Statutory definitions
These definitions as contained in section 5 of the ordinance are given
below:
(a) “approved securities” means the
securities in which a trustee may invest money under clause (a), clause (b),
clause (bb), clause (c) or clause (d) of section 20 of the Trust Act, 1882 (II
of 1882), and for the purpose of—
(i) sub-section (2) of section 13,
includes such other securities as the Federal Government may, by notification
in the official Gazette, declare to be approved securities for the purpose of
that subsection; and
(ii) sub-section (1) of section 29,
includes such types of Pakistan rupee obligations of the Federal Government or
a Provincial Government or of a Corporation wholly owned or controlled,
directly or indirectly, by the Federal Government or a Provincial Government
and guaranteed by the Federal Government as the Federal Government may, by
notification in the official Gazette, declare, to the extent determined from
time to time, to be approved securities for the purpose of that sub-section;1
(b) “banking” means the accepting, for the purpose of lending or investment, of
deposits of money from the public, repayable on demand or otherwise, and
withdraw able by cheque, draft, order or otherwise; (c) “banking company” means
any company which transacts the business of banking in Pakistan and includes
their branches and subsidiaries functioning outside Pakistan of banking
companies incorporated in Pakistan2;
Explanation.— Any company which is engaged in the manufacture
of goods or carries on any trade and which accepts deposits of money from the
public merely for the purpose of financing its business as such manufacturer or
trader shall not be deemed to transact the business of banking within the
meaning of this clause;
(d) “branch” or “branch office”, in
relation to a banking company, means any branch or branch office, whether
called a pay office or sub-pay office or by any other name, at which deposits
are received, cheques cashed or moneys lent, and for the purposes of section 40
includes any place of business where any other form of business referred to in
sub-section (1) of section 7 is transacted;
(dd)“creditor” includes persons from
whom deposits have been received on the basis of participation in profit and
loss and a banking company or financial institution from which financial
accommodation or facility has been received on the basis of participation in
profit and loss, mark-up in price, hire-purchase, lease, or otherwise;
General
Concept of Creditor
From this definition, it is transpired
that a banker can be a debtor as well as a creditor depending upon the nature
of transaction. When the banker accepts deposits from his customers the bank
becomes debtor and the customer is treated as creditor. However when a customer
avails a loan or finance from the bank, the banker becomes creditor and
customer shall be debtor. This relationship shall be explained in detailed
while discussing banker’s customer’s relationship. However same is briefly
discussed for understanding the said definition.
A bank performs a number of functions
for the customer. After the account in the bank is opened and the relationship
of a banker and customer is established, the bank not only undertakes to
collect the cheques which are deposited in the account but also makes the
payment on behalf of the customer, whenever there is a mandate from the
customer. The cheques which are realized by the bank are deposited in this
account of the customer and on many occasions, the bank performs certain other
functions on behalf of the customer such as keeping the valuables, etc.,
deposited by the customer with the bank as a trustee. On many occasions, when
the customer gives bills for collection to his bank and the said bank passes
the bills for collection to another bank and the amount of the bills is reduced
as a result of debiting the customer's account with collection charges as a
result of an agreement between two banks, the bank is always acting on behalf
of the customer. There are thus too many occasions relating to so many matters
which arise during the mutual dealings between the banker and the customer and
at each time, a question arises as to what is the relationship between a banker
and a customer
When a bank
grants loan or other credit facilities to the customer, relationship is
reversed, that is now
Customer is
Debtor & Banker is Creditor
In such cases it
is not the money of the customer in the hands of the banker but it is the money
of the bank in the hands of the customer but in all such cases when a
customer’s account is over drawn, the customer does not cease to be a customer.
(e) “company” means any company which
may be wound up under the Companies Ordinance, 1984 (XLVII of 1984) and
includes a branch of a foreign banking company doing banking business in
Pakistan under a license issued by the State Bank in this behalf;
(ee) “Debtor” includes a person to whom,
or a banking company or financial institution to which, finance as defined in
the Banking Tribunals Ordinance 1984, has been provided;
(f) “Demand liabilities” means
liabilities which must be met on demand, and “time liabilities” means
liabilities which are not demand liabilities;
(ff) “Family members” in relation to a
person means his spouse, dependent lineal ascendants and descendants and
dependent brothers and sisters;
(ffa) “foreign banking company” means a
banking company, not incorporated in Pakistan, which has a branch or branches
doing banking business in Pakistan under a license issued by State Bank in this
behalf;
(g) “Gold” includes gold in the form of
coin, whether legal tender or not, or in the form of bullion or ingot, whether
refined or not;
(gg)“ loans, advances, and credit”
includes “finance” as defined in the Banking Tribunals Ordinance, 1984;
The above definition is a referral
definition. Definition of finance as contained in Banking Tribunal Ordinance,
1984 is reproduced here under:
‘Finance’ includes an accommodation or
facility under a system which is not based on interest but provided on the
basis of participation in profit and loss, mark-up or mark-down in price,
hire-purchase, lease, rent sharing, licensing, charge or fee of any kin,
purchase and sale of any property, including commodities, patents, designs,
trade marks and copy rights, bills of exchange, promissory notes or other
instruments with or without by-back arrangement by a seller, participation term
certificate, musharika certificate, modaraba certificate, term finance
certificate or any other mode other than an accommodation or facility based on
interest and also includes guarantees, indemnities and any other obligation,
facility the real beneficiary whereof is a person other than the person to whom
or in whose name it was provided
(h) “managing director”, in relation to
a banking company, means a director who, by virtue of an agreement with the
banking company or of a resolution passed by the banking company in general
meeting or by its Board of Directors or, by virtue of its memorandum or articles
of association, is entrusted with the management of the whole, or substantially
the whole of the affairs of the company, and includes a director occupying the
position of a managing director, by whatever name called;
(i) “Prescribed” means prescribed by
rules made under this Ordinance;
(j) “Private company” has the same meaning as
in the Companies Ordinance, 1984 (XLVII of 1984);
(k) “Registrar” has the same meaning as
in, the Companies Ordinance, 1984 (XLVII of 1984);
(l) “Scheduled bank” has the same
meaning as in the State Bank of Pakistan Act, 1956 (XXXIII of 1956);
This is a referral definition; the same
as contained in State Bank of Pakistan Act 1956 is given here under:
"Scheduled bank" means a bank for the time being
included in the list of banks
maintained under sub-section (1) of Section 37;
Sub section (1) of Section 37 is also
reproducing for ready reference.
(I)
The Bank shall maintain at all its offices and branches an up-to-date list of
banks declared by it to be scheduled banks under Clause (a) of sub-section (2).
(m) “secured loan or advance” means a
loan or advance made on the security of assets the market value of which is not
at any time less than the amount of such loan or advance, and “unsecured loan
or advance” means a loan or advance not so secured, or that part of it which is
not so secured;
(mm) “securities” includes securities as
defined in the Capital Issues (Continuance of Control) Act, 1947 (XXIX of
1947),
(n) “State Bank” means the State Bank of
Pakistan
(o) “substantial interest” in an
undertaking shall be deemed to be possessed by a person if he or any of his
family members is the owner, director or officer of or has control over the
undertaking or if he or any of his family members holds shares carrying not
less than twenty per cent of the voting power in such undertaking;
Explanation. — For the purpose of this clause,—
(i) “control” in relation to an
undertaking, means the power to exercise a controlling influence over the
management or the policies of the undertaking, and, in relation to shares,
means the
Power to exercise a controlling
influence over the voting power attached to such shares;
(ii) “Person” includes a Hindu undivided
family, a firm, an association or body of individuals, whether incorporated or
not, a company and every other juridical person; and
(iii)“undertaking” means any concern,
institution, establishment or enterprise engaged in the production, supply or
distribution of goods, or in the provision or control of any services relating
to the provision of board, lodging, transport, entertainment or amusement, or
of facilities in connection with the supply of electrical or other energy, or
to the purveying of news, insurance or investment.
The Ordinance
shall override memorandum, articles, etc of Banking Company under section 6 of
the Ordinance:
The provisions
of this Ordinance shall have effect notwithstanding anything to the contrary
contained in the memorandum or articles of a banking company, or in any
agreement executed by it, or in any resolution passed by the banking company in
general meeting or by its Board of Directors, whether the same be registered,
executed or passed, as the case may be, before or after the commencement of
this Ordinance; and
Any provision contained in the memorandum, articles, agreement or
resolution aforesaid shall, to the
extent to which it is repugnant to the provisions of this Ordinance, become or be void, as the case may be.
Memorandum of
Associations and Article of Associations are very important concepts with
regard to any company weather a banking company or a non banking company. The
concepts are explained below:
Memorandum of Association
Memorandum of association
is a legal document for incorporation of a company
Memorandum of association
is a fundamental legal document on the basis of which the company conducts its
external affairs. This document signifies the powers of the company as
well as the limitations of the company. It contains information
regarding the purpose, capital, and place of business, liability of the members
and acquisition of shares by the subscribers.
- Contents of
Memorandum—these are discussed below:
- Memorandum of association is required to be subscribed
by at least three persons in case of public company and at least by one
person in case of private company.
- Objects
- Liability of the members—limited or unlimited
- Authorized capital
Memorandum of company
limited by shares. This is contained in Section 16 of the ordinance which is
reproduced below.
a.
In the case of a company limited by shares,-
the memorandum shall state--
the memorandum shall state--
i.
the name of the company with the word "limited" as the
last word of the name in the case of a public limited company, and the parenthesis
and words "(Private) Limited" as the last words of the name in the
case of a private limited company,
ii.
the Province or the part of Pakistan not forming part of a
Province, as the case may be, in which the registered office of the company is
to be situate;
iii.
the objects of the
company, and except in the case of a trading corporation the territories to
which they extend;
iv.
that the liability of the members is limited; and
v.
the amount of share capital with which the company proposes to
be registered, and the division thereof into shares of a fixed amount:
b. No subscriber of the
memorandum shall take less than one share; and
c. Each subscriber of the
memorandum shall write opposite to his name the number of shares he takes.
Memorandum of company
limited by guarantee: sec 17
In the case
of a company limited by guarantee,-
a.
whether or not the company has a share capital, the memorandum
shall state-
i.
the name of the company with the parenthesis and words
"(Guarantee) Limited" as the last words of its name;
ii.
the Province or the part of Pakistan
iii.
the objects of the company, and, except in the case of a trading
corporation, the territories to which they extend;
iv.
that the liability of the members is limited; and
v.
that each member
undertakes to contribute to the assets of the company in the event of its being
wound up while he is a member, or within one year afterwards, for payment of
the debts and liabilities of the company contracted before he ceases to be a
member, and of costs, charges and expenses of winding up, and for adjustment of
the rights of the contributories among themselves, such amount as may be
required, not exceeding a specified amount; and
b. if the company has a share
capital,--
i.
The memorandum shall also state the amount of share capital with
which the company proposes to be registered and the division thereof into
shares of a fixed amount:
ii.
no subscriber of the memorandum shall take less than one share:
and
Memorandum of unlimited company: sec 18
In the case of an unlimited company—
a.
whether or not the company has a share capital, the memorandum
shall stale
i.
the name of the company;
ii.
the Province or the part of Pakistan not forming part of a
Province, as the case may be, in which the registered office of the company is
to be situate; and
iii.
the objects of the company, and, except in the case of a trading
corporation, the territories to which they extend; and
b.
if the company has a share capital,-
i.
No subscriber of the memorandum shall take less than one share;
and
ii.
Each subscriber shall write opposite to his name the number of
shares he takes
Requirements of memorandum
Following requirements must be fulfilled
before submission of the memorandum of association to the Registrar.
·
Required to be printed
·
Should be divided into paragraphs
·
Paragraphs to be consecutively numbered
·
To be signed by the subscribers
·
Signatures duly witnessed by at least one witness
·
Signature of each subscriber to be attested by the witness
·
Complete address/ occupation of the subscriber to be mentioned.
·
Address, occupation of the witness to be mentioned
·
Memorandum to be duly stamped under stamp Act.
Articles of Associations
Article of association is
another important legal document which is subordinate to memorandum of
association. It is concerned with the internal conduct and control of the
company.
Articles of association as provided in section 2 (1) (i)
--"articles"
means the articles of association of a company as originally framed or as
altered in accordance with the provisions of any previous Companies Act, or of
this Ordinance, including, so far as they apply to the company, the regulations
contained in Table A in the First Schedule;
Contents of Articles of association is comprised of provisions,
rules of Articles of Association:
- Regulations concerning the internal management of the
company which is outlined here under:
- Definition of important terms
- Issue of shares and allotment of shares
- Share capital, rights of share holders.
- Transfer of shares
- Alteration of share capital
- Dividend
- Directors—appointment, election, removal, powers,
duties
- Meetings, voting, powers
- Borrowing powers
- Accounts and Audit
- Winding up
Registration of articles is contained in section 26 which is
given below:
1.
There may, in the case of a company limited by shares, and there
shall, in the case of a company limited by guarantee or an unlimited company,
be registered with the memorandum, articles of association signed by the
subscribers to the memorandum and setting out regulations for the company.
2.
Articles of association may adopt all or any of the regulations
contained in Table A in the First Schedule.
3.
In the case of an unlimited company or a company limited by
guarantee, the articles, if the company has a share capital, shall state the
amount of share capital with which the company proposes to be registered.
4.
In case of an unlimited company or a company limited by
guarantee, if the company has not a share capital, the articles shall state the
number of members with which the company proposes to be registered
5.
In the case of a company limited by shares and registered after
the commencement of this Ordinance, if articles are not registered, or, if
articles are registered, in so far as the articles do not exclude or modify the
regulations in Table A in the First Schedule, those regulations shall, so far
as applicable, be the regulations of the company in the same manner and to the same
extent as if they were contained in duly registered articles.
6.
The articles of every company shall be explicit and without
ambiguity and, without prejudice to the generality of foregoing, shall list and
enumerate the voting and other rights attached to the different classes of
shares and other securities, if any, issued or to be issued by it.
Alteration of articles: sec 28
Subject to the provisions
of this Ordinance and to the conditions contained in its memorandum, a company
may by special resolution alter or add to its articles, and any alteration or
addition so made shall be as valid as if originally contained in the articles,
and be subject in like manner to alteration by special resolution:
Provided that, where such alteration affects the substantive rights or liabilities of members or of a class of members, it shall be carried out only if a majority of at least three-fourth of the members or of the class of members affected by such alteration, as the case may be, personally or through proxy vote for such alteration.
Provided that, where such alteration affects the substantive rights or liabilities of members or of a class of members, it shall be carried out only if a majority of at least three-fourth of the members or of the class of members affected by such alteration, as the case may be, personally or through proxy vote for such alteration.
Form of memorandum and
articles: sec 29
a.
The form of memorandum of articles shall be in accordance with
the forms set out in tables, B,C,D and E of the first schedule the memorandum
of association of a company limited by shares;
b.
The memorandum and articles of association of a company limited
by guarantee and not having a share capital;
c.
the memorandum and articles of association of a company limited
by guarantee and having a share capital;
Registration of memorandum
and articles, etc: sec 30
1.
The memorandum and the articles, if any, shall be filed with the
registrar in the Province or the part of Pakistan
2.
A declaration by such person as may be prescribed in this
behalf, or by a person named in the articles as a director, or other officer of
company, of compliance with all or any of the requirements of this Ordinance
and the rules made there under shall be filed with the registrar; and the
registrar may accept such a declaration as sufficient evidence of such
compliance.
3.
If the registrar is satisfied that the company is being formed
for lawful purposes, that none of its objects stated in the memorandum is
inappropriate or deceptive or insufficiently expressive and that all the
requirements of this Ordinance and the rules made there under have been
complied with in respect of registration and matters precedent and incidental
thereto, he shall retain and register the memorandum and articles. if any.
4.
If registration of the memorandum is refused, the subscribers of
the memorandum or any one of them authorized by them in writing may either
supply the deficiency and remove the defect pointed out, or within thirty days
of the order of refusal prefer an appeal--
(a) where the order of refusal has been passed by an additional registrar, a joint registrar, a deputy registrar or an assistant registrar, to the registrar; and
(b) where the order of refusal has been passed, or upheld in appeal, by the registrar, to the Authority.
(a) where the order of refusal has been passed by an additional registrar, a joint registrar, a deputy registrar or an assistant registrar, to the registrar; and
(b) where the order of refusal has been passed, or upheld in appeal, by the registrar, to the Authority.
5.
An order of the Authority under subsection (4) shall be final
and shall not be called in question before any Court or other authority.
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