. The Registrar of Companies then issues a certificate reminding
that the proposed name is available. This is to ensure against
duplication and deception
2. File Memorandum and Articles of association with the Registrar of
Companies in the Province where the proposed company is to be
incorporated along with other prescribed forms.
3. On registration the Registrar issues a Certificate of Incorporation and a
private limited can commence business immediately.
4. A public limited company can commence business only after a
Certificate of Commencement of Business is issued by the Registrar
5. A public limited company intending to have its shares listed must obtain
permission from the relevant Stock Exchange
 DEFINITIONS.
• MEMORANDUM OF ASSOCIATION .
Sets out the constitution of the Company. The foundation on
which the Company’s structure is based. Defines scope of
activities. Tells what it does spelling out its objectives
1. Name
2. Province of registration.
3. Objects
4. Limited by shares or guarantee

A STATEMENT OF THE OBJECTS OF THE COMPANY, ITS

POSITION AND ITS RELATION TO THE WORLD WITHOUT
 DEFINITIONS– Contd:
• ARTICLES OF ASSOCIATION
A document regulating the rights of the member of company
among themselves. The manner in in which the business of
the company shall be conducted. Dealing with the whole
internal arrangement of the Company.

Originally framed when the Company incorporated. Subsequent

changes by special resolution

RULES AND REGULATIONS PRESCRIBED FOR THE INTERNAL

MANAGEMENT OF A COMPANY.
 PROSPECTUS
• A document which invites persons to take shares in a company
and set forth the advantages of the company. Contains the
information for invitation of subscription from the public
Any notice, circular, advertisement or other intimation,
offering to the public for subscription, or purchase of any
shares or debentures of a company
1. Discussed and approved by the Board of Directors
2. Public companies issuing prospectus required to file
application to SECP for approval of prospectus for publication.
3. Date of application to SECP and no publication unless
prospectus registered with SECP