Recap

1. Recap • Dividend • Declaration • Payment • Modaraba Companies • Meaning • Legal Status • Types of Modaraba • Business of Modaraba • Accounts of Modaraba • Audit of Modaraba

2. SMCSingle Member Company

3. Introduction of SMC • A new concept of ‘Single Member Company (SMC)’ has been introduced through the Companies Ordinance, 2002. Now a sole proprietorship can be transformed into a company and it will not be necessary for a person to associate with another person just to form a company. A single individual or person may form a company just by subscribing to memorandum of association. The single member shall now be able to enjoy the privilege of limited liabilities as envisaged under the provision of the Companies Ordinance.

4. Introduction • The benefit of having a status of a company shall also be availed by such a single member. For a purpose of having a second person in a meeting and have sound documentation, an SMC shall be under obligation to appoint a company secretary. The SMC shall have all the rights and privileges as well as obligations and liabilities as other private company has. The transformation of sole proprietorship into SMC will, of course, help in documentation of economy.

5. Registered Companies companies limited by guarantee Unlimited companies Companies limited by shares Having share capital Not having share capital Private company Public company Single member company Other than single member company Listed company Unlisted company

6. Single Member Company • What Is A Single Member Company? • A single member company can be defined as a company with only one member, also referred to as the shareholder. A company may be formed as a single member company or may become a single member company following a share transfer whereby the number of shareholders is reduced to one.  This one shareholder will hold all of the shares of the company in their name.

7. Short Title, Commencement and Application. • These rules are called Single Member Companies Rules, 2003. • These rules shall come into force at once. • These rules shall apply to: • A company incorporated as single member company. • A private company limited by shares which has more than one member and becomes a single member company after complying with the requirements of these rules.

8. Definitions. • In these rules, unless there is anything repugnant in the subject or context: 1. Alternate nominee director means an individual nominated by a single member to act as nominee director in case of non-availability of nominee director. 2. Form means the Form annexed to these rules. 3. Nominee director means an individual nominated by a single member to act as director in case of his death. 4. Ordinance means the Companies Ordinance 1984 (XLVII of 1984).

9. Definitions contd… • Private Company means a private company which is not a single member company. • Section means section of ordinance. • Single member company or SMC means a private company which has only one member. • Sole director means a director of a single member company who is for the time being the only director.

10. Contd.. 2. The words and expressions used but not defined in these rules shall have the same meaning as are assigned to them in the ordinance.

11. Single Member Company. • A single person may form a SMC and it shall be incumbent on such person to file with the registrar at the time of incorporation: • A nomination in the form as set out in Form S1. • Indicating at least two individuals to act as nominee director and alternate director, in accordance with provisions of rule 7, of the company in the event of his death. • Also, where the membership of a SMC is transferred to a new member, the company shall, within 15 days from such transfer, file with the registrar, a nomination in the form as set out in Form S1.

12. Contined… • Provided that a nominee director shall be an individual other than the secretary and to whom the condition of being a member of the company shall not apply. • Provided further that a single member of a company originally incorporated as a SMC, or converted as such before commencement of these rules, shall also file nomination in the form as set out in Form S1 , within two months of commencement of these rules.

13. Change in Status of a SMC. • A single member company may be converted into a private company on increase of the number of its members to more than one due to transfer of shares or further allotment of shares Or death of the single member or operation of law and a SMC converting into a private company:

14. SMC shall.. a). in case of transfer of shares or further allotment of shares: • Pass a special resolution for change of status form SMC to private company and alter its articles accordingly within 30 days of transfer of shares or further allotment of shares; and • Appoint and elect one or more additional directors within 15 days of date of passing of the special resolution and notify the appointment on Form 29 prescribed under the companies (General Provisions and Forms) Rules, 1985 , within fourteen days.

15. SMC shall.. b) May, in case of death of single member, either be wound up in accordance with the provisions of the ordinance or be converted into private company for which:

16. SMC shall.. • The nominee director shall transfer shares in the name of the legal heirs of the single member within seven days. • The company shall pass a special resolution for change of status from SMC to private company and alter its articles accordingly within thirty days of transfer of shares; and • The members shall appoint and elect one or more additional directors within fifteen days of date of passing of the special resolution and notify the appointment on Form 29 within fourteen days of date of such appointment.

17. SMC shall.. c) in case of operation of the law: • Transfer the shares, within seven days, in the name of relevant persons to give effect to the order of the court or any other authority; • Pass a special resolution for change of status from SMC to a private company a alter its articles accordingly within thirty days of transfer of shares; and • Appoint additional director or directors within fifteen days of date of passing of special resolution and notify the appointment of Form 29 within fourteen days of date of such appointment.

18. SMC shall.. 2) A SMC originally incorporated or converted from private company as such may convert into private company in accordance with the provisions of sub-rule (1). 3) The persons becoming members due to transfer or transmission or further allotment of shares, as the case may be, shall pass a special resolution to make alteration in articles and appoint one or more additional directors. 4) Where a single member company converts into a private company pursuant to sub-rule (1), it shall file a notice of the fact in writing in the form as set out in Form S2, with the registrar within sixty days from the date of passing of special resolution.

19. Meeting of Directors and Members. Any provision of the Ordinance or rules made there under or articles of the company which: • Enables or requires any matter to be done or to be decided by directors or members, as the case may be, of the company; or • Requires any matter to be decided by a resolution of the directors or members, as the case may be, of the company, shall be deemed to be satisfied if the decision is taken by the single member or sole director, as the case may be and is drawn up in writing and recorded in the minutes book.

20. Company Secretary. • A SMC shall appoint a company secretary within fifteen days of incorporation or of becoming a SMC or of the office of company secretary falling vacant and notify such appointment on Form 29 within fourteen days of such appointment. Provided that the sole director shall not be the company secretary. • The company secretary shall attend and cause a fair and accurate summary of the minutes of all proceedings of general meetings and meetings of director or directors, as the case may be, along with the names of those participating in such meetings to be entered in properly maintained minutes book.

21. Transfer of Management to Nominee Director. • The single member shall nominate two individuals, one of whom shall become nominee director in case of death of single member and the other shall become alternate nominee director to work as nominee director in case of non-availability of the nominee director.

22. Transfer of Management to Nominee Director. 2. The nominee director shall: • Manage the affairs of the company in case of death of single member till the transfer of shares to legal heirs of the single member. b) Inform the registrar concerned of the death of the single member, provide particulars of the legal heirs and in case of any impediment report the circumstances seeking the directions in the form as set out in Form S3 within seven days of the death of the single member.

23. Contd.. • Transfer the shares to legal heirs of the single member; and • Call the general meeting of the members to elect directors. 3. It shall also be incumbent upon the company secretary to inform the registrar concerned about the death of the single member.

24. Contd.. 4. In case of any impediment due to transfer of shares, or election of directors or any other circumstances, the registrar concerned shall call, or direct to calling of the meeting of the legal heirs, in exercise of the powers conferred by section 170 in such manner as he deems fit and give such directions with regard to election of directors and making alteration in the articles, if any, and such ancillary and consequential directions as he thinks expedient in relation to calling, holding and conducting of the meeting.

25. Contracts With Single Member. • Where a single member company enters into a contract with the single member of the company, the SMC shall, unless the contract is in writing, ensure that the terms of the contract are forthwith set out in a written memorandum or are recorded in the minutes of the first meeting of the directors of the company, following the making of the contract.

26. Company Becoming a SMC. • No private company having two or more members on the commencement of these rules, shall become a SMC unless it passes a special resolution for change of its status and make necessary alterations in its articles and obtains approval of the commission. • An application for seeking approval under sub-rule (1) shall be submitted in the form as set out in Form S4 and shall be submitted to the commission by the company not later than thirty days from the date on which the special resolution for change of status to SMC was passed.

27. Company Becoming a SMC. 3. The commission on being satisfied, after obtaining such further information as it may consider necessary, grant the approval applied for subject to such conditions as it may deem fit to impose. 4. The company shall transfer shares in the name of single member within fifteen days of the approval of the commission and notify change in the board of directors on Form 29 within fourteen days of transfer of shares. 5. A certified copy of the order containing the approval under sub-rule (1), together with a notice in the form as set out in the Form S5 and a nomination of nominee director in the form as set out in the Form S1 shall be filed with the registrar concerned within the time as specified in rule 3.

28. Pattern and Style of Name. • “XYZ (SMC-Private) Limited” shall be the pattern and style of the name of a SMC and the parenthesis, letters, hyphen and words “(SMC-Private) Limited”, shall form the part of the name of every SMC. • On change of status of a private company into a SMC, the registrar concerned shall issue a certificate in the form as set out in Form S6, and the parenthesis, letters, hyphens and words “(SMC-Private) Limited” shall form part of the name of the company. • On change of status of a SMC into a private company, the registrar concerned shall issue a certificate in the form as set out in Form S7 omitting the letters and hyphens “SMC” from part of the name of the SMC.

29. Regulations of SMC. • A SMC may adopt the regulations as set out in Form S8, as its articles or as nearly as possible thereto.

30. FORM S1 THE COMPANIES ORDINANCE, 1984 NOTICE OF NOMINATION OF NOMINEE DIRECTOR BY SINGLE MEMBER OF A SINGLE MEMBER COMPANY Please complete in typescript or in bold block capitals.

32. 8. Name, NIC No., and address of nominee directors:

33. 12. N.I.C No. of signatory:

34. FORM 29 THE COMPANIES ORDINANCE, 1984 (Section 205) PARTICULARS OF DIRECTORS AND OFFICERS, INCLUDING THE CHIEF EXECUTIVE, MANAGING AGENT, SECRETARY, CHIEF ACCOUNTANT, AUDITORS AND LEGAL ADVISER, OR OF ANY CHANGE THEREIN Please complete in typescript or in bold black capitals.

35. 6.Particulars*:

36. * In the case of a firm, the full name, address and above mentioned particulars of each partner, and the date on which each became a partner. ** In case the nationality is not the nationality of origin, provide the nationality of origin as well. *** Also provide particulars of other directorships or offices held, if any.”.

37. Thus …… • Sole proprietorships are the simplest businesses to form, operate and manage. A sole proprietorship's company assets, income and expenses are all regarded as personal assets and liabilities of the proprietor. Profits are taxed as personal income. The price for independent ownership and total control of a proprietorship is total personal liability for any negligence, debts or other liabilities resulting from business operations.