Question: Our foreign company is planning to expand in Pakistan by establishing subsidiary and start oil and gas exploration work with our own technologies. In order to begin the process we are looking for a business law firm, which will provide us with the services of business registration and provide assistance on obtaining the type of the license that enables us to do the oil and gas exploration in licensed territories of Pakistan; to allocate the oil and gas, sign an agreement with the needed parties; followed by the drilling process. This will basically mean covering all the stages and aspects of the oil and gas cycle.
In terms of business subsidiary registration, please kindly advise on the following questions:
- License types or ownership we could have; if its LLC,LTD…etc.
- Time frame to get the license and do the registration.
- Min no. of shareholders
- Minimum start capital
Answer/Response
As you plan to expand your company’s operations into Pakistan, establishing a subsidiary and commencing oil and gas exploration work with your proprietary technologies, we understand the need for expert legal assistance throughout this complex process. Our firm, one of the top energy law firms in Pakistan, is well-equipped to provide comprehensive support in business registration, obtaining necessary licences, and facilitating all stages of the oil and gas exploration cycle.
Expertise and Services Offered
Our team includes a leading oil and gas expert with an LLM in Oil and Gas Law from the University of Aberdeen. She has authored the Pakistan Chapter of the Oil and Gas Regulation Guide of the ICLG series, published by the GLG group in London. Our firm has extensive experience in handling cases involving the acquisition of permits and registration for exploration work in licensed territories. We can provide detailed information on the required and implemented procedures, along with the fees and timelines for these services.
Business Subsidiary Registration
Corporate Structure and Registration
For oil and gas operations in Pakistan, we recommend registering as a Private Limited Company (LTD), as this structure is favourable within the Petroleum Ministry. We advise registering your company in major cities such as Islamabad or Karachi.
Timeline for Registration
- New Company Registration (Foreign Directors): The process for a new company with foreign directors typically takes 4-6 months. This timeframe includes a security clearance from the Ministry of Interior before registration by the Securities and Exchange Commission of Pakistan (SECP). For local nationals, the process usually takes 2-3 months.
- Branch Office Registration (Foreign Company): If registering a branch office of your company in Germany, the process will involve obtaining a permit from the Board of Investment (BOI) before SECP registration, taking approximately 6 months.
Shareholders and Capital Requirements
- Minimum Number of Shareholders: The minimum number of shareholders for a Private Limited Company is two.
- Minimum Start Capital: There is no prescribed minimum capital requirement for registering a Private Limited Company in Pakistan. However, practical considerations and business needs will dictate the initial capital.
Licensing and Regulatory Compliance
Types of Licenses
- Exploration License: To conduct oil and gas exploration, you will need to obtain an exploration licence from the Directorate General of Petroleum Concessions (DGPC) under the Ministry of Energy (Petroleum Division).
- Drilling and Production Licences: Subsequent to successful exploration, drilling and production licences will be required, each involving specific regulatory compliance and approvals.
Process and Timeframe
- Exploration Licence: The application process for an exploration licence involves submitting detailed technical, financial, and environmental assessments. The timeframe for obtaining this licence can vary, but typically ranges from 6-12 months, depending on the complexity of the project and governmental processing times.
Foreign Shareholders and State Bank Clearance
For foreign shareholders, permission from the State Bank of Pakistan is required. This involves:
- Security Clearance: The Board of Investment (BOI) and the Ministry of Interior will conduct security clearances for foreign shareholders prior to SECP registration.
- Assistance: Our firm will assist in navigating these clearances and obtaining the necessary permissions.
Additional Services
Our legal advice will also cover:
- Local Office Setup: Guidance on setting up your local office, including compliance with local laws and regulations.
- Taxation Structures: Structuring your taxation to optimise compliance and efficiency.
- Due Diligence: Conducting thorough due diligence to ensure all legal and regulatory requirements are met.
Additional information
To establish a business subsidiary in Pakistan for oil and gas exploration, foreign companies must comply with the legal provisions outlined in the Companies Act, 2017. Here is a detailed process and the relevant provisions for registering a foreign company’s business subsidiary for oil and gas exploration in Pakistan:
Registration Process
1. Establishing a Place of Business: Foreign companies that establish a place of business in Pakistan must deliver certain documents to the registrar within thirty days of establishing the business. These documents include:
- A certified copy of the charter, statute, or memorandum and articles of the company, along with a certified translation if not in English or Urdu.
- The full address of the registered or principal office of the company.
- A list of directors, chief executive, and secretary (if any) of the company.
- A return showing the full names, former names, surnames, nationality, designation, and full address in Pakistan of the principal officer of the company in Pakistan.
- The full names, former names, surnames, nationality, and addresses of persons resident in Pakistan authorized to accept service of process on behalf of the company.
- The full address of the office in Pakistan deemed to be the principal place of business in Pakistan .
2. Registering Alterations: Any alterations in the charter, statute, memorandum and articles, address of the registered office, directors, chief executive, secretary, or other relevant particulars must be reported to the registrar within thirty days of such alteration .
3. Filing Accounts: Every foreign company must file annual financial statements with the registrar, including a list of Pakistani members and debenture-holders and details of business operations in Pakistan. These documents must be filed within forty-five days from the submission to the public authority of the country of incorporation or within 180 days of the financial year-end, whichever is earlier .
Licensing for Oil and Gas Exploration
1. Obtaining Licenses: To conduct oil and gas exploration, a company must obtain the relevant licenses from the Directorate General of Petroleum Concessions (DGPC). This process involves:
- Applying for a petroleum exploration license.
- Complying with the Pakistan Petroleum (Exploration and Production) Rules, 2001, which outline the requirements for obtaining exploration licenses, conducting exploration activities, and reporting discoveries.
- Negotiating and signing the Model Petroleum Concession Agreement (MPCA) with the Government of Pakistan .
2. Complying with Regulatory Requirements: Foreign companies must ensure compliance with local regulations, including environmental regulations, safety standards, and local content requirements, which mandate the use of local goods and services where feasible.
Corporate Structure and Requirements
1. Types of Entities: Foreign companies can establish a subsidiary as a private limited company (Ltd) or a limited liability company (LLC). The Companies Act, 2017 provides flexibility in terms of corporate structure, allowing foreign companies to either incorporate a new entity or register as a branch office.
2. Shareholders and Capital Requirements:
- A minimum of two shareholders is required for incorporating a private limited company.
- There is no specified minimum start capital for a private limited company, but the capital should be sufficient to meet the business’s operational requirements .
3. Time Frame:
- Registering a new company with foreign directors typically takes around 4-6 months due to security clearances by the Ministry of Interior.
- Registering a branch office of a foreign company involves obtaining a permit from the Board of Investment and can take up to 6 months .
Legal Assistance and Fees
1. Legal Services: Legal firms specializing in corporate and energy law, such as Josh and Mak International, can assist with:
- Company registration with the Securities and Exchange Commission of Pakistan (SECP).
- Obtaining the necessary permits and licenses from the DGPC.
- Drafting and negotiating agreements related to petroleum concessions and joint ventures.
- Ensuring compliance with all regulatory and legal requirements throughout the exploration and production process.
2. Fees: The fees for registering a foreign company and obtaining necessary licenses vary and typically include:
- Registration fee for the company.
- Fees for filing and registering documents related to mortgages, charges, and pledges.
- Fees for obtaining certified copies of incorporation documents and other statutory filings .
This comprehensive process ensures that foreign companies can establish a compliant and efficient subsidiary in Pakistan to engage in oil and gas exploration, leveraging local expertise and adhering to all regulatory requirements.
