/ m o c . Quest Questio ion n No 14: e Differentiate Different iate between between i. Sole tradersh tradership, ip, Partnership Partnership & e Joint Joi nt Stock r Company. f ii. Public & Private Limited Company. e orand iii. Ar t i c l e Of Ass As s o c i ati at i o n & Memo Mem an d u m Of As A s s o c i ati at i o n . n iv. Shareholder Shareholder & Debentur Debentureholder. ieholder. An A n s w er: er : l i. Differentiation Between Sole Tradership, Partnership n & Joint Stock o Company: l 1. Definition: l SOLE TRADERSHIP: a businesesss in w hic “Sol “Sole e propri prop riet etor orsship hi p means mean s t he busin hi ch one person person is is . ibl e for all t he loss t he owner ow ner w ho solely solely res r espons ponsibl losses and enjoys enjo ys wall t he profit .” w wPARTNERSHIP: /relat ionship betw “Part “Part nership nership is i s t he bet w een een persons persons w ho have /it of busines agreed agreed t o share share prof businesss, carr carried ied on by all or any of : t hem hem act act ing for all” p tCOMPANY OR (Public Limited Company): JOINT STOCK t h
/ m o c Other Points of Difference: . The other points of difference between Sole tradership, e Partnership and Public Limited Company (JSC)are e mentioned below. r POINTS SOL E PARTNER PUBLIC f SHIP LIMITED e PROPRIETO n RSHIP COMPANY i (JSC) l There are no There is a There is a long 2.Formation n complicated simple and o formalities for process for complicated l the the process for the l formation formation of formation of a of the solepublic limited tradership. . partnership co. w . No w legal documents w are / required. / : is no Activities of The activities of There 3.Legislation legal or Act p Act of partnership the PLCo. Are solecontrolled controlled by t tradership. by the Companies t h
“Joint “Joint St ock ock Comp Company any is i s a volunt vol unt ary ass associat ociat ion of indivi ind ividual dualss for profit prof it , having having a capit capit al divided int o trans t ransferable ferable shares shares,, t he ow nership nership of w hich hich is t he condit ion of membership” membership”
/ m o There must be There must be There must c minimum (7) only one be owner in sole minimum . members and e there is no tradership. (2) members e restriction on and not maximum. r more than f (20). e The capital is Its n capital is Its authorized i increased or described capital is decreased in the mentioned l according agreement. in the MOA. It n to the It may be is very o circumstances changed by complicated l or mutual process to l according consent of change the a the to the owner amount of . wish. partners. capital. w The Registratio Registration of w registration of n is PLCo. w sole / optional is tradership is according compulsory / not required to and there is : by the law. Partnership special p Act 1932. Ordinance t 1984 for its t registration. h Partnership Ordinance ACT 1932. 1984.
4.Number 4.Number of Members
5.Capital
6. Registration
7.Management
8.Liabilities
9.Title
/ All the mshareholders take o can’t part in the c management. . So, e management e depends r upon f directors of the e company. n The liability of The The Liability of i the owner is Liability of shareholder unlimited. The l the partner is limited to nis personal the value of property of the ounlimited. shares they l The owner held. can be l personal sold to pay a property debts. of the . partner w liable tois w pay debt. w /is no There is no It is necessary There need /to use need to use to use the any : specific any specific word “Public “Public word with its specific p Limited” with name. word with t its name. its name. t h All business affairs are managed by the owner himself.
All the partners can take part in the manageme nt of the business.
/The Public limited mcompany o can’t start any c work whether . the e certificate of e commencemen r t of business is f not received. e n The life of The life of Public Ltd 11.Working i sole partnership enjoys long life. Life l tradership is short. The death nBecause of shareholder is too oon death of can’t affect short. Because on l a partner is the life of the death of l an a cause business. owner it can a of the end cause of . of the end of business. w business. w There w is no There is no There is 12.Submission to need to compulsory to of Repor Reports ts need / prepare / and prepare submit submit repo report rt to the the : any and report. submit any registrar. p report to t the t h 10.Legal Documents
There is no need of preparation any other legal documents.
There is no need of preparation any other legal documents except registration, which is also on your option.
/ mThe changes in The owner The can change partners o MOA and anything can make c AOA can . be made to according to any his mind. change e limited extent in the e as provided by agreement the law. r as f and when e they feel. n i The audit of The audit The audit is books of of books of very l accounts is accounts compulsory. n not is not For this o compulsory l compulsory purpose, legal by law. l by law. It methods are is used by a optional the Chartered . and use Ac A c c o u n t ant an t s w simple under the w method. requirement w of Comp Compan any y / Ordinance 1984. / : The rates of Each Double tax is p are partner paid by the taxes t low pays very company. Tax t because of individual is paid in whole h registrar.
13.Changes
14.Audit
15.Tax
/profit of the and mcompany on the o shareholder. c Sole Profit & . Some amount tradership is loss is e is distributed an only in distributed e among which among the r businessman the f shareholders enjoys partners according to e 100% profit according the number n and also to of share they i have to partnership held, and l bear all the deed. other n loss. amount is kept o in reserve. l The owner l The The books of can keep and partners accounts to be a can keep kept under the maintain the . and books of law are wIt is maintain compulsory. accounts. w the books not w compulsory. of / accounts. It is not / compulsory : by Act p 1932. t t There is no There is no In Public Ltd h the single income of the owner.
16.Profit Distribution
17.Books 17.Books of Ac A c c o u n t s
18.Prospectus
and single tax on his income.
/Co. it is to mnecessary issue o prospectus to c general public. . e The owner Minimum e 2 There must be himself is the and r at least 7 promoter of maximum promoters. f the business. 20 e partners are n promoters. i It is suitable l It is It is suitable for for small suitable for large size n scale of osmall and business. business. l medium size of l business. a There is no. There is no Statutory and need to call w need to call Annual any meeting any General w because of meeting of meeting are w single of compulsory by /owner. partners the law. / : partnership p . t Sole NO partner Shares of t h need and requirement to issue prospectus.
19.Promoters
20.Size of Business
21.Meeting
22.T 22.Trans ransfer fer o f
need and requiremen t to issue prospectus of firm.
Shares
23.Dissolution
24.Withdrawal of capital
/Public Ltd Co. are easily mtransferable o any person. to c . e e r f The Dissolution Dissolution of e dissolution of of Public Ltd Co. n sole partnership is a very i tradership is very complicated l does not easy. process. require any n There are legal formality ono rules l and or restriction. l regulations a for this . purpose. The sole w Any partner The members w can can tradership of the company w get his withdraw can receive /only at his share of their money capital the / time capital by back by of liquidation transferring selling the : of p the the rights to shares in business. another stock t person by exchange. t the consent h tradership can sell or transfer his business without any restriction.
can transfer or sale his share without the consent of all other partners.
/ m o c The formation Sole Partnership 25. tradership bears less. expenses are Expenses e much more bears less formation of Formation formation expenses e than the expenses as as r formation of a compared to compared partnership or f other forms of to a e JSC. sole tradership. business. n The sole All the The share 26.Payments i tradership is partners holder is of Debt Debt l liable to are liable to not n pay the debts pay the responsible to oobligations pay the debts of the business. l of the of the l business. company. a Partnership Only Public Sole 27.Listed in tradership . also cannot limited Stock cannot be Exchange w be listed in company listed in w stock stock can be exchange. exchange. listed in stock w exchange. / / Conclusion: : Sole proprietorship business plays an important role in under p developing developing countries countries like Pakistan. Pakistan. It is helpful in equalizing equalizing t the unequal distribution of wealth and unemployment, and it t can be considered the best form of business due to full h of other partners.
/ m o c . e e r ii). Differentia Differentiation tion between between Public & Private Private Limited Company: Company: f 1. DEFINITION: e n Public Limited Company: i associat “Joint “Joint St ock ock Comp Company any is i s a volunt vol unt ary ass ociat ion of indivi ind ividual dualss l int o trans for profit prof it , having having a capit capit al divided t ransferable ferable shares shares,, t he ownership ownership of w hich hich is t n he condit condit ion of membership.” membership.” o l Company: Private Limited “Joint “Joint St ock ock Comp Company any is i s a l volunt vol unt ary ass associat ociat ion of indivi ind ividual dualss aal divided into non t ransferable for profit , having having a capit capit ransferable . of w hich shares, hares, t he owners ow nership hip hich is the condit condit ion of wmembership.” w The other points of difference between Partnership, Public w Limited Company / (JSC) and Private Limited Company are mentioned below. / Other Points of DIFFERENCES: : POINTS PUB LIC LIMITED PRIVATE LIMITED p COMPANY COMPANY t t is a long and There is a complicated 2.Formation There h control. control. It is considered considered the best for small scale scale business. business. Partnership Partnership business business plays an important important role in under developing countries like Pakistan. The partners are of equal equal status status,, abilit ability y and reso resource urces. s. In JSC, JSC, it means means if if management of company is good then it is considered as best suited. The formation of a company is need of the day. JSC are fit for large scale business due to country grows.
/ m o The activities of the It is c govern by . Ordinance PLCo. are controlled Companies e by 1984. Companies e Ordinance 1984. r fMinimum number of There must be emembers is (2) and minimum (7) n maximum limit is members and i (50). there is no restriction on l maximum. n Its capital is so o Private limited Co.’s l capital is less than large. l Public limited Co. a Public limited Private Company . company can sale cannot sale its shares w its shares to to general public. w general public. w All the / shareholders The management of can’t / take part in the Private limited management. So, company depends : management upon owners of the p upon company. depends t of the directors t h complicated process process but easy as for the formation compared to Public of public limited co. Limited Company.
3.Legislation
4.Number 4.Number of Members
5.Capital
6. Sale Of Shares
7.Management
/ m of The Liability of The Liability o is limited shareholder is shareholder limited to the value upto c the value of . which they held of shares they held. shares, ethem. with e It is necessary to It is has to use the r use the specific specific word “Private fLimited” with its word “Public ename. Limited” with its n name. i The Public limited The Private Ltd Co. l company can’t start required only n any work whether incorporation certificate o and there is no need of the certificate of l of commencement of commencement business is l not business. received. a . Public Ltd enjoys Privat Private e Ltd also also enjo enjoys ys w long life. The death long life but less than w of shareholder Public Ltd Co. w the life can’t affect of the / business. / There is compulsory There is no strict rule : to submit report to for the submission of p the registrar. reports to the t registrar. t h company.
8.Liabilities
9.Title
10.Legal Documents
11.W 11.Work orking ing Life Lif e
12.Submission of Reports
13.Changes
14.Audit
15.Tax 15.Tax Rebate Rebat e
16.Profit Distribution
17.Books 17.Books of Ac A c c o u n t s
/ m o c . e of books of The audit is very Audit compulsory. For accounts e may or may this purpose, not be compulsory. It is r legal methods are f optional case. used by the e Chartered n Accountants under i the requirement l of Ordinance 1984. n The Govt. gives The Govt. does not o rebate for investing gives rebate for l in public investing in Private lLtd Co. Ltd Co. a Some amount . is All profit is distributed distributed wamong according to the value the shareholders of shares, and no w according to the reserve is made by a w number of share private limited / they held, and other company. / amount is kept in : reserve. p The books of It is compulsory to keep t accounts t are to be the books of h The changes in MOA and AOA can be made to limited extent as provided by the law.
The changes in MOA and AOA are very complicated procedure.
/ m o cis no need and In Public Ltd Co. it is There . necessary to issue requirement to issue e prospectus to prospectus. general public. e r There must be at There must be at least least 7 promoters. f 2 promoters. e There must be at n There must be at least least 7 directors. i 2 directors. It is suitable for l It is suitable for medium large size business. n business. o There is no need to call Statutory and l statutory meeting. Annual General meeting are l compulsory a by law. . Shares of Public Ltd The shares of Private w Co. are easily Ltd Co. are not w transferable to any transferable to any person. w persons. / Dissolution of Public The Dissolution of / Ltd Co. is a very Private Ltd Co. is a : complicated complicated procedure p process. but less difficult as t compare to Public Ltd. t h kept under the law are compulsory.
18.Prospectus
19.Promoters 20. 20. Dir Director ector s 21.Size of Business 22.Meeting
23.Transfer of Shares
24. 24. Diss Dissolu olutio tion n
accounts under Companies Ordinance 1984 but to a little bit.
/ There is restriction There m is no restriction o for minimum for minimum c subscription. subscription. . e The directors’ The e directors’ written written consent is consent is not required. r required. f Public Ltd Co can ePrivate Ltd Co cannot n be listed with stock be listed with i exchange. stock l exchange. n In directors meeting In directors meeting o of minimum number of minimum number lor members is 2. directors is four l is 1/3 whichever a greater. . Public Ltd Co must There is no restriction w publish its annual for Private Ltd Co is w report. to performance publish its w annual performance / report. / A public Ltd Co A private Ltd Co can : cannot get loan after get loan after its p its incorporation but incorporation. t can after its t h Co.
25. 25. Allo tment of Shares
26. Written Consent of Directors 27. 27. Listed Lis ted With Stock Exchange 28. 28. Quoru m
rd
29. Publication
30. 30. Loans Lo ans
/ m Public Ltd Co has Private 31. Secrecy oLtd Co has less secrecy. more csecrecy. . The powers of The powers of directors 32. 32. Pow Powers ers of of eso wide. directors are not so are Directors wide but depending e upon article of r association. f 33. 33. Legal Public Ltd Co has to ePrivate Ltd Co has to n face more but less strict face strict legal Restrictions i legal restrictions. restrictions. l Area of ownership in Area of ownership in a 34. 34. Area of n a Public Ltd Co Private Ltd Co is Ownership o is wide. It is restricted to one not restricted l to one family. l family. a at There must be at least 35.Memorandum There must be . least 7 signatures to 2 signatures to form Signatures w form memorandum. memorandum. w w CONCLUSION: / It is concluded concluded that better /Public Ltd. Joint Stock Company is better than Private Ltd Joint : Stock Company due to Large Capital, free Issuance Issuance & Transference Transfe Shares & debenture debentures, s, Listed Listed p rence ofof Shares with Stock Exchange, Less Chances of frauds, large numbers of t Directors to operate t the company, Govt. Incentives, etc…… h commencement.
/ m o c . e e r f e n i iii). Differentiation Between Article Of Association & l Memorandum n Of Association. 1. Defini fi niti tion on:: o Memorandum Of Association (MOA): l “The MOA is the most important document of the company. It l defines defines the relationship relationship between between the company and the public. public. a It depicts the character of a JSC as it includes all the objects of . formation of JSC.” w w Article Of Association (AOA): w of the company. These rules are used “The AOA are the rules to manage manage the Internal Inte / rnal affairs affairs of the the company company and to to achiev achieve e /in MOA. A set of 85 articles are given in the objects stated Table A : of Companies Ordinance 1984.” p t Other DIFFERENCES BETWEEN MOA & AOA: t Memorandum Of Article Of Association POINTS h
2.Usage
3.Scope
4.Status
5.Approval
6.Filing
7.Preparation
8.Ma 8.Main in Object
(AOA) / m The AOA are the by laws o regulations govern the c which origination and . internal conduct of a company. e MOA states the work AOA contains the set e a company can do. of rules and r regulations to f complete the objects e stated in MOA. n A MOA is subordinate An AOA is subordinate i to Companies to Companies l 1984. Ordinance 1984 and Ordinance MOA. n If a company o violates If a company violates the MOA l it cannot the MOA it cannot be approv app roved ed by the be approved by l shareholders. the shareholders. a It is .necessary to file It is not necessary to the MOA with file the AOA with w registrar. registrar as per w Table A of Companies w Ordinance 1984. /It is prepared under It is prepared under /the provision of the provision of : Companies Companies Ordinance p Ordinance 1984. 1984 and MOA. t Main object is to give Main object is to t information to the control and regulate h Association (MOA) MOA is an an offic officia iall document setting out the details of the company existence.
/the Internal m affairs of the company. 9.Importance has a secondary o Itimportance c formation ofin thethe . company. e 10.Nature contains the rules, e Itwhich govern the r administration of the f company. e down AOA contains the 11.Objects MOA only lays the objects n of the procedure for i company. achieving the l objects of the company. n 12.Alteration It is not o alterable but The provision can be can be laltered only changed by special be l special resolution easily. resolution of the a court. . 13.Relation- ship It w is the relationship It is the relationship between the company between the members w the outside and the management. and wpublic. /It is necessary for the It is not necessary for 14.Registr ation Purpose /registration of the registration of : the company. the company. 15.Legal Effect p A company cannot go A company can go t beyond the scope of beyond the scope of t MOA. Otherwise AOA. The activities h outsiders about the company. It has a primary importance in the formation of the company. It is a constitution of the company.
/cannot become illegal. m 16.Clauses The AOA has many o clauses. c limited toItsixis not . Table (A) hasclauses. e clauses for (85) e operating the r company. f e CONCLUSION: n In short, AOA is used only by the management of company because it the secrets container i and secrets should not be l as well as outsider to unfold. MOA is used by management n information related to company. o lShareholder & Debentureholder: iv). Differentiation Between l 1. Definition: a Shareholder: . The total capital of the w company is divided into small parts / units, each small part is called share. The person who w purchased the shares wof the company is called shareholder. /Debentureholder: / The certificate issued to as a receipt by borrower to lender for : the settlement of the debts in future as by borrower (JSC) is p called debenture and the holder of debenture is called t Debentureholder. t h consider illegal and cannot rectified. The MOA has usually six clauses. According to Companies Ordinance 1984.
/ m o Sh ar eh o l d er Deb en t u r eh o l d er c The amount paid by the . The amount given by the shareholder is kind of an debentureholder is kind e equity instrument. of an equity instrument. e These are considered as These are considered less r liquid instrument. liquid instrument as f compared to Shareholders. e These get return in the for These get return in the form of dividend. n of Interest. ithe Debentureholders do not Shareholders share l risk of the company. share the risk of the n company because they get fix interest. o The life of shareholders is Debentureholders are l short as they can be considered to be long term l sold and bought any time instruments. Usually there a in stock exchange. are issued for the period of . 3, 5 & 7 years. w Shareholders are the Debent Debenture urehol holder ders s are the w owners of the company. creditors of the w company. / Shareholders have the Debentureholders have no right / to share the profit concern with the profit & : loss of the company. & loss of the company. p can withdraw These These cannot withdraw t by selling shares capital before the maturity capital t the stock in date. h
Other DIFFERENCES BETWEEN Shareholder & Debentureholders:
Po i n t s 2.Nature
3.Liquidity
4.Return 5.Risk Sharing
6.Time 6.Time Peri Period od
7.Position
8.Share 8.Share in Profit & Lo ss 9.Withdrawn of Capit Capital al
10.Legality or Justification
11.Prefrence
12.Security 13.Liability
14.R 14.Rig ight hts s& Powers
15.Bonus
16.Convertability 17.Listings
/ There is as such no m conceptt of intere interest st in Islam Islam oconcep the debentures cbecause contain the element of . interest. e Shareholders have the Debent Debenture urehol holder ders s have have the e secondary right to primary right to claim for r share the value of debts at the time of assets at the time of f liquidation. e liquidation. Shareholders are n Debentureholders are considered to be i Insecure. considered to be secured. lbe Debentureholders are not Shareholders may considered as n considered as responsible o for the responsible for the company’s liability. company’s liability. l The rights and powers of The rights and powers of l shareholders are debentureholders are a written in.AOA. written on the certificate issued to them. w Sometimes shareholders No bonus is paid to the w receive bonus in debentureholders. w addition to their dividend. / The shares of The debentures of / can be shareholders debentureholders may be : into the stock. converted into shares. converted The p shareholders’ shares The debentureholders’ tlisted in stock are debentures are not t Exchange. listed in stock h exchange. These are legal as expressed in terms of Islam.
Exchange. / 18.Participation Shareholders can Debentureholders cannot m participate in the participate in the o management of the cmanagement of the company. company. . 19.Nature of The amount contributed e The amount contributed by Am A m o u n t by the shareholders is the debentureholders e called company’s capital. is called loan to the r company. f Debentureholders can exis 20.Existance Shareholders can exist e only in public Ltd both in private & public n company. Ltd company. i l Conclusion: In the end we can say that the n shareholders are the owners of the company for the value of o shares purchased by them and l debentureholders are creditors they receive dividend whereas lof debentures acquired by them of the company for the value a of interest. But both provide and they receive a fixed rate funds to the JSC. . w w w / / : p t t h
/ m o c . e e r f e n i l n o l l a . w w w / / : p t t h
