As a foreign EPC contractor intending to establish a legal entity in Lahore, Pakistan, to conduct EPC contracting business (residential and commercial buildings, waste water treatment, road, power, railways buildings), a company seeks information on registering the company and the advisable form of entity for smooth operations in Pakistan. They have also inquired about the registration process, required documents, timeline, and insights on registering with the Pakistan Engineering Council (PEC).
Before proceeding, we need to determine whether your construction company falls under the category of “Foreign constructor or foreign operator” or “Foreign consulting engineer” as per PEC rules, considering you are an EPC company. If you are a “Foreign constructor or foreign operator,” the requirements are more demanding, necessitating 51% Pakistani shareholding. The PEC website provides further information on this category.
Alternatively, if you are a “Foreign consulting engineer,” the PEC registration process can be more straightforward. You may apply and register for projects individually through the PEC website, potentially reducing costs.
Should you wish to register your foreign company as a branch or a new company with foreign shareholders, we are here to assist you. Our services encompass company registration, trade-name registration, and guidance on obtaining permits from relevant authorities (PEC) to commence business.
Please note that for foreign company registration, clearance may take time. For more information on Company Registration, you can visit our website.
Regarding the question of having a local partner to hold 51% of shares in the local entity, it is necessary if your company falls under the category of “Foreign constructor or foreign operator.” According to PEC rules, such foreign constructors/operators must enter into joint venture agreements with Pakistani counterparts, with the foreign shareholding limited to specialized expertise and technology not available locally.
We recommend setting up a local branch or company regardless of PEC registration, as it will expedite future business partnerships in Pakistan. Keeping legal and tax status in order is essential for taking advantage of tendering opportunities from the Government of Pakistan, especially related to CPEC projects.
For further assistance and advice on partnership agreements, please feel free to contact us.
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Regarding the question of having a local partner to hold 51% of shares in the local entity, it is necessary if your company falls under the category of “Foreign constructor or foreign operator.” According to PEC rules, such foreign constructors/operators must enter into joint venture agreements with Pakistani counterparts, with the foreign shareholding limited to specialized expertise and technology not available locally.
We recommend setting up a local branch or company regardless of PEC registration, as it will expedite future business partnerships in Pakistan. Keeping legal and tax status in order is essential for taking advantage of tendering opportunities from the Government of Pakistan, especially related to CPEC projects.
For further assistance and advice on partnership agreements, please feel free to contact us.
Q & A in Detail are below
Question: As a foreign EPC contractor, we intend to establish a legal entity in Lahore, Pakistan, to conduct EPC contracting business, including residential and commercial building, waste water treatment, road, power, and railways buildings. We need information on registering such a company and the advisable form of entity to freely operate our business in Pakistan. Additionally, could you please provide insights on the registration process, required documents, timeline, and details on registering with the Pakistan Engineering Council (PEC)?
Answer: Based on the nature of your business as an EPC company, it is likely that you fall under the category of “Foreign constructor or foreign operator” as per PEC rules. For this category, the requirements are more stringent, requiring 51% Pakistani shareholding. You can find more information on the PEC website.
However, if your company is a consultancy firm or “Foreign Consulting Engineer,” the PEC registration process may be relatively easier. You can explore the option of applying and registering on a project-by-project basis through the PEC website.
Foreign EPC constructors: If you were an EPC constructor then we would highly recommend that you should find local partners and make a new company with 51% shareholding with them. Once in a joint venture, it will be much easier for you to get a yearly PEC license, as the rules are very clear on this regard. If you need help with partnership agreements, our team will be happy to advise you.
Meanwhile, it is best that you should set up a local branch or company regardless of PEC registration as it will help you expedite any future business partnerships with much speed. We always advise our clients to keep their legal and tax status in order, so they do not miss any wonderful tendering opportunities available from the Government of Pakistan, based on the CPEC project.
Should you wish to register your foreign company as a branch or a new entity with foreign shareholders, we are available to assist you with the following services:
- Company Registration
- Trade-name Registration
- Guidance on Permit Procurement from relevant authorities (PEC) to commence business.
Please note that government fees may vary depending on the paid-up capital, and the registration process for foreign companies may take some time to clear the necessary security procedures.
For further information on registering the branch office of a foreign company or a franchise, please feel free to contact us. We are here to provide comprehensive advice and support throughout the registration process.
Question: Is it necessary for a foreign EPC contractor to have a local partner holding 51% of shares in a local entity for setting up an EPC contracting/construction business in Pakistan? Can a Chinese company have 100% control over the entity?
Answer: No, it is not possible for a foreign EPC contractor to have 100% control over a local entity in Pakistan. According to the rules, a foreign constructor or foreign operator intending to undertake construction or engineering works in Pakistan must obtain an appropriate license from the Council. Such a license may only be granted for specific projects that require expertise and specialized technology not available with a Pakistani constructor or operator.
In this scenario, the foreign constructor or foreign operator is required to enter into a joint venture agreement with a Pakistani constructor or operator. The share of the foreign entity in this joint venture will be limited to the expertise and technology not available locally. Furthermore, the joint venture will be eligible to work with Pakistani constructors or operators, even if specialized technology is available in Pakistan.
Instead of project-specific licenses, the council will issue yearly licenses to the foreign constructor or operator, which must be renewed after expiry. However, the foreign firm will not be allowed to participate in bidding individually and must engage in joint ventures with Pakistani firms of appropriate categories. After entering into the joint venture, all partners will benefit from the project experience, regardless of their share percentage.
The foreign constructor or operator is also required to get its Enlistment Certificate renewed as long as it intends or requires operating in Pakistan. Separate licenses must be obtained for each specific project when participating in bidding or negotiation.
In summary, to establish an EPC contracting business in Pakistan, a foreign company cannot have 100% control over the local entity and must engage in joint ventures with Pakistani firms to undertake specific projects.
Question: Is it mandatory for a foreign EPC contractor to have a local partner holding 51% of shares in a local entity to establish an EPC contracting/construction business in Pakistan? Can a foreign company have 100% control over the entity?
Answer: No, it is not possible for a foreign EPC contractor to have 100% control over a local entity in Pakistan. As per the rules, a foreign constructor or foreign operator seeking to engage in construction or engineering works in Pakistan must obtain a license from the Council. However, such a license can only be granted for specific projects that require expertise and specialized technology not available with a Pakistani constructor or operator.
To proceed, the foreign constructor or foreign operator is required to enter into a joint venture agreement with a Pakistani constructor or operator. In this joint venture, the share of the foreign constructor or operator will be limited to the expertise and technology not available locally. After obtaining the necessary enlistment certificate from the Pakistan Engineering Council (PEC), the foreign constructor or operator will be eligible to collaborate with Pakistani constructors or operators, even if specialized technology is available within Pakistan.
Instead of project-specific licenses, the council will issue yearly licenses to the foreign constructor or operator, which will need to be renewed upon expiry. It is important to note that a foreign firm will not be permitted to participate in bidding individually. Instead, it must enter into a joint venture with a Pakistani firm of an appropriate category and submit the joint venture details to the employer before participating in any bidding process.
Upon entering into the joint venture, all partners involved will benefit from the project experience, and their collective experience will be considered in future projects, irrespective of the percentage of shares held by each partner.
The foreign constructor or foreign operator must ensure the renewal of its Enlistment Certificate as long as it intends to operate in Pakistan. Additionally, for each specific project in which it intends to participate in bidding or negotiation, a separate license must be obtained.
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