(a) What are the main form of business organisation for medium and large scale enterprises in this economy?

 

The main forms of business organisations for medium and large scale enterprises are companies, both private limited and public limited, statutory corporations, foundations, trusts and joint ventures.

 

(b) Is there a system of registration for these business organizations? If so, briefly describe.

 

Companies, both private and public are to be registered under the Companies Ordinance, 1984 (the Ordinance). Registration is effected by the filing with the Registrar of Companies of the Memorandum and Articles of Association as per a prescribed form. Certificate of incorporation entitling the company to do business is issued on the registration of the Memorandum. Statutory corporations do not require registration and are established by act of Parliament, the provisions of which Act govern their functioning. Foundations and Trusts may be registered under the Societies Registration Act, 1860 with the Registrar of Societies Joint Ventures may be set up by agreement under the Contract Act, 1872.

 

(c) Are there any minimal capitalisation requirements for these enterprises?

 

There are no minimum capital requirements for Pakistan companies.

 

(d) Briefly describe the main features of each type of these business organisations, by reference to public/private/state ownership and management; accounting and auditing responsibilities (particularly the standards which apply to accounting and auditing practices); director and management responsibility (including, if relevant, possible liability for debts); and the role of regulatory authorities regarding these enterprises.

 

Companies incorporated under the Companies Ordinance may be either private or public limited companies. The division does not depend on the scale of economic activity but upon the extent of permitted public participation in the company. A private limited company needs atleast two members for incorporation and maximum membership is limited to fifty exclusive of employees, it is allowed to allot shares and commence business immediately on incorporation and is not required to file with the Registrar copies of its annual balance sheet and profit and loss account or to hold statutory meeting and file a statutory report. The articles of a private limited company must restrict the right to transfer shares. A public limited company must have atleast seven members and no maximum is prescribed.

Management of both private and public limited companies vests with the board of directors.

Companies are required by law to keep proper books of account (Sec.230) and to preserve the accounts of atleast the previous ten years. The books of account are open to inspection by the Registrar of Companies or any person authorised by him. The directors of a company are under obligation to lay at the Annual General Meeting a balance sheet and profit and loss account or expenditure account (Sec.233). The balance sheet must reflect a true and fair view of the state of affairs of the company and the profit and loss account or expenditure account must give a true and fair view of the profit and loss of the company for the financial year and must conform to the standards prescribed by the Ordinance (Sec.234). These standards are fairly stringent. In the case of listed companies the law requires that international accounting standards be followed. Every company is under liability to appoint auditors who have access to all books, papers, accounts and vouchers of the company and who must make a report on every balance sheet and profit and loss account or income and expenditure account and every other document forming part thereof which are laid before the company in general meeting. The management or directors are responsible for their acts only to the extent of mismanagement or gross negligence.

Statutory corporations are owned by the state and are governed by the statutes by virtue of which they are established. Provisions regarding management etc are contained in each individual enactment.

Trusts and Funds are owned by trusts or societies and are governed by their founding documents and the statutes under which they are established.

Joint Ventures can be entered into by any parties through contract and are subject to the Contract Act 1872 governed by the terms of the contract under which they are established.

(a) Are there any relevant observations to make concerning political, social (powerful family), financier (bank equity or involvement) or cultural controls or influences in respect of these types of business organisation?

 

Up to the nineteen seventies the major industries were considered to be in the control of a number of powerful families, who jointly controlled a significant percentage of the total wealth of the country. Because of continued authoritarian rule in Pakistan cronyism has been on the rise and influential lobbies/groups primarily headed by family members and associates of the people in power have taken hold. With the nationalisation of banks in the seventies, issuance of credit on grounds of political pressure became common and this trend has continued unabated with the nationalised banks and a development Finance Institutions' (DFI's) being encumbered with vast unpaid debt, write offs and restructurings to favour the corporate debtors with influential backing.

[Having identified the types of business organisation, they will now (for ease of reference) be referred to as `corporates' and, thus, `corporate borrower', `corporate debtor' and so forth]