Section 2 — 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 per cent 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 p ercent 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 th e owner of or a partner or director in a
company or undertaking or, who so holds or controls shares carrying
not less than ten per cent 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 a ppointed 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 compan y 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 associa tion 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 shares1[, 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);

1 Inserted vide the Companies (Amendment) Act, 2021 dated 1 st December, 2021.

(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 for 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

2 Inserted vide the Companies (Amendment) Act, 2021 dated 1 st December, 2021.

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

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 any body 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.