Company Registration in Pakistan 2026: A Complete Legal Guide to SECP Incorporation, Compliance, Foreign Investment & Company Law

*Updated for the Companies Act, 2017, Companies Regulations, 2024, eZfile and the Pakistani corporate-law position as at August 2026

Establishing a company in Pakistan is considerably easier today than it was a decade ago. The mechanics of incorporation have become increasingly digital, the Securities and Exchange Commission of Pakistan (“SECP”) has consolidated much of the procedural law into the Companies Regulations, 2024, and the incorporation process is now substantially conducted through the eZfile environment. Yet the apparent simplicity of online registration can be deceptive.

A company is not merely a registration number obtained from a government portal. Incorporation creates a separate legal person. It determines where commercial liabilities will sit, who controls the enterprise, what rights shareholders possess, what responsibilities directors assume, how capital can be introduced, how ownership may subsequently change, how investment can be raised, what regulatory permissions may be required and, eventually, how the business can be sold, restructured or closed.

For that reason, the better question for a promoter is not merely:

“How do I register a company in Pakistan?”

It is:

“What company should I create, how should I structure it, and what legal architecture will best serve the business I intend to build?”

That distinction becomes especially important where the business involves foreign shareholders, family ownership, multiple founders, venture investment, regulated activity, real property, intellectual property, a joint venture, succession concerns or the possibility of a future sale.

At Josh and Mak International, our corporate practice encompasses company formation, shareholders’ arrangements, corporate governance, directors’ responsibilities, regulatory compliance, corporate restructuring, transactions, commercial contracts and corporate disputes. Our approach to incorporation is therefore deliberately wider than the filing of forms. We examine what the proposed company is intended to accomplish and structure the corporate vehicle accordingly.

This guide explains the Pakistani company-law regime comprehensively—from the choice of entity and incorporation process through to governance, shareholding, beneficial ownership, foreign investment, annual compliance, shareholder rights, corporate disputes and eventual exit.

1. The Corporate-Law Framework in Pakistan in 2026

The principal statute governing companies remains the Companies Act, 2017, as amended.

For ordinary registration, governance and corporate compliance, the Act must now be read alongside the Companies Regulations, 2024, issued through S.R.O. 201(I)/2024.

The importance of the 2024 Regulations should not be underestimated. SECP describes them as a unified regulatory framework consolidating multiple earlier regulations governing incorporation and post-incorporation matters. The consolidated regulations now cover, amongst other matters:

• company-name reservation;
• incorporation;
• foreign companies;
• reporting and compliance;
• beneficial ownership;
• changes in directors and officers;
• registered offices;
• further issue of shares;
• corporate forms;
• easy exit;
• Companies Registration Offices; and
• numerous event-based statutory filings.

The official SECP version presently available is stated to be updated up to 25 July 2025 and reviewed on 14 April 2026.

This matters because much company-law information circulating online still refers to the former Companies (Incorporation) Regulations, 2017, the Companies (General Provisions and Forms) Regulations, 2018, and historic form numbers. Those instruments remain relevant to understanding the evolution of the law, but for current corporate filing work the Companies Regulations, 2024 must be consulted.

The modern filing system must likewise be understood through eZfile. SECP presently states that name reservation and company incorporation are end-to-end digitised and that the incorporation process has been reduced to four principal electronic stages.

The digitisation of a procedure does not, however, simplify the underlying legal judgment. A memorandum drafted badly online remains a badly drafted memorandum. An unsuitable shareholder structure remains unsuitable even if SECP registers it in twenty minutes. A founder dispute is not prevented by a digital certificate of incorporation.

The quality of the legal structure remains more important than the speed of the electronic filing.

PART A — SHOULD YOU INCORPORATE A COMPANY AT ALL?

2. What Does Incorporation Actually Achieve?

A registered company possesses a legal personality distinct from its shareholders.

Once incorporated, the company becomes capable, in its own name, of:

• owning assets;
• entering contracts;
• opening bank accounts;
• borrowing money;
• employing personnel;
• acquiring intellectual property;
• holding licences;
• suing;
• being sued;
• issuing shares;
• incurring liabilities; and
• continuing notwithstanding changes in its membership.

Section 18 of the Companies Act gives legal effect to registration. Upon incorporation, the subscribers and subsequent members constitute a body corporate bearing the registered name, possessing the capacity of an incorporated company and perpetual succession. The subscribers become holders of the initial shares where the company has share capital. The legal effect of registration and corporate personality is reflected throughout the statutory architecture.

This separation between shareholder and company is one of the principal reasons businesses incorporate.

If A Ltd enters into a commercial lease, ordinarily the tenant is A Ltd—not every shareholder personally.

If A Ltd employs staff, the employer is ordinarily A Ltd.

If the company purchases machinery, it belongs to the company.

If one shareholder sells his shares, the company’s contracts do not ordinarily disappear.

If a shareholder dies, the company does not die with him.

That continuity distinguishes the incorporated company from many informal forms of enterprise.

The protection is not absolute. Directors, shareholders or controlling persons may incur personal liability where they provide personal guarantees, commit fraud, breach statutory duties, misuse corporate personality or become liable under another applicable law. But the starting position remains that the company and its members are legally distinct.

3. Limited Liability Does Not Mean “No Liability”

The phrase “limited liability company” is sometimes misunderstood.

The liability of a member of a company limited by shares is generally limited to the amount, if any, remaining unpaid upon the shares held by that member.

Suppose a shareholder subscribes for 100,000 shares of PKR 10 each and pays the subscription price in full. He ordinarily does not become personally responsible for every commercial liability later incurred by the company merely because he owns its shares.

That does not mean a shareholder can personally commit wrongdoing through a company and become immune from law.

Nor does it mean a director is protected from breaches of his own legal duties.

Nor does it prevent a bank from requiring a personal guarantee.

Nor does it prevent statutory liability arising under tax, environmental, labour, securities, anti-fraud or other legislation.

Corporate personality is a legal allocation of rights and obligations. It is not a licence for irresponsibility.

For entrepreneurs, the practical lesson is that the corporate form is powerful precisely because the law respects it. The people running the company should respect it too. Company money should be treated as company money. Board decisions should be properly authorised. Corporate records should be maintained. Related-party dealings should be documented. Personal and corporate affairs should not be casually intermixed.

4. When Is a Company Usually Better Than a Sole Proprietorship?

A sole proprietorship may be sufficient for a small individual enterprise whose risk, financing requirements and ownership arrangements are modest.

A company becomes increasingly attractive where the business:

• will have two or more owners;
• expects significant liabilities;
• will employ staff;
• requires substantial contracts;
• expects external investment;
• requires an industry licence;
• wishes to issue equity;
• owns important intellectual property;
• intends to acquire land or substantial assets;
• requires institutional banking;
• expects to tender for substantial work;
• seeks continuity beyond the founder;
• may eventually be sold; or
• requires a recognisable governance structure.

A private limited company also allows an investor to acquire an economic interest through shares rather than becoming a co-owner of every individual business asset.

That can make capital formation significantly easier.

5. Company Versus Partnership

A traditional partnership and an incorporated company are fundamentally different structures.

In a partnership, the relationship among partners and their exposure to partnership obligations can be considerably more personal. A company creates a distinct legal person and separates ownership into shares.

A partnership may nevertheless remain appropriate where:

• the venture is genuinely small;
• partners wish to operate personally;
• the regulatory burden of a company is unnecessary;
• the profession concerned is ordinarily conducted through partnership; or
• the parties consciously prefer partnership law.

Pakistan also recognises the Limited Liability Partnership (LLP) under separate legislation, creating another possible structure for professional and commercial ventures.

The decision should therefore not be reduced to a slogan such as “a company is always better”. The correct entity depends upon ownership, liability, tax, regulatory and investment requirements.

For most scalable businesses intending to raise capital or institutionalise ownership, however, a private company remains the usual corporate vehicle.

PART B — TYPES OF COMPANIES UNDER PAKISTANI LAW

6. Company Limited by Shares

The most familiar business company is a company limited by shares.

The members’ liability is limited by the memorandum to the amount, if any, unpaid upon their shares.

A company limited by shares may take the form of:

• a single-member company;
• a private company; or
• a public company.

SECP’s current Companies Regulations FAQ confirms these principal forms.

7. Private Limited Company

A private company is generally the preferred structure for privately owned commercial enterprises.

Under the Companies Act, its articles restrict the right to transfer shares, limit the number of members to the statutory maximum and prohibit invitations to the public to subscribe for shares or other specified securities.

The private-company format is suitable for:

• founder-led businesses;
• family businesses;
• wholly owned subsidiaries;
• foreign-owned Pakistani subsidiaries;
• start-ups;
• joint ventures;
• property-holding companies;
• service businesses;
• manufacturing companies;
• technology ventures;
• professional commercial enterprises where permitted; and
• private investment companies subject to any specialised regulatory requirements.

A private company requires at least two members unless it is incorporated as a single-member company. Section 14 and SECP’s current incorporation guidance reflect the familiar structure: three or more persons for a public company, two or more for an ordinary private company and one for an SMC.

8. Single-Member Company

An SMC permits one person to own the entirety of an incorporated private company.

This can be useful where:

• an individual entrepreneur requires corporate personality;
• there is genuinely only one beneficial owner;
• a person wishes to segregate a business from personal affairs;
• succession planning is important; or
• no artificial second shareholder should be introduced merely for registration.

The statutory framework contains special provisions for the nominee who acts upon the death of the sole member so that the company’s affairs can be preserved pending transfer of shares to the lawful heirs.

An SMC should not be regarded as a lesser company. It remains an incorporated legal person.

However, a business expecting immediate co-investment may be better incorporated from the beginning as an ordinary private company rather than repeatedly altering the structure.

9. Public Company

A public company requires at least three persons at formation.

Public-company status carries additional legal consequences. A public company may, depending upon its status and the applicable securities-law framework, have access to forms of capital raising unavailable to a private company, but it also bears greater governance and disclosure obligations.

It is important to distinguish:

• public company;
• public unlisted company; and
• listed company.

Not every public company is listed on a stock exchange.

Listing introduces an additional securities-law, Pakistan Stock Exchange and corporate-governance framework well beyond ordinary incorporation.

A founder planning a closely held business should therefore not choose a public company simply because the word “public” sounds larger or more prestigious.

10. Company Limited by Guarantee

A company limited by guarantee has members whose liability is limited by the memorandum to the amount they undertake to contribute to the company’s assets in the event of winding up.

This form is often associated with non-profit or membership-oriented structures, although particular organisations may also fall within the section 42 licensing regime where they are established for specified not-for-profit purposes.

The distinction between a guarantee company and a section 42 licence should not be blurred.

Section 42 is not merely a label placed upon an ordinary commercial company. It creates a specialised regulated non-profit structure, with restrictions concerning application of income, distribution to members, governance and regulatory supervision.

11. Unlimited Company

Pakistani company law also recognises an unlimited company, under which members do not enjoy the ordinary limitation upon liability characteristic of companies limited by shares or guarantee.

It is rarely the natural choice for an ordinary commercial start-up, precisely because the principal attraction of incorporation for most entrepreneurs is liability segregation.

Its existence nevertheless illustrates an important doctrinal point: incorporation and limited liability are related but conceptually distinct. A body may have corporate personality without the members enjoying ordinary limited liability.

PART C — CHOOSING OWNERSHIP BEFORE INCORPORATION

12. Decide the Shareholding Before Filing the Company

One of the most expensive founder mistakes occurs when promoters treat shareholding as an administrative matter.

It is not.

Shareholding determines economic ownership.

A company with two founders owning 50 per cent each is materially different from one owned 70:30.

A founder holding 51 per cent may have ordinary voting control but will not necessarily possess the statutory majority required for a special resolution.

A shareholder with 25 per cent or more may occupy a strategically important blocking position in relation to decisions requiring three-fourths support.

A small minority can still possess substantial contractual protections if the articles or shareholders’ agreement confer them.

Before incorporation, founders should therefore determine:

• who owns the company;
• what percentage each person receives;
• what contribution each shareholder makes;
• whether contributions are cash, property or intellectual property;
• whether equity vests immediately;
• whether future investment is expected;
• whether employee equity will be required;
• what happens if a founder leaves;
• whether there are reserved matters;
• how shares may be transferred;
• whether pre-emption applies;
• what happens upon death;
• what happens upon deadlock; and
• what happens if one shareholder materially breaches the founders’ arrangement.

The SECP incorporation form records ownership. It does not negotiate ownership.

That is the job of the promoters and their advisers.

13. Why 50:50 Companies Require Particular Care

A two-founder company owned 50:50 can look perfectly fair on incorporation day.

It can become paralysed on dispute day.

If the two shareholders also control the board equally, disagreement can obstruct:

• appointment of management;
• budgets;
• borrowing;
• litigation;
• major contracts;
• new investment;
• dividends;
• appointment of advisers;
• disposal of assets; and
• even routine governance.

That does not mean 50:50 ownership is inherently wrong.

It means that a serious 50:50 venture requires a deadlock mechanism.

Possible mechanisms include:

• escalation between founders;
• mediation;
• independent board member;
• casting-vote arrangements where legally and commercially appropriate;
• rotating rights;
• buy-sell mechanisms;
• put/call rights;
• Russian roulette or Texas shoot-out clauses in sophisticated transactions;
• valuation mechanisms; or
• agreed winding-up/exit consequences.

A standard memorandum and articles downloaded from an incorporation portal will not automatically solve a bespoke deadlock problem.

14. Shareholders’ Agreements

Where there is more than one substantial shareholder, a shareholders’ agreement should ordinarily be considered.

Such an agreement may regulate:

• board composition;
• reserved matters;
• information rights;
• business plan approval;
• budgets;
• funding;
• dividends;
• related-party transactions;
• issue of new shares;
• dilution;
• pre-emption;
• transfer restrictions;
• tag-along rights;
• drag-along rights;
• founder vesting;
• intellectual property;
• confidentiality;
• non-solicitation;
• deadlock;
• default;
• valuation;
• exit;
• dispute resolution; and
• governing law.

The articles and shareholders’ agreement should be drafted coherently.

A private contract cannot simply override mandatory provisions of the Companies Act, and the parties should consider which rights need to be reflected in the articles so that the corporate constitution supports the bargain.

PART D — THE 2026 COMPANY INCORPORATION PROCESS

15. Incorporation Is Now Conducted Through the SECP eZfile Environment

SECP presently states that company-name reservation and incorporation are end-to-end digitised.

A promoter may submit a combined or separate application for:

1. name reservation; and
2. incorporation,

through eZfile, or use the prescribed physical route where appropriate.

The eZfile system represents a significant improvement in accessibility.

It should nevertheless be understood as a filing platform rather than a substitute for professional judgment.

16. Stage One: Determine the Correct Company Type

Before opening the application, decide whether the proposed entity will be:

• SMC-private;
• ordinary private limited;
• public unlisted;
• public/listed in due course;
• limited by guarantee;
• section 42/non-profit where applicable;
• specialised/licensed; or
• another corporate form permitted by law.

This choice affects:

• minimum membership;
• governance;
• constitutional documents;
• annual compliance;
• audit;
• capital;
• regulatory permissions; and
• future fundraising.

17. Stage Two: Select and Reserve the Company Name

A company’s name is a legal identifier, a commercial brand and often an intellectual-property asset.

Section 10 of the Companies Act governs prohibited and restricted company names.

Broadly, a proposed name should not be:

• identical or confusingly similar to an existing company;
• inappropriate;
• undesirable;
• deceptive;
• offensive to religious susceptibilities;
• misleading concerning government patronage;
• suggestive of an unauthorised regulated business; or
• otherwise prohibited under the statutory framework.

Certain expressions implying association with:

• Government;
• foreign governments;
• international organisations;
• statutory institutions;
• regulated financial activities; or
• particular protected concepts

may require approval or supporting evidence.

A name may therefore fail even though no identical name already appears on the register.

18. Name Availability Is Not Trademark Clearance

This distinction is commercially important.

SECP’s acceptance of a company name does not necessarily mean the business is free to use that expression as a trademark.

Corporate-name registration and trademark registration serve different legal functions.

A prudent promoter should therefore conduct:

1. an SECP name search;
2. a relevant trademark search; and
3. where important, domain-name and digital-identity checks.

Registering Alpha Technologies (Private) Limited does not automatically give the company superior trademark rights over an earlier protected “ALPHA” brand in the relevant class.

For a consumer-facing business, trademark clearance should occur before significant money is spent upon signage, packaging, software, marketing or domains.

19. How Long Is a Reserved Name Held?

Under the current Companies Regulations framework, name reservation is time-limited.

SECP’s contemporary guidance states that a reserved name remains available for 60 days and is not automatically extended; if the reservation expires, a fresh application is ordinarily required.

Current fee amounts should always be checked through SECP’s live fee schedule or calculator at the date of filing because the Seventh Schedule can be amended.

The enduring legal point is this: a reserved name is not an indefinite property right.

20. The Company’s Name Should Match Its Principal Line of Business

Section 26 of the Companies Act is particularly important in modern Pakistani company formation.

The company’s principal line of business must be stated in its memorandum and should remain commensurate with the company’s name.

The Act broadly enables a company to carry on lawful business and activities incidental or ancillary to it, but it does not permit the company to use incorporation as a means of bypassing another law.

A company cannot lawfully undertake:

• prohibited business; or
• restricted/licensed business

unless the necessary licence, registration, permission or approval has been obtained.

The source material rightly places the principal line of business and licensed activity within the core Companies Act discussion.

This is a point with substantial practical consequences.

A company may be incorporated.

Its proposed business may still be illegal to commence without another regulator’s permission.

PART E — THE MEMORANDUM AND ARTICLES

21. The Memorandum of Association

The memorandum is one of the company’s fundamental constitutional instruments.

Depending upon the company and applicable statutory form, it addresses matters including:

• company name;
• registered-office jurisdiction;
• principal line of business;
• liability of members;
• share capital where applicable; and
• subscriber commitments.

The modern Companies Act deliberately moved away from excessively elaborate object clauses for ordinary companies, but that does not make the memorandum unimportant.

The principal business should be drafted accurately.

Where the business is regulated, the memorandum should be consistent with the regulator’s requirements.

Where a foreign parent is incorporating a subsidiary, the memorandum should also be consistent with:

• parent-board authority;
• investment approvals;
• group policy;
• banking KYC; and
• intended contracts.

22. Articles of Association

The articles govern the company’s internal corporate machinery.

They commonly regulate:

• issue of shares;
• transfer of shares;
• meetings;
• voting;
• board powers;
• directors;
• notices;
• dividends;
• accounts;
• capital;
• corporate records; and
• other governance matters.

Section 17 gives the registered memorandum and articles binding effect between the company and its members within the statutory framework.

The articles should therefore not be regarded as boilerplate simply because model articles exist.

For a wholly owned small company, standardised provisions may be sufficient.

For a joint venture, family business, venture-backed start-up or company with substantial minority investors, generic articles may be entirely inadequate.

23. Articles Versus Shareholders’ Agreement

The two documents perform overlapping but distinct roles.

The articles are part of the company’s registered constitutional framework.

A shareholders’ agreement is a private contractual bargain.

A sophisticated ownership structure may use both.

For example, if the investors agree that no further shares may be issued without Investor A’s consent, counsel should decide whether that protection should appear:

• contractually in the shareholders’ agreement;
• constitutionally in the articles; or
• in both, appropriately drafted.

Poorly integrated documents can create conflicts between corporate power and contractual obligation.

24. Altering the Memorandum

Section 32 allows alteration of the memorandum by special resolution for specified purposes, including:

• moving the registered office between provinces/ICT or other statutorily recognised jurisdictions;
• changing the principal line of business; and
• adopting or changing a business activity requiring a licence, registration, permission or approval.

Not every alteration follows the same confirmation route.

In particular, a change solely in the principal line of business does not carry the same Commission-confirmation requirement that applies to certain other section 32 alterations.

The altered memorandum must then be filed within the applicable statutory framework.

The source contains a substantial section 32 treatment which should remain part of any complete company-law guide.

25. Altering the Articles

Section 38 permits a company, subject to the Act and memorandum, to alter its articles by special resolution.

Where an alteration affects substantive rights or liabilities of members or a class, the statutory safeguards become especially important.

The altered articles must be filed with the registrar within the applicable period.

A majority shareholder should therefore not assume that ownership percentage creates an unrestricted power to rewrite minority rights.

Corporate majority rule operates within law.

PART F — SHARE CAPITAL

26. Authorised Capital and Paid-Up Capital Are Different

These expressions are frequently confused.

Authorised capital is the maximum nominal share capital that the memorandum presently authorises the company to issue.

Issued capital is the portion actually issued.

Paid-up capital represents the amount paid, or treated according to law as paid, upon the issued shares.

A company might therefore have:

• authorised capital: PKR 10 million;
• issued capital: PKR 2 million;
• paid-up capital: PKR 2 million.

The remaining authorised but unissued amount does not mean the company holds PKR 8 million of cash.

It merely means there is headroom within the presently authorised capital.

27. Is There a Minimum Capital Requirement?

For an ordinary private company, SECP’s current promoters’ material uses PKR 100,000 as the minimum authorised-capital starting point for ordinary incorporation mechanics, although actual capital requirements must always be distinguished from sector-specific regulatory capital.

A bank, insurer, NBFC, securities business, regulated financial institution or another licensed enterprise can be subject to vastly different capital requirements.

The relevant question is therefore not simply:

“What is the minimum capital for a company?”

It is:

“What capital is required for this company and this business?”

A very small legal minimum may also be commercially unsuitable.

A company expecting to rent substantial premises, employ twenty staff and import equipment should not necessarily begin with token paid-up capital merely because the incorporation portal permits it.

28. Capitalisation Should Reflect Commercial Reality

The initial capital structure affects:

• ownership;
• bank KYC;
• borrowing;
• future fundraising;
• foreign investment registration;
• shareholder rights;
• balance-sheet strength;
• statutory thresholds; and
• transaction credibility.

Under-capitalisation can leave a company immediately dependent upon undocumented shareholder advances.

Over-capitalisation can create its own inefficiencies.

The correct amount should therefore be determined with regard to the first 6–12 months of anticipated business and financing arrangements.

29. Subscription Money

Subscribers undertake to take the shares stated in the incorporation documents.

The Companies Act requires subscription money to be paid in accordance with the statutory framework, and SECP has separately prescribed the mechanism for subscription-money compliance.

Payment through a transparent banking channel is strongly preferable and, in relevant statutory circumstances, required by the prescribed framework.

For foreign shareholders, documentary discipline becomes even more important because the remittance record may later affect:

• evidence of foreign investment;
• dividend repatriation;
• sale proceeds;
• banking KYC; and
• State Bank compliance.

Cash should not be treated as a casual substitute for properly documented corporate capital.

30. Further Issue of Shares

The company’s financing needs may later require additional equity.

Section 83 and the Companies Regulations govern further issue of shares.

Existing shareholders ordinarily receive statutory/pre-emptive protection in a rights issue, subject to the applicable company type and circumstances.

This creates an important distinction between:

• founders agreeing informally that a new investor may “take 20%”; and
• legally issuing shares so that the new investor actually acquires 20%.

The company must consider:

• valuation;
• authorised capital;
• rights offer;
• shareholder approvals where necessary;
• board approval;
• consideration;
• statutory filings;
• changes in UBO; and
• foreign exchange where the investor is non-resident.

Investment should be structured before money is accepted.

31. Current Form 3 for Share Allotment and Ownership Changes

SECP’s statutory forms page, updated in July 2026, identifies Form 3 as the return dealing with:

allotments of shares and changes in shareholding, membership or voting rights.

This is one illustration of why corporate secretarial work should use current forms rather than relying upon historic form references copied from old templates.

PART G — DIRECTORS, CHIEF EXECUTIVE AND OFFICERS

32. Directors Do Not “Own” the Company Merely Because They Manage It

The shareholders own shares.

The board manages the company subject to the Act, articles, shareholder decisions and applicable duties.

A person can be:

• shareholder but not director;
• director but not shareholder; or
• both.

This separation becomes critical in joint ventures and family companies.

A founder may own 60 per cent of the equity without personally possessing an unrestricted right to treat company property as his own.

Similarly, a managing director may control daily operations without owning the majority of shares.

33. Director Duties Are Substantive

A directorship is not merely a name placed upon SECP records.

Directors assume legal responsibilities.

Depending upon the circumstances, those responsibilities engage matters such as:

• acting in accordance with the company’s constitution;
• exercising powers for proper corporate purposes;
• avoiding unlawful conflicts;
• disclosing interests;
• protecting company assets;
• proper decision-making;
• maintaining statutory records;
• ensuring filings;
• overseeing financial reporting;
• avoiding fraudulent conduct; and
• complying with applicable regulatory requirements.

Directors who do not participate in management should not assume that being “non-active” automatically eliminates every responsibility arising from their office.

34. Nominee Directors

Investors often nominate directors to represent their interests.

A nominee relationship does not convert the director into a mere messenger incapable of owing duties to the company.

The director must operate within the Companies Act, the articles and applicable fiduciary/statutory principles.

This becomes particularly important where the nominating shareholder’s interests diverge from those of the company.

35. The Chief Executive

The Companies Act defines the chief executive broadly as the individual entrusted, subject to the board’s control and direction, with the whole or substantially the whole of the powers of management of the company’s affairs.

The CEO therefore occupies a legally significant governance position.

The appointment, term, authority and remuneration should be documented properly.

In owner-managed companies, the same person may be shareholder, director and chief executive—but the three legal capacities should still be distinguished.

36. Current Form 9 Replaces Familiar Legacy Officer-Change Forms

This is one of the practical 2026 updates worth highlighting.

The current Form 9 is titled:

“Particulars of Directors and Officers, including the Chief Executive, Secretary, Chief Financial Officer, Auditors, Legal Adviser and, in case of Single Member Company, Nominee of Sole Member or of any change therein.”

It operates under sections 14, 167 and 197 read with the relevant Companies Regulations provisions. The current form itself was updated through the 2025 regulatory amendments.

Businesses using old corporate-secretarial checklists that still reflexively refer to “Form 29” for every director/officer change should therefore update their compliance systems.

PART H — REGISTERED OFFICE AND CORPORATE IDENTITY

37. Every Company Requires a Registered Office

Section 21 requires a registered office to which communications and notices may be addressed.

Where a correspondence address is initially used within the permitted incorporation procedure, the actual registered-office position must subsequently be regularised within the statutory framework.

A registered office is not merely a postal convenience.

It can determine:

• SECP jurisdiction;
• service of process;
• where records are maintained;
• court jurisdiction for Companies Act proceedings;
• official communications; and
• regulatory inspections.

A company should therefore use a genuine, controlled address.

38. Current Form 21

SECP’s present statutory forms retain Form 21 for notice of:

• registered-office address;
• changes to it; and
• the address at which books of account are maintained where applicable.

This is one of the historic form numbers that remains recognisable within the modern framework, unlike several others that have been reorganised.

39. Moving the Registered Office

Not every move requires the same corporate procedure.

A local change of address and an inter-provincial transfer are legally different events.

The Companies Act requires enhanced shareholder and/or regulatory procedure for particular jurisdictional transfers.

A company moving from one building in Islamabad to another should therefore not blindly use the same checklist as a company moving its registered office from Punjab to Sindh.

40. Publication of Company Identity

The Companies Act imposes requirements concerning display and use of the company’s name and corporate particulars.

Corporate identity may have to appear upon:

• registered/business offices;
• official documents;
• invoices;
• letterheads;
• negotiable instruments;
• communications; and
• other prescribed materials.

This performs an important commercial function: counterparties should know which legal person they are dealing with.

A business using a trading brand should not allow customers to remain uncertain whether the contracting party is:

• the individual founder;
• a foreign parent;
• the Pakistani subsidiary;
• a partnership; or
• another group entity.

Contractual identity should always be clear.

PART I — FOREIGN SHAREHOLDERS AND DIRECTORS

41. Foreign Nationals Can Incorporate and Own Pakistani Companies

Pakistan permits foreign participation in Pakistani companies subject to applicable sectoral, investment, foreign-exchange and security requirements.

A foreign individual or foreign body corporate can therefore participate as shareholder in many Pakistani businesses.

This must be distinguished from registration of a foreign company’s branch or liaison office, which is a different legal regime.

A Pakistani-incorporated subsidiary owned by a foreign corporation remains a Pakistani company.

A branch remains part of the foreign corporation itself.

42. The 2026 Security-Clearance Position Is More Nuanced Than “Foreigners Must Wait Before Incorporation”

Under the current Companies Regulations, 2024, companies having foreign subscribers or officers other than Indian nationals/persons of Indian origin may be incorporated on the basis of prescribed undertakings while the security-clearance case is forwarded to the Ministry of Interior.

If the foreign subscriber or officer is not cleared, the company and relevant person must take immediate steps for replacement and, where shares are held, transfer them in accordance with the regulatory requirement.

By contrast, where relevant subscribers/officers or specified persons connected with a foreign subscriber company are Indian nationals or persons of Indian origin, incorporation takes place after the prescribed security clearance has been received.

Security-service and matrimonial-service companies also operate under enhanced prior-clearance requirements.

The regulatory position remains subject to changes in Government security policy.

This is a materially better way to understand foreign shareholder clearance than the simplistic proposition that every foreign-owned company must remain unincorporated for months awaiting NOC.

43. Undertakings From Foreign Subscribers and Officers

The Companies Regulations prescribe formal undertaking language for foreign individuals and foreign corporate shareholders.

In substance, the undertaking recognises that if the relevant person/entity is not security-cleared by the Ministry of Interior, replacement and consequential share-transfer/corporate filings will be undertaken.

Where executed outside Pakistan, the current regulations also recognise appropriate authentication through:

• foreign public officer/notary and Pakistani diplomatic authentication; or
• qualifying apostille arrangements in states falling within the recognised Hague Apostille framework.

The prescribed format expressly accommodates apostilled documents.

For international investors, this is an important practical modernisation.

44. Foreign Corporate Shareholder Documentation

Where the subscriber is itself a foreign company, the incorporation package generally requires evidence establishing:

• the foreign entity’s legal existence;
• its constitution;
• authority to invest;
• proposed shareholding;
• nominee/representative arrangements;
• ownership and beneficial ownership;
• relevant directors;
• authorised signatory; and
• prescribed foreign-company information.

SECP’s applications page was itself updated in July 2026 to publish, amongst other materials, a Foreign Company Profile and a sample board resolution where a company or body corporate is a shareholder.

Foreign investors should therefore prepare the corporate package before commencing the eZfile application rather than discovering midway through filing that parent-company board authority is missing.

PART J — CERTIFICATE OF INCORPORATION

45. What Happens Once SECP Incorporates the Company?

Once incorporation is approved, the company comes into legal existence from the incorporation date stated in the certificate.

SECP’s system provides the certificate electronically within the digitised incorporation framework.

That certificate is important evidence of existence.

It is not, however:

• an industry licence;
• a tax exemption;
• a bank approval;
• permission to raise public deposits;
• permission to operate a regulated financial business;
• a trademark registration;
• an environmental approval; or
• proof that every intended business activity is lawful.

A company can be perfectly incorporated and still be legally unable to commence a regulated activity until another authority grants its licence.

46. Private Companies and Commencement

An ordinary private company can generally commence its lawful business after incorporation, subject always to:

• capital requirements;
• sector licensing;
• tax;
• banking;
• regulatory permissions;
• foreign-exchange law; and
• other applicable legislation.

A public company is subject to the statutory commencement framework, including the prescribed declaration where required. The current statutory forms include Form 22 — Declaration by a Public Company before Commencing Business.

PART K — THE FIRST 90 DAYS AFTER INCORPORATION

47. Do Not Treat Incorporation Day as the End of the Process

The weeks immediately following incorporation are when a newly formed company should establish its compliance infrastructure.

At a minimum, attention should ordinarily be given to:

• subscription capital;
• company bank account;
• registered office;
• books and records;
• appointment of auditor;
• appointment of legal adviser where applicable;
• tax registration;
• payroll/employment registrations;
• licences;
• share records;
• UBO records;
• corporate seal/document controls where applicable;
• accounting;
• board authorities; and
• statutory calendar.

A company that spends its first year trading and only afterwards asks what records should have been maintained can turn simple compliance into remedial legal work.

48. First Auditor

SECP’s current post-incorporation guidance states that the first auditor is to be appointed within 90 days of incorporation, with the applicable particulars filed through Form 9 within the prescribed period together with auditor consent.

Audit obligations must nevertheless be distinguished from appointment obligations and exemptions applicable to particular small private/SMC companies.

The company’s paid-up capital, classification and group position should be checked.

49. Appointment of Legal Adviser

Another area commonly governed by outdated internet figures is the legal-adviser threshold.

SECP’s current post-incorporation compliance booklet states that a company having paid-up capital of more than PKR 7.5 million falls within the relevant appointment requirement under the Companies (Appointment of Legal Advisers) Act, 1974 and Rules, with the appointment reported through Form 9 within the prescribed period.

This is a good example of why a business should not rely upon decades-old statutory thresholds reproduced without subsequent amendments.

50. NTN and Tax Registration

SECP incorporation and FBR systems are integrated to facilitate issuance of tax identification where the required information is complete.

But businesses should distinguish between:

• obtaining an NTN;
• becoming an active taxpayer;
• income-tax return obligations;
• sales-tax registration;
• provincial sales tax on services;
• withholding obligations;
• payroll taxation; and
• sector-specific taxes.

An NTN does not mean the company has satisfied every tax-registration requirement relevant to its business.

51. Corporate Bank Account

The company should open and operate its own bank account.

Modern KYC requirements may require:

• certificate of incorporation;
• memorandum/articles;
• board resolution;
• directors’ identification;
• shareholders;
• UBO information;
• tax record;
• business evidence;
• source of funds;
• registered office;
• foreign-company documents; and
• licences where relevant.

The bank’s compliance exercise is separate from SECP incorporation.

This is particularly significant for foreign-owned or complexly held companies.

52. Employment Registrations

A company employing personnel may need to address, depending upon province, workforce and statutory thresholds:

• EOBI;
• provincial social security;
• labour registration;
• professional-tax obligations;
• payroll withholding;
• employment contracts;
• minimum-wage rules; and
• workplace laws.

SECP system integration may facilitate information transfer to some authorities, but the employer remains responsible for confirming that applicable registrations have actually been completed.

PART L — CURRENT SECP FORMS: A 2026 PRACTICAL CROSS-CHECK

53. Why the Form Numbers Matter

Pakistan’s corporate filing architecture has changed materially as earlier regulations were consolidated into the Companies Regulations, 2024.

A corporate-secretarial checklist prepared several years ago may therefore direct a company to a form which no longer performs the same function.

SECP’s live statutory forms page, updated as recently as 8 July 2026, presently identifies the following among the principal forms.

This table should be treated as a practical orientation, not as a substitute for checking the particular statutory event and the current eZfile workflow.

Forms can be amended.

The legal obligation comes from the Act and Regulations, not from the continued existence of a PDF with a familiar number.

PART M — BENEFICIAL OWNERSHIP BEGINS AT INCORPORATION

54. The Company Must Know Who Ultimately Owns or Controls It

Modern Pakistani company law does not stop its enquiry at the registered shareholder.

Section 123A requires companies to obtain, maintain and update information concerning ultimate beneficial ownership.

In broad terms, the UBO is the natural person who ultimately owns or controls the company directly or indirectly through at least the prescribed share/voting threshold or through effective control.

The 25 per cent threshold remains central to the statutory UBO framework, but effective control cannot necessarily be ignored merely because a person’s direct percentage falls below a numerical threshold.

This is especially significant where ownership sits behind:

• holding companies;
• trusts or comparable structures;
• nominees;
• multiple corporate layers;
• family entities;
• foreign corporations; or
• interconnected arrangements.

55. Current UBO Forms

The modern Companies Regulations framework includes:

• Form 16 — notice to members for UBO particulars;
• Form 17 — declaration by a member about UBO;
• Form 18 — declaration concerning change in UBO or particulars; and
• Form 19 — company declaration of compliance with section 123A.

The current Form 19 was republished by SECP in July 2026.

Corporate compliance systems still referring exclusively to the historic Form 45 framework should therefore be updated to the present Companies Regulations regime.

56. Why Beneficial Ownership Is More Than a Filing Exercise

UBO information increasingly interacts with:

• bank KYC;
• anti-money-laundering controls;
• tax;
• foreign investment;
• sanctions screening;
• regulatory licensing;
• government contracting; and
• corporate investigations.

The company should therefore ensure that the ownership disclosed to SECP is consistent with the ownership disclosed to its bank, tax adviser, regulator and contractual counterparties where disclosure is required.

Conflicting ownership narratives are a compliance risk.

PART N — A HIGH-STREET APPROACH TO COMPANY FORMATION

57. What We Recommend Before Any Client Incorporates

Before incorporation, we ordinarily want a client to be able to answer the following questions:

Who are the actual owners?

Not merely whose CNICs are conveniently available.

Who will control the board?

Ownership and management should not be confused.

What will the company actually do?

This determines its principal line of business and regulatory position.

Will the activity require a licence?

If so, licensing requirements may affect the company before incorporation.

How much capital will genuinely be introduced?

The figure should reflect the business rather than a ceremonial minimum.

Will there be outside investors?

If yes, articles and founder arrangements should anticipate them.

Does the business depend upon intellectual property?

Ownership should be documented.

Will there be foreign shareholders?

Corporate documents, banking and security-clearance requirements should be planned.

What happens if a shareholder dies?

Succession issues should not first be considered after death.

What happens if founders disagree?

Deadlock is predictable. The precise dispute is not.

How does an investor exit?

A company which is easy to enter but impossible to exit is poorly structured.

58. Incorporation Is the Cheapest Time to Solve Governance Problems

A founders’ agreement negotiated when everyone is optimistic may feel unnecessary.

It becomes invaluable once interests diverge.

It is considerably cheaper to agree:

• ownership;
• board rights;
• transfer rules;
• IP ownership;
• capital obligations; and
• exit rights

before the business becomes valuable.

Once the company is worth PKR 500 million, every percentage point has a price.

Early legal discipline is therefore not bureaucracy.

It is risk allocation.

59. Company Registration Should Be Treated as the Beginning of Legal Architecture

A serious corporate formation engagement should consider four layers simultaneously.

The constitutional layer: memorandum, articles and statutory company status.

The ownership layer: shares, shareholder agreement, beneficial ownership and investment rights.

The operational layer: board powers, CEO authority, bank mandates, employment and contracting.

The regulatory layer: SECP, FBR, sector licensing, foreign exchange and continuing filings.

When these four layers correspond, the company tends to be manageable.

When they contradict one another, disputes follow.

A memorandum saying one thing, a shareholders’ agreement saying another, a bank mandate giving practical control to a third person and an SECP record showing outdated directors is not good corporate governance.

It is an invitation to litigation.

60. Josh and Mak International — Corporate Formation as Legal Strategy

At Josh and Mak International, company incorporation can form part of a wider corporate advisory mandate encompassing:

• company formation and structuring;
• founder and shareholder arrangements;
• memorandum and articles;
• foreign shareholder documentation;
• corporate governance;
• beneficial ownership;
• directors and officers;
• regulatory licences;
• commercial contracts;
• corporate restructuring;
• acquisitions and disposals;
• shareholder disputes;
• oppression and mismanagement proceedings;
• winding up and exit;
• corporate due diligence; and
• continuing compliance.

The purpose is not merely to obtain a certificate.

It is to create a company whose legal structure remains useful when the business grows, raises capital, changes ownership, encounters a dispute or eventually exits.

For company formation, restructuring or Pakistani corporate-law advice:

Josh and Mak International
Your Gateway to Honest and Accurate Legal Advice

joshandmakinternational.com
aemen@joshandmak.com
WhatsApp: +92-304-8734889

PART II — RUNNING THE COMPANY AFTER INCORPORATION

61. Incorporation Creates a Compliance Calendar

Once a company is incorporated, Pakistani company law begins imposing obligations that arise:

• annually;
• quarterly in certain cases;
• immediately upon particular corporate events; and
• whenever the company’s ownership, officers, capital, business or constitutional documents change.

The compliance system should therefore distinguish time-based filings from event-based filings.

A company which only remembers SECP once a year may still be non-compliant if it changed its directors, issued shares, moved its registered office, created a charge, changed its principal line of business or altered its beneficial ownership during the year.

The Companies Regulations, 2024 and current statutory forms make this event-driven architecture particularly clear. SECP’s statutory-forms page was updated again in July 2026 and presently includes current versions of Form A, Form 3, Form 9 and Form 19, alongside forms dealing with charges, registered office, special resolutions, capital alterations and other corporate events.

A well-run company should therefore maintain a compliance calendar covering at least:

• annual general meeting;
• annual return;
• annual financial statements;
• auditor;
• director/officer changes;
• UBO compliance;
• special resolutions;
• capital changes;
• share allotments and transfers;
• registered-office changes;
• charges;
• licences;
• tax returns;
• employment registrations; and
• sector-specific renewals.

The compliance function need not be bureaucratic.

It needs to be reliable.

PART O — ANNUAL GENERAL MEETINGS

62. The Annual General Meeting

The annual general meeting remains one of the central governance events in the life of a company.

Under the Companies Act framework, the first AGM must ordinarily be held within sixteen months from incorporation. Thereafter, the company must hold an AGM once in every calendar year within 120 days following the close of its financial year, subject to the statutory extension mechanism.

A single-member company is not subject to the ordinary AGM requirement.

SECP’s current financial-statements guidance continues to reflect this timetable, including the relationship between the AGM and the laying of annual financial statements.

The practical importance of the AGM lies in the business transacted there.

Depending upon the company’s circumstances, the meeting may deal with:

• financial statements;
• auditor appointment;
• election or appointment matters;
• dividends;
• shareholder questions;
• corporate disclosures;
• ordinary business; and
• properly notified special business.

The meeting should not be treated as a ritualistic signature exercise where substantial shareholders already “know what is happening”.

Corporate law uses meetings to create a formal decision-making record.

That record becomes extremely important if shareholders later disagree.

63. Extension of the AGM Period

The statutory period for holding the AGM is capable of limited extension for special reasons.

For listed companies the relevant authority is the Commission; in other cases the registrar performs the statutory role, and the extension is limited.

A company should not treat an extension as an automatic additional month.

If the company knows that accounts will not be ready, management should investigate the extension process before the statutory date expires.

Late applications are poor compliance planning.

64. Twenty-One Days’ Notice

The ordinary statutory AGM framework requires notice to persons entitled to receive it within the prescribed period.

For companies with active minority shareholders, good notice practice is particularly important.

The notice should clearly identify:

• date;
• time;
• place or permitted electronic participation;
• business to be considered;
• resolutions;
• special business where applicable; and
• explanatory information required by law.

A shareholder should not have to discover the substance of a major corporate proposal only after arriving at the meeting.

65. AGM Minutes Are Evidence

Minutes are not decorative records.

They may later establish:

• what resolution was proposed;
• who attended;
• who voted;
• whether quorum existed;
• whether a shareholder objected;
• whether a director disclosed an interest;
• whether accounts were laid;
• whether an auditor was appointed; and
• whether the procedural requirements of the Act were observed.

Minutes should therefore be prepared carefully, approved properly and retained with the company’s statutory records.

Where relations among shareholders are deteriorating, accurate minutes become even more important.

PART P — ANNUAL RETURNS

66. Every Company Must Consider Its Annual Return Obligation

Section 130 requires annual corporate particulars to be updated through the prescribed return mechanism.

The annual return functions as an annual snapshot of the company’s corporate position.

It records matters such as:

• registered office;
• principal business;
• share capital;
• shareholders;
• directors;
• chief executive;
• other officers;
• auditor;
• legal adviser where applicable; and
• related corporate particulars.

The source page previously treated the annual return as one of the principal continuing obligations of a Pakistani company.

The current Companies Regulations have, however, changed the form architecture materially.

67. Current Form A

Under the Companies Regulations, 2024 the current Form A is the principal annual return.

Importantly, the contemporary Form A is drafted under both sections 130(1) and 130(2) and is structured for the annual-return framework generally rather than preserving every historic form distinction found in earlier regulations.

The return is ordinarily made up to the AGM date or, where no AGM is held or concluded, the relevant statutory year-end reference date.

For companies which are actually changing ownership, directors, capital or other particulars, the annual return should not be used as a substitute for the event-based filing which should already have occurred.

Annual return compliance does not cure every missed filing during the year.

68. Form 24 Where Nothing Has Changed

The Companies Regulations, 2024 also contain a useful no-change mechanism.

Where the particulars contained in the previous annual return remain unchanged, a company falling within the applicable category may file Form 24 rather than reproduce the entire annual return.

The current Form 24 is expressly titled:

“Annual return of companies in case there is no change of particulars since last annual return filed with the registrar.”

There is an important exemption.

A single-member company or private company having paid-up capital not exceeding PKR 3 million need not file Form A or Form 24 merely to report that there has been no change since the last annual return. Other companies falling within the no-change situation use Form 24.

This is a good example of why current corporate advice should not simply reproduce historic Form A/Form B/Form C descriptions indefinitely.

The operative filing structure has changed.

69. Annual Return Timing

The annual return is ordinarily filed within 30 days of the annual general meeting or the corresponding statutory date where no AGM is held.

SECP continues to describe the annual return as a yearly filing required under section 130.

The company should not wait until its tax return is being prepared to ask whether the SECP annual return has been filed.

Corporate and tax filings operate under different legislation and calendars.

PART Q — FINANCIAL STATEMENTS AND AUDIT

70. Financial Reporting Depends Upon Company Classification and Capital

Not every Pakistani company has identical financial-statement filing obligations.

SECP’s current guidance distinguishes among:

• listed companies;
• other public and substantial companies;
• private companies;
• single-member companies;
• foreign companies; and
• smaller entities falling within specified capital thresholds.

The correct compliance question is therefore not:

“Do companies have to file audited accounts?”

It is:

“What financial statements must this particular company prepare, audit, circulate and file?”

Those are distinct obligations.

71. Companies Required to File Annual Audited Financial Statements

SECP presently identifies the following broad categories as required to file annual audited financial statements with the registrar:

• listed companies;
• companies other than private companies and SMCs within the specified small-capital exclusion; and
• foreign companies.

Private companies and SMCs having paid-up capital not exceeding PKR 10 million are excluded from the general audited-financial-statements filing requirement described by SECP.

That filing exemption should not be confused with an audit exemption.

They are different questions.

72. The Important PKR 1 Million Audit Threshold

SECP’s current guidance states that a private company or single-member company having paid-up capital of up to PKR 1 million, provided it is not a subsidiary of a public company, falls within the statutory exemption from ordinary audit and instead files the applicable unaudited financial statements.

Accordingly, a private company with capital above PKR 1 million but not exceeding PKR 10 million may fall into a position where audit obligations arise even though the audited statements are not required to be filed with the registrar solely by reason of that filing threshold.

This is precisely why “audit exemption” and “SECP filing exemption” should never be used interchangeably.

73. Filing Period for Listed Companies

Listed companies are subject to the most demanding financial-reporting regime.

SECP states that listed companies are required to file audited annual financial statements within 30 days of the AGM, in addition to the pre-AGM circulation and other listed-company reporting obligations.

Listed-company accounts are accompanied by the additional reports and corporate-governance materials applicable to that category.

74. Filing Period for Other Companies

For companies required to file audited accounts other than listed companies, SECP presently states that the annual audited financial statements must ordinarily be filed within 15 days of the AGM.

A company should therefore coordinate its AGM and filing process in advance.

The AGM is not the point at which management should first ask the accountant for a final PDF.

75. Foreign Company Accounts

Foreign companies registered in Pakistan operate under a distinct financial-statement timetable.

SECP states that annual financial statements are to be filed within the earlier of:

• 45 days from submission to the relevant public authority in the country of incorporation; or
• 180 days from the date to which the accounts are made up.

Foreign groups should coordinate Pakistani compliance with their overseas company-secretarial timetable.

A branch office should not discover six months later that parent-level accounts triggered a Pakistani filing deadline.

76. Board Approval of Financial Statements

Financial statements are not merely accountant-generated documents.

The board must approve them.

SECP’s guidance states that annual financial statements are signed on behalf of the board by the chief executive and at least one director, with additional CFO signing requirements for listed companies.

Where the chief executive is not available in Pakistan, the statutory alternative applies.

A single-member company’s financial statements are signed in the manner prescribed for that structure.

This reinforces an important governance principle:

the board owns the financial statements even where accountants prepare them.

77. Financial Statements Must Be Laid Before the AGM

The statutory architecture requires the annual financial statements to be approved by the board and then laid before the members within the AGM timetable.

Financial reporting therefore links:

• management;
• board;
• auditor;
• shareholders; and
• registrar.

A company whose directors sign accounts without reading them is not practising governance.

It is simply creating evidence against itself.

PART R — ORDINARY AND SPECIAL RESOLUTIONS

78. Not Every Shareholder Decision Requires the Same Majority

Pakistani company law distinguishes among decisions according to the level of shareholder approval required.

Many ordinary matters can be decided through the ordinary voting mechanism.

More fundamental corporate acts require a special resolution.

The statutory definition of special resolution requires support from not less than three-fourths of the members entitled to vote who participate in the permitted manner at the meeting, subject to the notice requirements.

This is not necessarily the same as 75 per cent of the company’s total issued share capital.

What matters is the voting framework prescribed by the Act and the constitution.

The source page correctly treats the three-fourths threshold as central to major constitutional decisions.

79. Examples of Matters Requiring Special Resolution

Depending upon the provision concerned, special resolutions arise in matters such as:

• alteration of memorandum;
• alteration of articles;
• change of name;
• particular registered-office transfers;
• alteration of share capital;
• reduction of capital;
• purchase of own shares;
• conversion of company status;
• certain shareholder-right variations; and
• other matters expressly identified by the Companies Act.

A special resolution should therefore be drafted by reference to the statutory power being exercised.

A generic resolution stating:

“Resolved that the company may make all necessary changes”

may be commercially understandable but legally inadequate.

80. Form 26 Must Be Filed Within Fifteen Days

Every special resolution passed by a company is required to be reported through Form 26 within fifteen days.

SECP’s current FAQ on the Companies Regulations 2024 and eZfile expressly confirms that Form 26 is the statutory filing for a special resolution under section 150.

The filing should not be forgotten simply because the underlying transaction also requires another form.

For example, an increase in authorised capital can involve:

• the corporate resolution;
• Form 26;
• Form 7;
• amended constitutional documentation; and
• the applicable fee.

One corporate event can produce several filings.

81. Shorter Notice

A company other than a listed company can, in the circumstances permitted by law, pass a special resolution at a meeting held on shorter notice where all members entitled to attend and vote agree.

SECP’s current eZfile guidance expressly accommodates this situation in the Form 26 filing workflow.

Shorter notice should not become a habitual device for excluding inconvenient shareholders.

Where unanimous consent does not exist, the statutory notice period matters.

PART S — SHARE TRANSFERS

82. Shares Are Property, but Private Company Shares Are Not Freely Tradable Like Listed Securities

A shareholder in a private company owns shares.

That does not mean the shareholder can necessarily sell them to any stranger immediately.

Private companies, by definition, restrict the right to transfer shares.

The Companies Act contains an express transfer framework.

Section 75 provides that the board ordinarily should not refuse a transfer unless the transfer instrument is defective or invalid, but the provision is expressly subject to the transfer restrictions of a private company’s articles.

Section 76 then imposes a specific regime where a member of a private company wishes to sell shares.

83. Section 76 and Existing Shareholders’ Pre-Emptive Position

A member wishing to sell shares in a private company must notify the board.

The board is then required, within the statutory period, to offer those shares to existing members in proportion to their holdings.

The current section 76 framework contemplates:

• seller’s notice to the board;
• board offer to members;
• disclosure of number of shares;
• price;
• acceptance period;
• further allocation of unsubscribed shares; and
• sale externally if existing members decline.

This is one reason private-company share transfers should not be conducted merely by signing a share-transfer deed between seller and outsider.

The company’s own transfer regime matters.

84. Articles and Shareholders’ Agreements Must Be Read Before Any Transfer

The articles may contain contractual and constitutional restrictions such as:

• pre-emption;
• permitted transfers;
• family-transfer exemptions;
• board consent;
• valuation;
• tag rights;
• drag rights;
• lock-in;
• rights of first refusal; and
• transfer upon default.

A shareholders’ agreement may impose additional contractual rights.

Those documents must be drafted and interpreted consistently with mandatory company law.

A transfer that violates the shareholders’ agreement may create a contractual claim even where the corporate registration issue is separately analysed.

The first question in any share-transfer matter should therefore be:

What does the Act require, and what do the company’s articles and shareholders’ agreement additionally require?

85. Valuation of Private Company Shares

In closely held companies, share price can become contentious.

Possible valuation approaches include:

• negotiated price;
• net asset value;
• earnings multiple;
• discounted cash flow;
• independent valuer;
• accountant-determined formula;
• latest investment price; or
• mechanism specified in the articles or shareholders’ agreement.

The Companies Act’s transfer mechanism should be read with the applicable regulations and constitutional documents regarding pricing.

A founder should be cautious about agreeing at incorporation that shares may later be purchased at “book value” without understanding what that might mean for a rapidly growing business.

A PKR 50 million company can have very different book and commercial values.

86. Current Form 3 and Shareholding Changes

SECP’s current statutory forms identify Form 3 as the return dealing with:

• allotment of shares; and
• change in shareholding, membership or voting rights.

The relevant event-based filing requirements should therefore be checked whenever a transfer or allotment changes ownership.

Changes may also trigger:

• UBO filings;
• foreign-investment reporting;
• bank KYC updates;
• sector-regulator notification; and
• tax consequences.

A share transfer is not merely a company-secretarial event.

PART T — DEATH OF A SHAREHOLDER AND TRANSMISSION

87. Death Does Not Extinguish Shares

Where a shareholder dies, the shares do not vanish and the surviving directors do not acquire them automatically.

Sections 78 and 79 address transmission and nomination within the corporate framework.

Section 78 provides for transfer of the deceased member’s shares or securities upon an appropriately supported application, including the succession documentation required by law.

This can become one of the most serious governance problems in family-owned companies.

88. A Nominee Is Not Necessarily the Beneficial Successor

Section 79 permits a member to make a nomination designed to protect the interests of legal heirs and facilitate the transition after death.

The nominee operates in a trustee-like protective capacity until lawful succession is implemented.

The nomination does not ordinarily rewrite inheritance law by converting the nominee into the beneficial owner against the rights of the lawful heirs.

The source page correctly explains that the nominee acts to protect the heirs pending transfer and that the nomination does not prevent the shareholder from dealing with the shares during lifetime.

This distinction is particularly important in Pakistan, where families sometimes assume that a nomination form is equivalent to a will disposing of the shares.

It is not.

89. Founder Succession Should Be Planned Before Death

Where the deceased shareholder was also:

• chief executive;
• managing director;
• bank signatory;
• majority shareholder;
• guarantor; and
• holder of important licences,

his death can create corporate paralysis.

A properly structured family company should therefore consider:

• nomination;
• succession planning;
• board continuity;
• bank-signatory succession;
• life insurance;
• buy-sell arrangements;
• shareholders’ agreement;
• valuation;
• management transition; and
• legal-heir implications.

Succession is a corporate governance issue, not merely a family-law issue.

PART U — FURTHER ISSUE OF SHARES AND DILUTION

90. Issuing New Shares Changes Ownership

A further issue of shares is not just fundraising.

It can change control.

Suppose A and B each own 50 shares.

If the company issues 100 new shares entirely to Investor C:

• A falls from 50 per cent to 25 per cent;
• B falls from 50 per cent to 25 per cent; and
• C obtains 50 per cent.

No original shareholder sold anything, yet control changed dramatically.

This is dilution.

Section 83 therefore contains important shareholder protections.

91. Rights Issue as the Starting Principle

Where directors decide to increase capital through a further share issue, section 83 provides the existing-members rights framework.

Shares are ordinarily offered to members proportionately to their existing shareholding and class.

The source page sets out the core mechanics, including the statutory offer period of not less than fifteen and not more than thirty days within the relevant framework.

The purpose is straightforward.

A controlling shareholder should not ordinarily be able to dilute minority owners secretly by issuing himself a large block of new shares.

92. Further Issue Is a Transaction Requiring Commercial Analysis

Before approving additional shares, directors should ask:

• Why is capital needed?
• What valuation is being used?
• Who is subscribing?
• Is the issue pro rata?
• If not, what legal route permits it?
• What happens to existing percentages?
• Are class rights affected?
• Is foreign investment involved?
• Is premium being charged?
• What UBO consequences arise?
• Are shareholder approvals required?
• Does a shareholders’ agreement restrict issuance?

A capital raise should be structured before the term sheet is signed.

93. Companies (Further Issue of Shares) Regulations, 2020 — Updated in 2026

For companies within their scope, the Companies (Further Issue of Shares) Regulations, 2020 remain an important additional framework.

SECP published a consolidated version updated to 13 January 2026, following amendments during 2025 and January 2026.

The current regulations address matters including:

• rights issues;
• other-than-right issues;
• bonus shares;
• employee stock option schemes; and
• shares carrying different rights or privileges,

within their applicable regulatory scope.

Listed companies in particular should therefore not rely solely upon the general text of section 83.

94. Shares With Different Rights

Companies may seek to create securities carrying different economic or voting characteristics.

Examples can include:

• preference shares;
• non-voting shares;
• enhanced voting rights;
• preferential dividend rights;
• liquidation preferences; and
• other class-specific rights permitted by law.

The 2025–2026 amendments to the Further Issue Regulations materially strengthened the regulatory treatment of shares carrying varied rights, particularly for listed companies.

Among other matters, the current consolidated framework restricts the extent of enhanced voting rights and protects the voting weight of ordinary “one share one vote” shares.

For private investment transactions, the exact economic bargain should be reflected not only in an investment agreement but also in the company’s constitutional documents and legally valid class structure.

PART V — EMPLOYEE EQUITY AND START-UPS

95. Employee Equity Can Be a Powerful Tool

Cash-poor but high-growth businesses often want employees to participate in the upside of the company.

Employee equity can be structured through mechanisms such as:

• direct shares;
• options;
• vesting arrangements;
• performance-linked grants; and
• other legally permissible equity incentives.

SECP expressly recognised the usefulness of employee stock option arrangements for private companies and start-ups, describing them as a means of attracting and retaining employees without requiring the company to fund the entire reward through cash compensation.

The concept is commercially sound.

Its implementation requires careful drafting.

96. Vesting Matters

A common founder mistake is to grant a senior employee 10 per cent of the company outright on day one because the employee appears indispensable.

Six months later the employee leaves.

The former employee still owns 10 per cent unless a valid contractual or corporate mechanism says otherwise.

An equity incentive should therefore address:

• vesting period;
• cliff;
• performance conditions;
• leaver status;
• good leaver;
• bad leaver;
• exercise price;
• exercise period;
• treatment on termination;
• treatment on sale;
• death;
• disability;
• tax;
• transfer restrictions; and
• dilution.

Employee equity should be designed as carefully as founder equity.

97. The Companies Act Definition of “Startup Company”

The Companies Act now contains a specific statutory concept of a startup company.

Broadly, the definition concerns companies:

• existing for not more than ten years, subject to any period otherwise specified;
• whose turnover remains within the prescribed statutory ceiling;
• engaged in innovation, development, improvement or scalable high-growth activity; or
• otherwise brought within a class notified by the Commission.

A company formed by splitting up or reconstructing an existing company is excluded.

The statutory definition includes the present PKR 500 million turnover benchmark unless otherwise specified.

This definition should be distinguished from special eligibility tests appearing in other regulatory regimes.

98. One Company Can Meet One “Startup” Test but Not Another

This is an important 2026 legal distinction.

Pakistani company law defines a startup for Companies Act purposes using the ten-year/PKR 500 million framework.

The State Bank’s foreign-exchange regime for a Pakistani operating company wishing to establish an overseas holding company applies its own eligibility test.

That SBP framework currently requires, amongst other things:

• incorporation as a private or public unlisted company for not more than seven years;
• annual revenue below PKR 2 billion; and
• equity below PKR 300 million.

Those are not the same test.

A company may therefore be a “startup company” for one statutory purpose yet fail a specialised SBP facility.

The word “startup” should never be used as though it has one universal legal definition throughout Pakistani law.

99. Overseas Holding Companies for Pakistani Start-ups

SBP’s equity-investment-abroad regime allows eligible Pakistani operating companies with innovative or scalable businesses to establish a foreign holding company under the prescribed general-permission structure.

The current framework permits the designated authorised dealer to remit actual incorporation expenses up to USD 10,000, allows a one-time mirror share swap and requires the foreign HoldCo to repatriate prescribed proportions of capital raised abroad into Pakistan.

This structure has become commercially important because many venture investors prefer investing into:

• US;
• UK;
• Singapore;
• UAE; or
• another offshore holding structure

rather than subscribing directly into the Pakistani operating company.

But the HoldCo structure must be implemented within the SBP framework.

It should not be improvised through undocumented offshore transfers.

100. Convertible Debt From Foreign Investors

SBP also created a specific regime allowing qualifying Pakistani start-ups to raise convertible debt from abroad.

The framework contains eligibility conditions broadly corresponding to the specialised SBP start-up criteria and allows foreign borrowing with the possibility of conversion into equity, subject to the foreign-exchange conditions, documentation, tenor, pricing and reporting requirements.

Convertible investment can be commercially attractive where parties do not wish to fix an equity valuation immediately.

It nevertheless requires coordinated:

• investment documentation;
• company-law authority;
• foreign-exchange compliance;
• conversion mechanics;
• valuation;
• tax analysis; and
• shareholder approvals.

A document called a “SAFE” or “convertible note” does not acquire legal effectiveness in Pakistan merely because it is common in Silicon Valley.

The instrument has to work under Pakistani law.

PART W — ALTERATION OF SHARE CAPITAL

101. Increasing Authorised Capital

A growing company may eventually exhaust its authorised share capital.

Section 85 allows a company, where authorised by its articles, to alter its capital structure by special resolution.

The powers include:

• increasing authorised capital;
• consolidating shares;
• subdividing shares; and
• cancelling unissued shares.

The source page correctly sets out these principal section 85 powers.

The current SECP filing package includes Form 7 — Notice of Alteration in Share Capital and, where the decision is made by special resolution, Form 26.

102. Increasing Authorised Capital Does Not Itself Raise Money

This distinction is basic but frequently misunderstood.

If a company increases authorised capital from PKR 1 million to PKR 100 million, it has not thereby received PKR 99 million.

It has merely increased the amount it is legally authorised to issue.

Actual investment occurs when shares are issued and consideration is received.

The process may therefore involve separate stages:

1. increase authorised capital;
2. approve further issue;
3. make rights or other lawful offer;
4. receive consideration;
5. allot shares;
6. file Form 3; and
7. update ownership and UBO records.

103. Share Consolidation and Subdivision

A company may also change the nominal structure of its shares.

For example:

100,000 shares of PKR 10 each might be subdivided into 1,000,000 shares of PKR 1 each.

The company’s underlying equity value does not magically increase merely because more share certificates exist.

Similarly, consolidation creates larger nominal units without necessarily changing the economic value of the company.

The legal rights attaching to the resulting shares must be preserved in accordance with the Act.

PART X — COMPANY BUY-BACKS AND TREASURY SHARES

104. Can a Pakistani Company Purchase Its Own Shares?

Yes, subject to section 88 and the applicable regulatory framework.

A purchase of the company’s own shares may be undertaken for authorised purposes and through the procedure prescribed by law.

Shares purchased by the company may, depending upon the circumstances:

• be cancelled; or
• be held as treasury shares.

The source page correctly identifies these possibilities and the core statutory restrictions.

105. Treasury Shares Do Not Vote

While shares remain treasury shares:

• voting rights are suspended; and
• ordinary cash dividends or corresponding distributions are not payable to the company upon those shares,

subject to the statutory framework.

This makes conceptual sense.

A company cannot use its own purchased shares to vote itself into control over its shareholders.

The source reflects these statutory restrictions.

106. Buy-Back Requires Proper Corporate Authority

Section 88 contemplates substantive board consideration followed by the prescribed member approval.

The decision should identify matters such as:

• number of shares;
• purpose;
• price;
• source of funds;
• financial effect; and
• treatment of purchased shares.

The source page also records that purchase authority is exercised through special resolution within the statutory framework.

SECP’s current forms include Form 27 — Final Return for Buy-Back of Shares of Unlisted Companies.

A buy-back should therefore be structured as a capital transaction—not as the company informally paying a departing founder for his shares from the corporate bank account.

PART Y — REDUCTION OF SHARE CAPITAL

107. Reduction of Capital Is Different From Cancellation of Unissued Shares

Section 89 addresses formal reduction of share capital.

A company limited by shares, where authorised by its articles, may by special resolution seek to reduce capital in the ways contemplated by the Act, subject to Court confirmation.

The source identifies examples including:

• cancellation of paid-up capital lost or no longer represented by available assets; and
• repayment of capital in excess of the company’s requirements.

This should be distinguished from cancellation of authorised but unissued shares under section 85.

The latter does not constitute the same statutory reduction.

108. Capital Reduction Can Affect Creditors

The reason capital reduction attracts judicial oversight is obvious.

Capital is not merely a bookkeeping figure affecting shareholders.

Creditors may have extended credit in reliance upon the company’s apparent financial structure.

A reduction which extracts value from the company can affect creditor interests.

Any proposed reduction should therefore be planned with:

• accounts;
• solvency;
• creditor position;
• tax;
• court procedure; and
• transaction purpose

in mind.

PART Z — CHARGES, SECURITY AND COMPANY BORROWING

109. A Company’s Security Interests May Need SECP Registration

Where a company creates a mortgage, charge or pledge over its assets, section 100 requires registration of qualifying security interests.

The Companies Act provides a 30-day registration period beginning after creation of the charge, subject to the detailed statutory rules.

The concept covers a broad range of corporate security, including charges over:

• immovable property;
• debenture security;
• book debts;
• floating assets;
• movable property;
• intellectual property;
• ships or aircraft; and
• other categories specified by the Act.

This is highly relevant to bank finance.

110. Current Form 10

The current Companies Regulations use Form 10 for particulars concerning:

• mortgage;
• charge;
• pledge;
• modification;
• satisfaction; and
• acquisition of property subject to a registrable security interest.

The importance of registration extends beyond administrative compliance.

Section 100 provides significant consequences where a registrable company charge has not been duly registered, particularly in relation to liquidators and creditors.

Lenders therefore normally make SECP charge registration a condition of financing.

PART AA — DIRECTORS’ CORPORATE GOVERNANCE

111. Directors Manage the Company; Shareholders Do Not Automatically Manage It

One of the recurring causes of corporate disputes is failure to distinguish ownership from management.

Shareholders possess ownership and voting rights.

The board exercises management powers subject to:

• Companies Act;
• articles;
• lawful shareholder resolutions;
• delegation;
• regulatory law; and
• directors’ duties.

A majority shareholder who is not authorised to sign for the company cannot simply execute a company contract because he owns most of the shares.

Likewise, a chief executive cannot ignore reserved shareholder matters merely because he runs day-to-day operations.

Corporate authority should be traceable.

112. Directors’ Duties

Section 204 contains substantive duties of directors.

The Act requires directors to exercise their powers and functions in accordance with the law and the company’s constitutional and governance framework.

Directors should approach their role with attention to:

• proper purpose;
• company interest;
• skill and care;
• good faith;
• conflicts;
• corporate opportunity;
• confidentiality;
• statutory compliance; and
• financial oversight.

A director should not approve a transaction solely because the shareholder who nominated him demanded it.

The director occupies an office in the company.

113. Personal Interest in Company Contracts

Where a director is concerned or interested in a proposed contract or arrangement, the Companies Act contains disclosure requirements.

The law also restricts participation and voting in circumstances where the director has the relevant interest, subject to statutory exceptions.

Where a majority of directors are interested in a transaction, shareholder approval may become necessary.

This is particularly important in family and group companies, where nearly every commercial transaction can involve a related entity.

114. Related-Party Transactions

Section 208 regulates transactions with related parties.

The categories include matters such as:

• sale and purchase of goods;
• acquisition and disposal of property;
• leases;
• services;
• agency arrangements; and
• appointments to offices or places of profit.

The statutory framework requires an appropriate board-approved policy and compliance with the conditions applicable to the transaction.

For substantial businesses, related-party records should therefore be maintained systematically.

A company whose majority shareholder owns the landlord, supplier and customer should not simply treat every payment as ordinary business.

115. The Listed Corporate Governance Code Does Not Apply to Every Private Company

This requires clear correction in any modern Pakistani company guide.

The Listed Companies (Code of Corporate Governance) Regulations, 2019 apply to listed companies, principally on the prescribed comply-or-explain model with mandatory requirements where expressly stated.

Public-sector companies have their own corporate-governance regime.

An ordinary privately owned unlisted company is therefore not automatically governed by the Listed Companies Code merely because it is incorporated.

It remains subject to:

• Companies Act;
• Companies Regulations;
• articles;
• applicable sector regulations;
• directors’ duties;
• related-party rules;
• contractual governance; and
• any other law applying to its particular status.

Private companies should certainly adopt good governance.

But legal accuracy requires distinguishing good practice from mandatory listed-company regulation.

PART AB — ASSOCIATED COMPANIES AND GROUP STRUCTURES

116. When Are Companies “Associated”?

Pakistani company law uses the concepts of associated companies and associated undertakings where entities are connected through ownership, directorship, management or control.

The source page records the statutory 20 per cent voting-power linkage as one route to association, alongside common management/control and subsidiary relationships.

This classification can matter for:

• investments;
• related-party transactions;
• disclosure;
• group accounts;
• lending;
• corporate approvals; and
• regulatory reporting.

Companies within the same commercial group should therefore determine whether the statutory “associated” relationship exists rather than relying solely on group branding.

117. “Sister Company” Is Not a Substitute for Legal Analysis

Businesses commonly describe two companies under the same ownership as “sister concerns”.

That phrase may be commercially understandable.

It does not itself determine statutory rights.

The legal relationship may in fact be:

• holding/subsidiary;
• associated companies;
• common-controlled companies;
• unrelated companies with common directors; or
• companies connected only by contractual arrangements.

The actual corporate chart should be documented.

PART AC — ULTIMATE BENEFICIAL OWNERSHIP IN DEPTH

118. Section 123A Requires Ongoing, Not One-Time, Compliance

Ultimate beneficial ownership is not merely an incorporation-stage declaration.

Section 123A requires companies to:

• obtain UBO particulars;
• maintain them;
• update them;
• record changes accurately; and
• provide the prescribed declaration to the registrar.

The source page correctly records the statutory threshold of at least 25 per cent shares/voting rights or effective control through other means.

The obligation therefore continues throughout the company’s life.

119. Forms 16, 17, 18 and 19

The Companies Regulations, 2024 now organise UBO compliance through the following forms:

• Form 16: notice to members requesting UBO particulars;
• Form 17: member declaration of UBO;
• Form 18: declaration regarding changes in UBO or particulars; and
• Form 19: company declaration of compliance with section 123A.

SECP republished Form 19 in July 2026.

This replaces the need for practitioners to keep treating the historic Form 45 framework as though no regulatory consolidation has occurred.

120. UBO Is About Natural-Person Control

Suppose a Pakistani company is owned:

100% by UAE HoldCo,
which is owned
100% by Singapore HoldCo,
which is owned
60% by Person A and 40% by Person B.

The Pakistani company cannot simply enter “UAE HoldCo” into its beneficial ownership register and stop there.

The statutory purpose is to identify the natural persons who ultimately own or control the company.

The corporate chain must therefore be traced.

121. Effective Control Can Matter Even Without 25 Per Cent Ownership

A person can sometimes possess control through:

• contractual rights;
• board appointment rights;
• voting agreements;
• veto rights;
• trusts;
• nominees; or
• another mechanism,

even where his apparent direct share percentage does not tell the whole story.

UBO analysis should therefore look at substance as well as arithmetic.

122. Why UBO Records Matter to Banks

Banks increasingly compare SECP ownership records with their own KYC information.

A mismatch can result in:

• account-opening delay;
• enhanced due diligence;
• frozen transaction processing;
• additional source-of-funds questions; or
• refusal to process cross-border payments.

A company should maintain one coherent beneficial-ownership narrative across every regulator and financial institution.

PART AD — SHAREHOLDER RIGHTS AND MINORITY PROTECTION

123. Majority Ownership Is Powerful, but Not Unlimited

Pakistani company law recognises majority decision-making.

But majority rule is constrained by:

• statutory procedure;
• class rights;
• fiduciary duties;
• constitutional documents;
• minority remedies;
• oppression/mismanagement provisions;
• fraud principles; and
• court jurisdiction.

A 75 per cent shareholder cannot lawfully appropriate the company’s assets merely because he possesses 75 per cent of the votes.

The assets belong to the company.

124. Class Rights

Where the company has more than one class of shares, the rights attached to a class cannot be casually rewritten.

Section 59 connects variation of class rights with the protections contained in section 38.

Members of the affected class may challenge a variation before the Court where the statutory requirements are met, particularly where relevant information was withheld or the alteration unfairly prejudices the class.

The source page identifies this minority safeguard expressly.

125. Minority Shareholders Should Negotiate Before Investing

Statutory rights matter.

Contractual rights can matter even more in a private company.

A serious minority investment should consider:

• board seat;
• observer rights;
• veto/reserved matters;
• information;
• audit access;
• pre-emption;
• anti-dilution;
• tag rights;
• exit rights;
• related-party restrictions;
• borrowing limits;
• dividend policy; and
• change-of-control protections.

The investor should not wait until the relationship collapses before asking whether it has a right to see company accounts.

PART AE — OPPRESSION AND MISMANAGEMENT

126. Section 286 Provides a Powerful Corporate Remedy

Section 286 addresses circumstances in which company affairs are conducted, or are likely to be conducted, in an unlawful, fraudulent or oppressive manner, outside the memorandum, or in a manner unfairly prejudicial to members, creditors or public interest.

The source page reproduces the important standing threshold: members holding not less than ten per cent of issued share capital, qualifying creditors, the Commission or registrar may invoke the statutory machinery in the circumstances contemplated by the Act.

This is one of the most important remedies in Pakistani shareholder litigation.

127. The Court Has Broad Remedial Power

The purpose of an oppression remedy is not necessarily to destroy the company.

Where winding up would unfairly prejudice members or creditors, the Court can make orders designed to bring the complained-of conduct to an end.

Possible relief may include regulation of future conduct and purchase of shares, amongst other remedies available within section 286.

The source correctly notes that Court-ordered amendments to the memorandum or articles can bind the company and restrict inconsistent future alterations without leave.

For private-company disputes, this can be more commercially useful than winding up an otherwise profitable enterprise.

128. Typical Oppression Problems

Fact patterns can include allegations such as:

• exclusion from management contrary to agreed arrangements;
• improper dilution;
• diversion of business;
• related-party siphoning;
• manipulation of accounts;
• refusal of information;
• unauthorised remuneration;
• transfer of assets to associated persons;
• sham meetings;
• misuse of majority voting;
• suppression of dividends while controllers extract value elsewhere; or
• alteration of constitutional rights to disadvantage a minority.

Each case depends upon its evidence.

A mere disagreement among shareholders does not automatically become oppression.

PART AF — CORPORATE RECORDS AS LITIGATION INSURANCE

129. A Well-Kept Statutory File Can Decide a Dispute

When shareholder litigation begins, parties frequently discover that nobody can locate:

• share-transfer instruments;
• original board minutes;
• allotment records;
• shareholder registers;
• notices;
• proxies;
• bank resolutions;
• auditor appointments;
• special resolutions;
• director consents; or
• constitutional amendments.

Corporate records are then reconstructed from emails and photocopies.

That is avoidable.

A well-maintained corporate file should contain an auditable history of the company.

130. Maintain Both Regulatory and Commercial Records

The company’s permanent file should include:

Constitutional records

• certificate of incorporation;
• memorandum;
• articles;
• certificates of change;
• status conversions.

Ownership

• register of members;
• share certificates;
• transfers;
• allotments;
• UBO;
• shareholder agreements.

Governance

• board minutes;
• shareholder minutes;
• resolutions;
• notices;
• proxies;
• director consents.

Finance

• audited accounts;
• management accounts;
• bank authorities;
• charges;
• borrowing documents.

Regulation

• licences;
• SECP acknowledgements;
• tax records;
• regulatory correspondence.

Commercial

• key contracts;
• IP records;
• leases;
• material employment agreements.

Electronic storage should be backed up.

Control over the company’s only corporate records should never sit permanently on the laptop of one employee.

PART AG — A PRACTICAL GOVERNANCE CHECKLIST FOR GROWING PRIVATE COMPANIES

131. At the End of Every Quarter, Management Should Ask

Even where the law does not require quarterly statutory accounts, a growing private company should consider whether:

• shareholding changed;
• UBO changed;
• directors changed;
• office changed;
• new charges were created;
• capital changed;
• licences require renewal;
• related-party transactions occurred;
• major contracts require board ratification;
• litigation commenced;
• tax filings are current; and
• corporate registers match SECP records.

Good compliance is easiest when reviewed frequently.

132. Before Every Major Transaction

Before a company:

• buys land;
• borrows substantially;
• issues shares;
• sells a business division;
• grants a guarantee;
• acquires another company;
• signs a joint venture;
• licenses valuable IP; or
• enters a substantial related-party arrangement,

management should check:

1. Does the company have power to do it?
2. Is the activity licensed?
3. Is board approval sufficient?
4. Is shareholder approval required?
5. Is a special resolution required?
6. Is a director interested?
7. Is regulatory approval required?
8. Does a lender’s covenant restrict it?
9. Does the shareholders’ agreement restrict it?
10. What filing follows afterwards?

Corporate advice is most valuable before execution.

PART AH — CLIENT ADVISORY: WHAT COMPANY OWNERS COMMONLY GET WRONG

133. “We Own 80 Per Cent, So We Can Do Anything”

No.

An 80 per cent shareholder has substantial voting power.

It does not personally own:

• company bank balances;
• real property;
• vehicles;
• contracts;
• receivables; or
• intellectual property.

Those belong to the company.

Majority ownership does not abolish directors’ duties, minority remedies, creditor rights or statutory procedure.

134. “We Never Had Meetings, but Everyone Agreed”

Informal consensus may explain commercial history.

It is not always a substitute for statutory corporate action.

Where the Companies Act requires:

• resolution;
• notice;
• filing;
• meeting;
• disclosure; or
• approval,

the safest course is to comply with that requirement.

An undocumented understanding becomes difficult to prove after relationships deteriorate.

135. “The Accountant Handles SECP”

Accountants can play an important and legitimate compliance role.

But many corporate decisions require legal analysis before a filing exists.

An accountant can file Form 3.

The harder question may be whether the underlying share issue lawfully diluted a founder.

An accountant can prepare financial statements.

The harder question may be whether directors improperly diverted company business.

Company law should not be reduced to form filing.

136. “We Will Draft the Shareholders’ Agreement Later”

Later often means after:

• investment arrives;
• company value increases;
• founder expectations diverge; or
• control becomes contested.

At that stage, every clause becomes more expensive to negotiate.

Shareholder architecture should ordinarily be agreed while interests are still aligned.

137. “The Nominee Gets the Shares When I Die”

Not necessarily.

The statutory nomination framework is designed to protect and facilitate the legal heirs’ interests.

It should not be confused with beneficial inheritance.

Succession planning should therefore involve both corporate and inheritance advice.

138. “We Can Issue New Shares to Remove the Minority”

Using corporate capital powers for an improper purpose can generate serious dispute.

Further issue of shares should have a genuine corporate rationale and comply with section 83, shareholder rights and applicable regulations.

A dilution transaction undertaken solely as a device to destroy another shareholder’s position can attract judicial scrutiny.

PART AI — HOW JOSH AND MAK INTERNATIONAL ASSISTS WITH POST-INCORPORATION GOVERNANCE

139. Corporate Compliance Should Be Managed as a Legal System

Josh and Mak International advises Pakistani and foreign-owned companies on the corporate lifecycle after incorporation, including:

• annual compliance reviews;
• statutory filings;
• AGM and EGM documentation;
• board resolutions;
• special resolutions;
• director appointments and removals;
• registered-office changes;
• share transfers;
• share allotments;
• UBO;
• foreign ownership changes;
• further issue of capital;
• preference and investor rights;
• shareholder agreements;
• capital increases;
• buy-backs;
• corporate borrowing;
• charges;
• related-party transactions;
• corporate restructuring;
• joint ventures;
• shareholder disputes;
• oppression and mismanagement proceedings;
• succession of shares; and
• corporate exits.

The aim is not to add paperwork for its own sake.

The aim is to ensure that the legal record accurately reflects the commercial reality of the company.

140. Corporate Health Checks

A corporate health check can be particularly useful before:

• investment;
• sale;
• bank borrowing;
• property acquisition;
• government tender;
• restructuring;
• foreign investment;
• shareholder exit; or
• litigation.

The review ordinarily examines whether:

• SECP records are current;
• ownership is correctly recorded;
• UBO is current;
• directors are validly appointed;
• memorandum/articles reflect the business;
• special resolutions were filed;
• capital is correct;
• financial statements are compliant;
• auditor/legal adviser requirements are met;
• charges are registered;
• shareholder agreements match the constitution;
• licences remain valid; and
• unresolved corporate defects exist.

A buyer will find these problems during due diligence.

It is usually better for the company to find them first.

141. The Corporate Record Should Tell One Consistent Story

The company’s:

• SECP file;
• tax record;
• bank KYC;
• shareholder register;
• UBO register;
• articles;
• accounts;
• board minutes; and
• commercial contracts

should all describe the same company.

If SECP says A owns 70 per cent, the bank says B owns 70 per cent, the accounts say shares have not been paid and a private agreement says C is the “real owner”, the structure is not sophisticated.

It is unstable.

Corporate law works best when ownership and control are transparent, authorised and properly documented.

142. The Governing Principle

A successful company needs more than incorporation.

It needs continuity of lawful decision-making.

That means the company should always be able to answer:

• Who owns us?
• Who controls us?
• Who can bind us?
• What business may we lawfully conduct?
• What approvals are required?
• What filings are outstanding?
• What rights do our shareholders possess?
• What happens if ownership changes?
• What happens if a shareholder dies?
• What happens if the founders fight?
• What happens if we need new capital?
• What happens if we want to exit?

If those questions cannot be answered from the company’s records, its corporate structure requires attention.

Josh and Mak International
Your Gateway to Honest and Accurate Legal Advice

joshandmakinternational.com
aemen@joshandmak.com
WhatsApp: +92-304-8734889

PART III — TAXATION, FOREIGN INVESTMENT, COMMERCIAL OPERATIONS, M&A, DISPUTES AND CORPORATE EXIT

143. Company Registration and Tax Registration Are Separate Legal Questions

Incorporating a company with the SECP creates the corporate person. It does not settle the company’s entire tax position.

A Pakistani company may subsequently encounter federal income tax, withholding obligations, sales tax, provincial sales tax on services, customs duties, federal excise, capital gains taxation, payroll taxation and specialised sectoral taxation depending upon what the company actually does.

The correct tax analysis therefore begins with the business model rather than the certificate of incorporation.

A software exporter, construction company, restaurant chain, property developer, pharmaceutical importer, bank, manufacturing company and professional services business may all be private limited companies while having materially different tax profiles.

Pakistan’s Income Tax Ordinance, 2001 remains the principal federal income-tax statute. FBR currently publishes the Ordinance in a consolidated version amended up to 30 June 2026, incorporating the Finance Act 2026 changes

This matters because tax figures reproduced in company-registration articles can become obsolete after a single federal budget.

A corporate-law guide should therefore explain the architecture and identify current headline rates, while making clear that transaction-specific advice remains necessary.

144. The Ordinary Corporate Income-Tax Rate

For an ordinary company falling outside a specialised schedule or category, the standard corporate income-tax rate remains 29 per cent.

The statutory First Schedule also contains a reduced rate for a qualifying small company, historically 20 per cent, while banking and other specially regulated categories can be subject to materially different taxation.

The legal classification of a “small company” for tax purposes should not be confused with the Companies Act concepts of a small company, private company or start-up company.

A business can be “small” commercially but fail the statutory tax definition.

Conversely, a company can qualify for a tax classification while having a corporate structure no different from any other private limited company.

Tax status should therefore be verified under the Income Tax Ordinance rather than assumed from turnover alone.

The 29 per cent ordinary-company rate remains embedded in the federal corporate-tax structure, while the Income Tax Ordinance itself should be checked for the relevant tax year and any specialised schedule.

145. The 2026 Super Tax Position Changed Materially

The Finance Act 2026 introduced a significant rationalisation of section 4C super tax.

FBR’s official Budget 2026–27 salient features state that super tax was abolished for persons having income of up to PKR 500 million and the rate for income exceeding PKR 500 million was reduced from 10 per cent to 8 per cent.

FBR expressly states that those concessions do not apply in the same manner to the banking, exploration and production and fertiliser sectors.

This change is commercially significant.

A company looking only at the nominal 29 per cent corporate rate may substantially understate its effective tax exposure where section 4C applies.

Tax modelling for a substantial Pakistani company should therefore consider:

ordinary corporate income tax, super tax, minimum tax or alternative regimes where applicable, withholding credits, provincial indirect taxation and any sector-specific tax treatment.

The headline corporate rate is not the same thing as the company’s effective tax burden.

146. Super Tax Is Not Merely a Historical Issue

Section 4C was the subject of major constitutional litigation.

In January 2026, FBR reported that the Federal Constitutional Court upheld the validity of the super tax provisions, including their retrospective operation for the relevant tax year considered by the Court.

Accordingly, corporate clients should not proceed upon an assumption that super tax can simply be ignored because litigation had historically surrounded it.

The 2026 Finance Act has changed the forward-looking rate structure, but the statutory obligation itself remains highly relevant for larger companies.

PART AJ — WITHHOLDING TAX

147. Pakistan Uses Withholding Tax Extensively

Pakistan’s income-tax system relies heavily upon deduction and collection of tax at source.

A company may therefore become a withholding agent even where its own annual income-tax computation is relatively straightforward.

Depending upon the nature of the transaction, withholding can arise upon payments involving salaries, services, contracts, supplies, rent, dividends, profit on debt, royalties and payments to non-residents.

Rates may depend upon matters including the character of the payment, tax status of the recipient, whether the recipient appears on the Active Taxpayers List, whether the transaction is domestic or cross-border and whether a double taxation treaty modifies the domestic rate.

The company should build withholding into its accounting and contract-management systems.

A contract stating that a consultant will receive “PKR 1 million” can produce an avoidable dispute if neither party has agreed whether that figure is gross or net of mandatory Pakistani tax deduction.

148. Gross-Up Clauses

Cross-border agreements frequently contain gross-up provisions under which the payer promises that the foreign recipient will receive a stated net sum notwithstanding withholding tax.

Those clauses can substantially increase the Pakistani company’s cost.

For example, a foreign licensor expecting USD 100,000 net may require the Pakistani company to bear any Pakistani withholding tax in addition to the contractual fee.

The tax cost should therefore be modelled before the agreement is signed.

A gross-up clause should not be accepted as boilerplate.

PART AK — DIVIDENDS

149. Dividends Are Paid From the Company to Its Shareholders

A shareholder does not become entitled to withdraw company profits merely because the company has earned them.

The company’s profit remains corporate property until lawfully distributed.

Dividend declarations must comply with the Companies Act, the company’s accounts, board/shareholder process and applicable tax law.

The company should also distinguish between:

a dividend, shareholder salary, director remuneration, repayment of a genuine shareholder loan, reimbursement of business expenditure and return of capital.

These are not interchangeable labels.

A shareholder who simply transfers money from the corporate bank account to himself and later describes the payment as a “dividend” may create both company-law and tax problems.

150. Dividend Tax Depends Upon the Recipient and the Nature of the Dividend

Pakistan imposes income tax and withholding upon dividends under the Income Tax Ordinance.

The applicable rate can depend upon the category of company or fund paying the dividend, the recipient’s tax status and any treaty relief available to a non-resident shareholder.

For this reason, a sophisticated 2026 company guide should not freeze a single dividend percentage into a paragraph and suggest that it applies universally.

Before a material distribution to a foreign shareholder, the company should verify the current domestic rate and the applicable treaty.

151. Dividends to Foreign Shareholders Can Be Repatriated

A properly structured foreign investment can ordinarily allow dividends to be remitted abroad through the Pakistani banking system.

SBP’s foreign-exchange framework permits designated authorised dealers to process dividend remittances to non-resident shareholders, net of applicable Pakistani tax, where the shares have been properly held on a repatriation basis and the required banking record exists.

This is why foreign investors should structure the inward investment correctly at the beginning.

The practical ability to repatriate profit later can depend upon evidence concerning how the original investment entered Pakistan.

PART AL — SALES TAX AND PROVINCIAL SERVICE TAX

152. Income Tax and Sales Tax Are Different Systems

Businesses sometimes assume that obtaining an NTN resolves all federal tax obligations.

It does not.

Sales tax on goods is principally governed federally through the Sales Tax Act, 1990, while much taxation of services falls within provincial or territorial regimes.

A business providing services may consequently need registration with an authority other than FBR.

Depending upon location and activity, relevant authorities can include the Sindh Revenue Board, Punjab Revenue Authority, Khyber Pakhtunkhwa Revenue Authority and Balochistan Revenue Authority, alongside the regime applicable within Islamabad Capital Territory.

A business operating nationally may encounter more than one provincial indirect-tax jurisdiction.

153. Provincial Taxation Must Be Considered Before Pricing Services

Suppose an Islamabad consulting company enters a substantial contract with a customer in Karachi.

The legal analysis should not wait until after the first invoice to ask which service-tax regime applies.

The company should determine in advance:

where the service is provided, which provincial legislation applies, whether registration is required, whether the customer must withhold provincial tax, how the invoice should be drafted and whether input adjustments are available.

Tax affects contractual pricing.

It should therefore be addressed during contract negotiation rather than merely during return preparation.

PART AM — TAX RETURNS AND THE ACTIVE TAXPAYERS LIST

154. A Company Should Remain an Active and Compliant Taxpayer

A newly registered company should establish its FBR compliance immediately.

A company which fails to file returns can encounter consequences extending beyond the eventual tax assessment.

Non-compliance can affect withholding rates, banking, government procurement, regulatory credibility, property transactions and commercial due diligence.

A serious company should therefore monitor not merely whether an NTN exists but whether its tax return, withholding statements and other required submissions are current.

PART AN — FOREIGN INVESTMENT IN PAKISTANI COMPANIES

155. Foreign Ownership and Repatriable Ownership Are Related but Distinct Concepts

A foreign shareholder can legally own shares in a Pakistani company.

But if the investment is intended to remain repatriable, the foreign-exchange record must be properly established.

SBP’s Chapter 20 framework permits qualifying shares and securities to be issued or transferred to non-residents on a repatriation basis where the prescribed conditions are met, including payment through appropriate foreign-exchange channels and maintenance of the investment record through the relevant authorised dealer.

This distinction matters enormously.

A shareholder may possess perfectly valid shares under company law while experiencing difficulty repatriating proceeds if the foreign investment was never properly documented through the banking system.

156. The Designated Authorised Dealer Has Become Even More Important in 2026

The State Bank issued FE Circular No. 02 of 2026 dealing with delegation of functions concerning registration of shares or units issued or transferred to non-residents on a repatriable basis and designation of the authorised dealer.

The circular forms part of SBP’s continuing movement toward greater delegation of investment-processing functions to the banking system.

For foreign investors, the practical consequence is that the choice and coordination of the Pakistani bank should form part of the legal transaction.

The bank is not merely the institution into which the investment happens to arrive.

It becomes part of the regulatory chain supporting future dividends and exit.

157. Evidence of Inward Remittance Should Be Preserved Permanently

The company should preserve the documentation showing:

the foreign shareholder, remitting bank, Pakistani receiving bank, foreign currency amount, Pakistani rupee equivalent, date of receipt, purpose of remittance, share issue or acquisition supported by the remittance and regulatory reporting completed afterwards.

Those records can become critical years later.

A foreign shareholder acquiring shares in 2026 may not attempt to exit until 2036.

The relevant employees may have left.

The bank branch may have reorganised.

The original accountant may no longer exist.

The company should therefore treat investment-remittance records as permanent corporate records.

158. Foreign Investment Should Not Be Routed Informally

A proposed foreign investor should be cautious if advised to send investment funds:

to an individual founder’s personal account, through an unrelated third party, through cash, through unexplained cryptocurrency conversions or through a corporate account belonging to another business.

The clean approach is generally traceable banking documentation linking the remittance to the investment.

A short-cut taken at entry may become a major obstacle at exit.

PART AO — REPATRIATING THE SALE PROCEEDS OF SHARES

159. Foreign Investors Can Exit Pakistani Equity

Pakistan’s foreign-exchange framework permits qualifying disinvestment proceeds to be remitted abroad.

SBP’s Chapter 20 allows authorised dealers to process disinvestment proceeds subject to valuation and documentary requirements.

For listed securities, market value is relevant.

For unlisted securities, valuation requirements may involve the break-up value or another permissible valuation methodology under the applicable SBP framework.

Accordingly, a foreign investor should not agree an exit price in isolation from the foreign-exchange rules governing remittance.

A contractual sale price does not automatically mean the full figure can be remitted without the supporting regulatory documentation.

160. Exit Planning Should Begin Before the Investment Is Made

A sophisticated foreign investor should ask at entry:

How will our shares be registered?

Which bank will maintain the repatriation record?

How will dividends be remitted?

What valuation will apply upon exit?

Can the shares be sold to a Pakistani resident?

Can they be sold to another non-resident?

What pre-emption applies?

What tax will arise?

Will competition approval be needed?

Will a regulator need to consent?

This is why foreign investment work cannot sensibly be divided into “incorporation now” and “exit advice someday”.

The two are connected.

PART AP — SHAREHOLDER LOANS AND FOREIGN DEBT

161. Equity Is Not the Only Way to Fund a Pakistani Company

A foreign parent may wish to finance its Pakistani subsidiary through debt rather than subscribing exclusively for shares.

A shareholder loan can offer commercial flexibility, but cross-border borrowing engages SBP foreign-exchange requirements as well as tax.

Issues can include maturity, interest, permitted currency, repayment, security, withholding tax, transfer pricing and whether the proposed borrowing falls within a general permission or requires specific regulatory treatment.

The company should not simply execute an English-law inter-company loan and transfer dollars into Pakistan without checking the Pakistani foreign-exchange rules.

162. Debt and Equity Have Different Exit Consequences

Equity is ordinarily returned through dividend, capital transactions or sale of shares.

Debt is repaid according to the loan terms and applicable foreign-exchange framework.

Those differences can materially affect:

cash flow, tax, solvency, creditor ranking, dividend capacity, valuation and repatriation.

The appropriate capital structure should therefore be modelled before money enters Pakistan.

PART AQ — RELATED-PARTY AND INTER-COMPANY PAYMENTS

163. Multinational Groups Commonly Charge Their Pakistani Subsidiaries

Cross-border corporate groups frequently use inter-company arrangements involving management fees, technical services, software licences, intellectual-property royalties, procurement services, cost-sharing, group loans and reimbursement arrangements.

Each payment should have a genuine commercial and documentary basis.

Pakistani tax and banking authorities can legitimately ask:

what service was provided, why the Pakistani company needed it, how the price was calculated, whether withholding tax was deducted, whether transfer pricing is supportable and whether the payment is remittable under SBP rules.

An invoice labelled “management support — USD 500,000” is not self-proving.

164. Transfer Pricing

Transactions between associated enterprises should be undertaken on an arm’s-length basis under Pakistan’s transfer-pricing framework.

A multinational should therefore maintain appropriate evidence concerning:

the services or assets involved, contractual basis, method of pricing, comparables where relevant, allocation methodology and benefit to the Pakistani entity.

Transfer-pricing documentation should correspond with the company’s accounts and actual conduct.

A beautifully drafted service agreement is of limited use if no evidence exists that the foreign parent actually performed the service.

PART AR — INTELLECTUAL PROPERTY

165. Corporate Registration Does Not Protect the Brand

A registered company name and a registered trademark are different legal rights.

The SECP may incorporate a company whose name contains a particular word without determining the complete intellectual-property landscape applicable to that word.

Companies whose value depends upon branding should therefore separately consider trademark registration through Pakistan’s intellectual-property system.

This becomes especially important for:

technology businesses, fashion companies, restaurants, consumer products, pharmaceutical products, educational services, financial products, e-commerce brands and franchises.

166. Intellectual Property Should Belong to the Correct Entity

Start-ups frequently develop valuable intellectual property before the company is incorporated.

Code may have been written by founders personally.

A logo may have been created by a freelancer.

A patentable invention may have been conceived by a founder.

Domain names may be held in one individual’s personal account.

If investment later arrives, the investor will ask a simple question:

Does the company actually own the intellectual property on which its valuation depends?

If the answer is uncertain, the problem should be cured through properly drafted assignments and licences.

167. Founder Intellectual Property

Where founders contribute pre-existing IP, the documents should establish whether it is:

assigned outright to the company, licensed exclusively, licensed non-exclusively or retained by the founder.

This should never be left to assumption.

A founder departing after three years should not suddenly assert that the company’s principal software platform was always personally owned by him.

168. Employee and Contractor IP

Employment and consultancy contracts should address intellectual property produced within the engagement.

Technology businesses in particular should use clear provisions concerning:

software, source code, inventions, designs, databases, confidential information, documentation, improvements and work product.

A business purchasing software development from an independent contractor should not assume that paying an invoice automatically transfers every intellectual-property right contemplated by law.

PART AS — COMMERCIAL CONTRACTS

169. Incorporation Does Not Replace Contracting

Once incorporated, the company should contract in its own correct legal name.

Agreements should identify:

the incorporated name, registered or relevant business address, registration number where appropriate and the person signing under proper corporate authority.

Where a company operates under a brand, the contract should still identify the actual legal person.

“XYZ Pakistan” may be a brand.

The contracting party may actually be XYZ Solutions (Private) Limited.

That distinction becomes critical during enforcement.

170. Authority to Sign

Every business should establish who has authority to bind the company.

Depending upon the transaction, authority can arise from:

the articles, board resolution, employment position, delegation, power of attorney or another legally recognised source.

Major contracts should not simply be signed by whichever employee happens to negotiate them.

The company should maintain a signing-authority matrix.

171. Contracts Should Address Pakistani Tax

Commercial agreements should clearly deal with tax.

The drafting may need to address:

whether fees are inclusive or exclusive of sales tax, whether withholding may be deducted, whether the recipient receives a gross or net amount, responsibility for invoicing, tax certificates and consequences of a change in law.

Ambiguity can transform a profitable contract into a loss-making one.

172. Governing Law

A Pakistani company may agree to Pakistani or foreign governing law depending upon the transaction and applicable mandatory rules.

Foreign-law clauses are common in international contracts.

But a foreign governing law should not be selected merely because it appears sophisticated.

The parties should consider:

where performance occurs, where assets are situated, where enforcement will be required, whether mandatory Pakistani law applies and whether the chosen dispute forum can provide effective relief.

PART AT — ARBITRATION

173. International Arbitration Can Be Appropriate for Cross-Border Contracts

Pakistan has implemented the New York Convention through the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011.

Accordingly, foreign arbitral awards falling within the statutory framework may be recognised and enforced in Pakistan subject to the Convention grounds and applicable procedure.

For substantial international contracts, arbitration may offer important advantages including neutrality of forum and international enforceability.

But the arbitration clause must be drafted properly.

174. A Good Arbitration Clause Should Be Complete

The agreement should ordinarily identify the seat of arbitration, institutional rules or other procedural framework, number of arbitrators, appointment process, language and applicable substantive law.

The distinction between the seat and the physical venue of hearings should be understood.

A clause saying:

“Any dispute shall be referred to arbitration in a mutually agreed country”

is not sophisticated flexibility.

It is a future jurisdictional dispute.

175. Pakistani Court Relief May Still Be Necessary

Even where the contract contains an arbitration clause, Pakistani court assistance may remain relevant for:

interim relief, preservation of assets, enforcement, statutory company matters, insolvency, public-law issues and proceedings which cannot lawfully be removed from the jurisdiction of Pakistani courts.

Corporate dispute strategy should therefore consider arbitration and litigation together rather than treating them as mutually exclusive universes.

PART AU — EMPLOYMENT

176. A Company Becomes an Employer as Soon as It Hires People

Employment law in Pakistan is significantly affected by provincial legislation following constitutional devolution.

The applicable regime may therefore differ depending upon whether employees work in Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan or Islamabad Capital Territory.

A company employing people nationally should not assume that a single generic HR template resolves every provincial labour requirement.

177. Employment Contracts Should Be Localised

A foreign-owned company should not simply replace “England” with “Pakistan” in its global employment agreement.

Pakistani employment documents should be reviewed for:

probation, working hours, leave, minimum wages, benefits, termination, misconduct, confidentiality, intellectual property, data protection, social security, EOBI and applicable standing-orders legislation.

Senior management may occupy a different legal position from statutory workers.

The employment analysis should therefore consider the employee’s actual functions rather than job title alone.

178. Termination Is Not Merely an HR Decision

Poorly handled termination can create:

labour proceedings, civil claims, reputational complaints, regulatory disputes, claims for unpaid benefits and disputes concerning company property or confidential information.

Before terminating an important employee, the company should establish:

applicable legislation, contractual notice, misconduct procedure where relevant, accrued benefits, company property, IT access, confidentiality, IP and any post-termination obligations.

A five-minute dismissal meeting can generate five years of litigation.

PART AV — REGULATED BUSINESSES

179. A Certificate of Incorporation Is Not a Sector Licence

This principle deserves repetition because it is central to Pakistani corporate law.

Section 26 itself recognises that a company cannot lawfully engage in business restricted by another law without the required licence, registration, permission or approval.

Accordingly, incorporation does not authorise a company to operate as, for example:

a bank, insurer, securities intermediary, NBFC, payment operator, telecom provider or pharmaceutical business merely because suitable words appear in its memorandum.

The sector regulator remains decisive.

The source article already recognised the distinction between lawful business and business requiring specific regulatory approval.

180. Regulated Companies Should Obtain Licensing Advice Before Incorporation

A specialised licence can affect:

company name, minimum capital, shareholder eligibility, foreign ownership, board composition, chief executive qualifications, premises, systems, cyber-security, business plan and memorandum.

If those requirements are investigated only after incorporation, the company may need immediate restructuring.

The appropriate sequence is often:

regulatory feasibility, corporate structuring, incorporation and then formal licensing in the order required by the relevant regulator.

PART AW — MERGERS AND ACQUISITIONS

181. Buying a Company Is Different From Buying Its Assets

An investor acquiring shares purchases an interest in the company itself.

The company ordinarily retains its existing:

assets, liabilities, contracts, employees, tax history, licences, litigation and corporate history.

An asset acquisition can instead allow selected assets and liabilities to be transferred subject to contractual, regulatory, property, tax and employment requirements.

The choice between a share purchase and an asset purchase should therefore be deliberate.

182. Legal Due Diligence

Before purchasing a Pakistani company, a buyer should conduct due diligence sufficient for the size and risk of the transaction.

Corporate due diligence ordinarily examines ownership, constitutional documents, share capital, beneficial ownership, directors, charges and historical filings.

Commercial due diligence examines material contracts, customers, suppliers and change-of-control restrictions.

Further workstreams may cover tax, employment, property, intellectual property, litigation, regulatory licences, environmental matters, data, insurance and anti-bribery issues.

The aim is not merely to discover whether the target is “good” or “bad”.

Due diligence identifies risks so the transaction can allocate them.

183. Due Diligence Should Influence the Purchase Agreement

A discovered liability can be addressed through:

price reduction, pre-completion remedy, condition precedent, warranty, indemnity, escrow, retention, insurance or abandonment of the transaction.

A due-diligence report that does not influence transaction drafting is merely expensive reading.

PART AX — COMPETITION COMMISSION MERGER CONTROL

184. Pakistan Has a Mandatory Pre-Merger Clearance Regime

The Competition Act, 2010 and Competition (Merger Control) Regulations, 2016 impose pre-merger notification requirements where the prescribed thresholds are met.

The regime is not confined to companies incorporated in Pakistan. The regulations expressly apply to qualifying undertakings incorporated outside Pakistan where the transaction has the relevant Pakistani business nexus.

The Competition Commission presently summarises the financial thresholds as follows: one party having gross assets of at least PKR 300 million or combined assets of PKR 1 billion, or one party having annual turnover of at least PKR 500 million or combined turnover of PKR 1 billion, together with either transaction value of at least PKR 100 million or an acquisition taking the acquirer above the applicable voting-share threshold.

Threshold analysis should be performed before completion.

185. Joint Ventures Can Also Be “Mergers” for Competition Purposes

The Competition Commission expressly recognises qualifying lasting, autonomous joint ventures under its merger-control framework.

Parties therefore should not assume that merger control applies only when one company “buys another”.

A newly created joint venture can also require notification.

PART AY — LISTED COMPANY ACQUISITIONS

186. Listed Targets Require Securities-Law Analysis

Acquiring shares in a private company and acquiring substantial voting control of a listed company are very different transactions.

Listed-company acquisitions engage the Securities Act, 2015 and the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2017, as amended.

Depending upon the shareholding acquired and transaction structure, disclosure obligations and mandatory public-offer requirements may arise.

A foreign investor contemplating control of a PSX-listed business should therefore obtain capital-markets advice before signing the acquisition agreement.

PART AZ — CORPORATE RESTRUCTURING

187. Companies Can Be Restructured Without Being Wound Up

Corporate restructuring can involve:

share transfers, capital reorganisation, holding-company structures, amalgamation, schemes of arrangement, sale of business, demerger-type arrangements, acquisition, conversion of status and other lawful corporate reorganisations.

The correct route depends upon the objective.

A profitable company should not necessarily be wound up merely because shareholders wish to change the ownership or business structure.

188. Schemes and Court-Supervised Restructuring

The Companies Act contains mechanisms under which arrangements and corporate combinations can be brought before the competent corporate forum.

Such transactions can be highly effective where multiple shareholder, creditor and asset interests need to be reorganised within one coherent legal process.

They are, however, document-intensive and should ordinarily involve legal, tax, accounting and valuation advisers.

PART BA — COMPANY BENCH JURISDICTION

189. Companies Act Proceedings Belong to the High Court’s Company Jurisdiction

The Companies Act defines the relevant “Court” principally by reference to the High Court having jurisdiction over the place of the company’s registered office.

The source article correctly identifies that matters assigned to the Company Court are not ordinary civil suits to be commenced indiscriminately before subordinate civil courts.

Each High Court maintains the corporate jurisdiction contemplated by the Act through its Company Bench structure.

The registered office can therefore have real litigation consequences.

190. The Companies Act Creates a Special Procedural Framework

Corporate litigation under the Companies Act has its own procedural architecture.

The Act contemplates written submissions containing the factual case, grounds, relief, affidavit material and supporting documents.

The source article also records the Act’s case-management objective of progressing Company Bench proceedings through specialised service and hearing mechanisms rather than simply importing ordinary civil procedure wholesale.

Corporate petitions should therefore be drafted as specialist company proceedings.

PART BB — SHAREHOLDER LITIGATION

191. A Shareholder Dispute Is Rarely “Just” a Shareholder Dispute

A serious private-company dispute can simultaneously involve:

the Companies Act, contract, fiduciary duty, fraud, property, banking authority, inheritance, employment, criminal allegations and tax.

One shareholder may seek removal of a director.

Another may challenge share allotments.

The company may allege misappropriation.

A founder may assert ownership of intellectual property.

A deceased shareholder’s heirs may challenge transmission.

A bank may have competing mandates.

The correct litigation strategy therefore begins by separating each legal capacity and each remedy.

192. Injunctive Relief

Where a threatened corporate act would cause irreversible prejudice, interim relief may be critical.

Examples may include threatened transfer of shares, disposal of a company’s principal asset, removal of records, dilution, dissipation of funds or implementation of an allegedly unlawful resolution.

The timing of the application often matters as much as the ultimate merits.

Corporate clients should seek advice before the disputed transaction is completed wherever possible.

PART BC — OPPRESSION AND MISMANAGEMENT

193. Section 286 Is Not a General Complaint Box

As discussed in Part II, section 286 creates important remedies where company affairs are being conducted, or are likely to be conducted, in the unlawful, fraudulent, oppressive or unfairly prejudicial manner contemplated by the statute.

The source article records both the qualifying shareholder/creditor threshold and the Court’s broad remedial powers.

However, not every disagreement among shareholders constitutes oppression.

Courts examine the actual corporate conduct.

A founder who has merely lost a lawful vote cannot automatically transform defeat into oppression.

Conversely, technically valid voting machinery cannot necessarily sanitise fraud or a transaction undertaken for an improper oppressive purpose.

PART BD — WINDING UP

194. Winding Up Is the Legal Death Process of a Company

A company possesses perpetual succession.

It therefore does not cease to exist merely because the business closes its office, stops trading or shareholders abandon it.

Formal dissolution requires a legally recognised process.

The Companies Act provides mechanisms including winding up by the Court and other forms of winding up within the statutory framework.

The source article contains extensive treatment of sections 293 onwards, including contributories, inability to pay debts, petitions and Court powers.

These provisions remain important because corporate closure should be distinguished from business inactivity.

195. Court Winding Up

A company may be wound up by the Court upon statutory grounds.

Those grounds extend beyond simple insolvency and can include circumstances relating to unlawful business, failure of corporate structure, regulatory licence revocation and other circumstances contemplated by the Act.

A winding-up petition is therefore not merely a debt-recovery mechanism.

It is an application seeking termination of the company’s corporate existence through judicial process.

PART BE — INABILITY TO PAY DEBTS

196. Section 302 Contains the Statutory Insolvency Indicators

The source article reproduces section 302’s principal tests concerning inability to pay debts.

Those include circumstances where a qualifying creditor serves a statutory demand for a debt above the prescribed amount and the company fails for the statutory period to pay, secure or compound the debt to the creditor’s reasonable satisfaction; execution upon a judgment remains unsatisfied; or the Court is otherwise satisfied that the company is unable to pay its debts, taking contingent and prospective liabilities into account.

The statutory-demand procedure should be used carefully.

A genuinely disputed debt is different from an undisputed debt the company simply refuses to pay.

Winding-up jurisdiction should not be misused as a substitute for an ordinary trial merely to apply commercial pressure.

197. Who Can Petition?

Section 304 permits winding-up petitions by persons falling within the statutory classes, including the company itself, qualifying creditors, contributories, the registrar, Commission and other authorised persons subject to the conditions contained in the provision.

The source sets out these classes and their qualifications in detail.

Standing should therefore be analysed before any petition is drafted.

198. The Court Has More Options Than “Wind Up” or “Dismiss”

Upon hearing a winding-up petition, the Court has powers to make interim and other orders available under the Act.

The source correctly records powers including dismissal, interim relief, appointment of a provisional manager, winding-up order and other orders considered appropriate within the statutory jurisdiction.

Where an alternative remedy adequately protects the petitioner, the Court may consider whether winding up would be disproportionate.

Corporate death is an extreme remedy.

PART BF — VOLUNTARY CLOSURE AND EASY EXIT

199. Not Every Dormant Company Needs a Full Winding Up

The Companies Act provides a simpler mechanism for certain defunct companies that have ceased operations and possess no known assets or liabilities.

Section 426 allows an eligible company to seek striking-off from the register.

The Companies Regulations, 2024 now contain the operative Easy Exit procedure within Regulations 144 to 146, replacing reliance upon the historic stand-alone Easy Exit regulations for current procedural work. SECP’s present consolidated Companies Regulations were last officially republished in April 2026.

This is one of the most significant procedural updates for corporate closure.

200. Easy Exit Is for Genuine Defunct Companies

Easy exit is not a mechanism for making liabilities disappear.

The statutory concept concerns a company which has ceased to operate and has no known assets and liabilities, subject to the exclusions and conditions prescribed by law.

A company should therefore not seek easy exit merely because its shareholders would prefer not to pay:

tax, employee claims, supplier debts, bank liabilities, litigation liabilities or regulatory penalties.

Outstanding corporate obligations need to be resolved.

201. The Registrar’s Notice and Dissolution

Under section 426, where the registrar is satisfied with the application, the statutory notice procedure is initiated.

The Act contemplates public notice and a period during which objections may be made before the company’s name is finally struck off.

Once the statutory dissolution notice is published, the company stands dissolved.

But dissolution does not automatically extinguish every pre-existing civil, criminal or other liability of directors, officers and members.

The source article correctly emphasises the survival of such liability notwithstanding dissolution.

Easy exit should therefore never be marketed to clients as a “legal wipe”.

202. Foreign Companies Do Not Use the Domestic Easy Exit Route

A foreign company registered in Pakistan as an overseas corporate presence is not simply a Pakistani private company that can be removed through ordinary domestic easy exit.

Foreign-company cessation is governed through the Part XII framework and the relevant foreign-company forms and regulatory requirements.

Branches and liaison offices can also require coordination with the Board of Investment, tax authorities and banks.

Entity classification therefore remains important even at closure.

PART BG — CLOSING A COMPANY PROPERLY

203. A Closure Checklist Should Begin With Assets and Liabilities

Before selecting the exit mechanism, management should establish whether the company still has:

cash, receivables, bank accounts, land, equipment, vehicles, intellectual property, loans, employee obligations, taxes, litigation, guarantees, supplier debts or regulatory licences.

If significant assets or liabilities remain, simple striking off may not be appropriate.

The company may instead require a formal winding-up, sale, restructuring or settlement programme.

204. The Company’s Bank Account Should Not Simply Be Abandoned

A dormant account can continue to attract compliance problems.

The company should reconcile balances, settle lawful liabilities, document distributions or repayments properly and then close banking arrangements through the appropriate corporate authority.

Bank closure should correspond with the legal closure timetable.

The last director should not empty the account into his personal account and assume that corporate dissolution later legitimises the payment.

205. Tax Closure

Corporate dissolution does not necessarily remove tax exposure arising before dissolution.

The company should therefore review:

income-tax returns, withholding statements, sales tax, provincial service tax, audits, notices, outstanding demands and tax deregistration requirements.

Where a company has conducted genuine business, tax closure can be one of the most important workstreams in the entire exit process.

PART BH — DIRECTOR AND SHAREHOLDER LIABILITY AFTER THINGS GO WRONG

206. Limited Liability Protects Shareholders, Not Fraud

Shareholders of a company limited by shares ordinarily enjoy liability limited to the unpaid amount upon their shares.

That principle does not protect a person against liability for his own fraud or unlawful conduct.

A shareholder who personally guarantees the company’s loan can also become liable under the guarantee.

A person who causes corporate assets to be fraudulently transferred may face remedies entirely apart from his limited status as shareholder.

Limited liability should therefore be understood accurately rather than marketed as absolute immunity.

207. Directors Can Be Personally Exposed

Directors may incur liability for their own statutory defaults, breach of duty, fraud, misstatement and other wrongful conduct.

A director should therefore never accept appointment merely to provide the company with a convenient name for regulatory purposes.

The office carries responsibility.

Nominee directors, relatives and employees placed upon boards merely as accommodation should understand this before signing consent.

PART BI — INSOLVENCY WARNING SIGNS FOR DIRECTORS

208. Directors Should Respond Before the Company Is Beyond Rescue

Warning signs may include persistent inability to meet payroll, dishonoured cheques, unpaid taxes, creditor demands, repeated default under financing, inability to obtain working capital and sale of essential assets merely to meet ordinary expenses.

The board should not wait until a winding-up petition is served.

Possible responses can include restructuring, shareholder funding, asset sale, negotiated standstill, refinancing, composition with creditors, business sale or formal insolvency advice.

Continuing to incur obligations when there is no credible path to payment can create substantial legal risk.

PART BJ — CORPORATE DISPUTE PREVENTION

209. Most Corporate Disputes Begin Long Before the First Legal Notice

Warning signs commonly include:

one founder controlling the bank without oversight, incomplete board minutes, informal share transfers, company funds used personally, related-party transactions without approval, unexplained new share issues, refusal to provide accounts, IP held outside the company and shareholder loans with no documentation.

Those are governance problems before they become litigation problems.

The cheapest corporate dispute is the one prevented by good documentation.

210. Annual Corporate Review

A privately owned company should consider a legal compliance review at least annually and before any substantial investment, sale, financing or restructuring.

The review should ensure that the legal corporate record matches reality.

A company which says it has four shareholders but whose SECP record still identifies two founders from incorporation five years earlier has a problem.

The fact that everyone “knows who owns what” is not a substitute for correct corporate records.

PART BK — DUE DILIGENCE BEFORE SEEKING INVESTMENT

211. Investors Inspect Corporate Hygiene

Professional investors generally expect a company to produce an organised data room.

A disorganised company can lose leverage during fundraising because each missing document becomes a potential risk.

Typical investor questions include whether the company owns its IP, whether founders’ shares are properly issued, whether UBO filings are current, whether tax returns have been filed, whether employees signed IP/confidentiality agreements, whether significant litigation exists and whether major contracts are transferable.

Corporate housekeeping can therefore affect valuation.

212. Founder Promises Are Not Due Diligence

An investor should verify.

If a founder says:

“we own the trademark,”

ask for the registration or assignment.

If he says:

“there are no debts,”

review accounts and tax records.

If he says:

“all the staff signed contracts,”

inspect them.

If he says:

“my partner left and gave his shares back,”

inspect the transfer.

Commercial trust is valuable.

Verification is still necessary.

PART BL — FREQUENTLY ASKED QUESTIONS ABOUT COMPANY REGISTRATION AND CORPORATE LAW IN PAKISTAN

213. How Long Does It Take to Register a Pakistani Company?

A straightforward domestic incorporation can often be processed quickly through SECP’s eZfile system where the proposed name, business activity and documentation do not create complications.

The actual period varies according to the company, foreign involvement, restricted names, regulated activity and completeness of documentation.

A serious client should therefore distinguish between the time needed to obtain the certificate of incorporation and the time needed to make the company fully operational.

Banking, tax, licences and foreign-investment documentation can take additional time.

214. Can One Person Register a Company?

Yes.

A single individual can incorporate a single-member company, subject to the Companies Act and prescribed nominee arrangements.

An ordinary private company requires at least two members.

215. Can a Foreigner Own a Pakistani Company?

Yes, in many sectors foreign ownership of a Pakistani company is permitted, including 100 per cent ownership where the relevant investment and sectoral laws allow it.

Foreign shareholders and officers are subject to the applicable documentation, security-clearance and foreign-exchange framework.

Regulated sectors must always be checked independently.

216. Does a Foreign Investor Need a Pakistani Partner?

Not generally in every sector.

A local shareholder should not be introduced merely because an intermediary asserts that “foreigners cannot own companies in Pakistan”.

In many ordinary sectors that proposition is simply wrong.

A joint venture may nevertheless be commercially desirable where the local party genuinely contributes market access, licences, infrastructure, distribution or expertise.

217. Can a Foreign Company Register a Branch Instead?

Yes, but a branch office is not the same legal structure as a Pakistani subsidiary.

A branch is an extension of the foreign parent and its permitted activity may be tied to the approval and contractual basis upon which the branch was established.

Long-term general commercial operations may often be better suited to a local subsidiary.

218. What Is the Difference Between Authorised and Paid-Up Capital?

Authorised capital is the maximum nominal share capital presently authorised by the memorandum.

Paid-up capital is the amount actually paid upon issued shares.

Increasing authorised capital does not itself bring cash into the company.

219. Can a Company Issue New Shares Whenever It Likes?

The company can issue further shares only in accordance with the Companies Act, its articles, applicable regulations and shareholder rights.

Section 83 contains significant pre-emptive protections for existing shareholders.

An issue designed improperly to dilute another shareholder can create substantial litigation risk.

220. Can a Director Be Removed?

Directors are appointed and removed through the Companies Act and the company’s constitutional framework.

The exact procedure depends upon how the director was appointed, the company’s status, board composition, election cycle and any shareholder agreement.

A company should not simply lock a director out of the office and assume the corporate record has changed.

221. Can a Shareholder Be Removed From a Company?

A shareholder cannot simply be “fired” from ownership in the way an employee can be dismissed.

His shares must be transferred, acquired, redeemed, bought back or otherwise dealt with through a lawful corporate mechanism.

A shareholders’ agreement may contain compulsory-transfer provisions upon specified events, but those provisions must still operate within company law.

222. Can a Company Refuse to Transfer Shares?

Private companies can have transfer restrictions, and sections 75 and 76 establish the statutory transfer framework.

The board’s power is not an unrestricted licence to block every transfer indefinitely.

The Act, articles and any shareholders’ agreement should all be examined.

223. What Happens to Shares When a Shareholder Dies?

Shares pass through the lawful transmission and succession process.

A statutory nominee can protect the interests of heirs and facilitate administration but is not simply substituted as beneficial owner contrary to succession law.

Family-owned companies should plan succession before a death occurs.

224. Does Every Company Need an Auditor?

Audit obligations depend upon the company’s classification and applicable capital thresholds.

Small private companies and SMCs falling within statutory exemptions can receive different treatment.

The position should be checked against current SECP requirements rather than an old generic incorporation checklist.

225. Does Every Company Need a Legal Adviser?

No.

The separate Companies (Appointment of Legal Advisers) Act framework presently engages the relevant capital threshold. SECP’s current guidance identifies paid-up capital exceeding PKR 7.5 million for this purpose.

Companies below that threshold may nevertheless choose to retain corporate counsel.

226. Does Every Private Company Have to Follow the Listed Companies Code of Corporate Governance?

No.

The Listed Companies Code applies to listed companies.

An ordinary private company remains subject to the Companies Act, Companies Regulations, its articles, directors’ duties and other applicable law, but it is not converted into a listed company merely because corporate governance is desirable.

227. Can a Company Change Its Business?

Yes, subject to the Companies Act.

Changes to the principal line of business must be reported, and regulated activity cannot be commenced without the necessary licence or approval.

Some memorandum alterations require a special resolution and, depending upon the nature of the alteration, SECP confirmation.

228. Can a Company Change Its Name?

Yes.

A change of name requires the corporate and registrar procedure prescribed under sections 12 and 13 and the Companies Regulations.

Changing the name does not create a new company or extinguish existing liabilities.

The same corporate person continues under the new name.

229. Can a Pakistani Company Buy Its Own Shares?

Yes, within section 88 and the applicable regulatory framework.

The transaction requires proper authority, funding and statutory procedure.

An informal payment from the company to a departing shareholder should not be mistaken for a valid company buy-back.

230. Can a Company Reduce Its Capital?

Yes, but formal reduction of capital under section 89 is subject to special resolution and Court confirmation within the statutory process.

It is different from merely cancelling unissued authorised shares.

231. Can a Pakistani Company Raise Foreign Investment?

Yes.

Foreign equity can be introduced into eligible Pakistani companies subject to company law, foreign-exchange documentation, banking and sector-specific regulation.

For investment intended to remain repatriable, compliance with SBP requirements is particularly important.

232. Can a Foreign Investor Take Dividends Out of Pakistan?

Yes, where the investment and shareholding have been appropriately recorded and applicable tax and banking requirements are satisfied.

SBP’s foreign-exchange framework permits qualifying dividend remittance through authorised dealers.

233. Can a Foreign Investor Sell Its Shares and Repatriate the Money?

Yes, subject to the applicable company-law, tax, valuation, foreign-exchange and banking requirements.

The quality of the original investment record can materially affect the ease of exit.

234. Does Pakistan Allow Foreign Shareholder Loans?

Cross-border debt can be permissible, but it is subject to SBP and tax requirements.

A shareholder should not assume that calling a remittance a “loan” permits unrestricted future repayment.

235. What Is the Corporate Tax Rate?

For an ordinary Pakistani company the standard federal income-tax rate remains 29 per cent, while qualifying small companies and specialised sectors can be subject to different rates.

Large companies should additionally consider the 2026 section 4C super-tax position and any other applicable tax regimes.

236. Has Super Tax Been Abolished?

Not entirely.

The Finance Act 2026 abolished section 4C super tax for persons with income up to PKR 500 million and reduced the rate to 8 per cent for persons above that level, subject to stated sectoral exceptions.

237. Does a Company Have to Register for Sales Tax?

That depends upon what the company supplies and the applicable statutory regime.

Goods and services must be analysed separately.

Services can fall under provincial taxation rather than the federal sales-tax system alone.

238. Can a Company Own Property?

Yes.

A company has separate legal personality and can own assets in its own name, subject to any applicable land, development, foreign-ownership or sector-specific restrictions.

The title should be registered in the company’s legal name.

239. Can a Company Sue and Be Sued?

Yes.

Corporate personality allows the company to institute and defend proceedings in its own name.

Shareholders do not ordinarily sue personally for a debt owed to the company merely because they own its shares.

240. What if the Majority Shareholder Misuses the Company?

Depending upon the facts, remedies can include statutory minority protection, oppression and mismanagement proceedings, injunctive relief, derivative or other company-law remedies, contractual enforcement and proceedings concerning directors’ duties.

The legal remedy depends upon the particular misconduct.

241. Can a Company Be Closed Without Winding Up?

An eligible genuinely defunct company with no known assets and liabilities may qualify for easy exit under section 426 and Regulations 144–146 of the Companies Regulations, 2024.

Companies which remain operational, indebted or asset-holding may require another closure mechanism

242. Does Easy Exit Eliminate Director Liability?

No.

Section 426 expressly preserves the potential civil, criminal and other liabilities of directors, officers and members notwithstanding dissolution.

Easy exit is a simplified corporate dissolution mechanism, not an amnesty from wrongdoing or debt.

243. Can a Creditor Wind Up a Company?

Potentially.

Where the statutory conditions under sections 301–304 are met, a qualifying creditor may seek winding up.

The existence of a disputed commercial claim does not automatically make winding-up proceedings appropriate.

244. Is a Company Automatically Insolvent if It Misses One Payment?

No.

Section 302 provides statutory tests concerning inability to pay debts.

A temporary missed payment and established commercial insolvency are not necessarily the same thing.

The Court examines the statutory basis and evidence.

PART BM — WHEN A COMPANY SHOULD SEEK LEGAL ADVICE

245. The Best Time Is Before the Transaction

Corporate lawyers are often contacted after the event:

after the shares were issued, after the director was removed, after the investor sent money, after the employee took the source code, after the company bought disputed property or after the shareholder transferred corporate funds to himself.

At that stage the legal task is remediation.

It is normally cheaper to structure the transaction correctly before execution.

A company should consider specialist advice before:

incorporation involving multiple founders, foreign investment, substantial share issuance, shareholder agreements, regulated businesses, acquisitions, major borrowing, corporate restructuring, major related-party transactions, shareholder exits, founder disputes or closure.

246. What a Corporate Lawyer Should Actually Do

Corporate advice should not merely tell the client which button to press on eZfile.

The legal adviser should understand:

the transaction, ownership, control, regulatory framework, tax implications, financing, shareholder rights, exit and dispute risks.

A technically perfect form can still implement a commercially disastrous structure.

The purpose of counsel is to identify that before filing.

PART BN — JOSH AND MAK INTERNATIONAL CORPORATE SERVICES

247. Company Formation

Josh and Mak International advises entrepreneurs, Pakistani businesses, overseas Pakistanis, foreign corporations and international investors concerning the appropriate corporate structure before incorporation and assists with the resulting SECP process.

Our work may include company-name analysis, corporate structuring, memorandum and articles, founder arrangements, foreign shareholder documentation, beneficial ownership and post-incorporation compliance.

248. Corporate Governance and Compliance

We advise companies concerning directors, officers, board procedure, shareholders’ meetings, special resolutions, annual compliance, UBO, registered-office changes, corporate authorities and statutory records.

For growing companies, we can also undertake a corporate health check before investment, financing or sale.

249. Shareholder and Founder Agreements

For companies with multiple owners, we advise upon shareholder rights, board control, reserved matters, funding, dilution, share transfers, deadlock, exit, intellectual property and dispute resolution.

The objective is to document the commercial bargain while the shareholders still agree upon it.

250. Foreign Investment

We assist foreign clients with the Pakistani corporate aspects of inbound investment, foreign shareholder and director documentation, security-clearance issues, subsidiary structuring and coordination of company-law requirements with applicable foreign-exchange and banking processes.

251. Mergers, Acquisitions and Due Diligence

Our transaction work can include corporate due diligence, share-purchase and asset-purchase agreements, joint ventures, restructuring, shareholder exits and regulatory analysis.

Where merger-control or specialised regulatory approvals may apply, those issues should be identified before completion rather than treated as post-closing formalities.

252. Corporate Disputes

We advise and represent companies, shareholders, directors and investors in disputes involving:

share ownership, board control, shareholder oppression, dilution, mismanagement, related-party transactions, share transfers, contractual rights, corporate records, investment, debt recovery and winding up.

The most effective remedy depends upon whether the dispute belongs principally in contractual, company, civil, regulatory or insolvency jurisdiction.

253. Corporate Exit and Closure

Where a company has reached the end of its commercial life, we advise upon appropriate closure.

That can involve easy exit, shareholder sale, business sale, settlement of liabilities, winding up, corporate restructuring or another mechanism dictated by the company’s actual financial position.

The correct exit process protects shareholders and directors from assuming that an inactive company has somehow ceased to exist merely because it no longer trades.

CONCLUSION — COMPANY REGISTRATION IS THE START OF THE CORPORATE LIFE CYCLE

254. A Company’s Legal Structure Should Grow With Its Business

The modern Pakistani incorporation process is significantly more accessible than the corporate-registration procedures of earlier decades.

eZfile has digitised company incorporation.

The Companies Regulations, 2024 have consolidated much of the procedural framework.

• Electronic filings have become routine.
• Foreign investment structures have become more sophisticated.
• Start-ups have access to corporate and foreign-exchange mechanisms that did not exist in the same form a decade ago.
• Yet the central legal questions remain remarkably traditional.
• Who owns the company?
• Who controls it?
• Who owes duties to it?
• Who can bind it?
• Who owns its assets?
• How can new shares be issued?
• What happens to minority shareholders?
• What happens when a shareholder dies?
• How does a foreign investor bring capital in and take value out?
• What happens when directors disagree?
• What happens when the business becomes insolvent?
• And how does the corporate person eventually cease to exist?
• Those are not questions an incorporation portal can answer.
• They require legal structure.

255. The Difference Between a Registered Company and a Well-Structured Company

A registered company possesses a certificate.

A well-structured company possesses something more valuable:

a coherent relationship between ownership, management, finance, regulation and commercial purpose.

Its SECP record corresponds with its true ownership.

Its shareholders understand their rights.

Its board understands its authority.

Its capital has been properly introduced.

Its contracts identify the correct legal entity.

Its IP belongs where investors expect it to belong.

Its tax and regulatory obligations have been identified.

Its foreign investment record supports repatriation.

Its directors can explain how important decisions were authorised.

And if a founder leaves, dies, defaults or falls out with another founder, the company does not immediately descend into institutional chaos.

That is what good company law is supposed to achieve.

256. Why Early Legal Advice Usually Costs Less

Corporate legal work often looks optional when a business is young.

The founders trust each other.

There is little money.

The company has one client.

The brand is not valuable.

Nobody expects litigation.

That is precisely when fundamental governance can be documented most cheaply.

Once a company has substantial turnover, valuable property, multiple shareholders, employees, foreign investors and competing interests, every unresolved legal issue acquires a monetary value.

A founder who casually agreed to 20 per cent ownership when the company was worth PKR 100,000 may litigate fiercely over the same percentage when it is worth PKR 1 billion.

A badly drafted shareholders’ agreement becomes expensive when there is something worth fighting over.

Corporate planning is therefore not about expecting relationships to fail.

It is about ensuring the business survives if they do.

257. Company Formation as Commercial Legal Strategy

At Josh and Mak International, we regard company registration as part of a larger corporate strategy.

• For a small founder-led company, that may require little more than sensible incorporation, appropriate ownership and a clean compliance structure.
• For a family company, succession may be central.
• For a start-up, founder vesting, investment rights and intellectual property may matter most.
• For a foreign subsidiary, security clearance, foreign-exchange documentation and repatriation may dominate.
• For a joint venture, control and deadlock provisions may determine whether the project succeeds.
• For an established business, restructuring, acquisition, shareholder disputes or succession may become the principal legal issue.
• The same Companies Act applies to all of them.
• The legal solution should not therefore be identical.

258. Final Advisory Note

Pakistan’s Companies Act, 2017 and Companies Regulations, 2024 provide an increasingly modern framework for establishing and operating companies.

But company law interacts constantly with other legislation.

Corporate advice may therefore require consideration of:

tax, banking, foreign exchange, labour law, competition law, securities regulation, intellectual property, land law, insolvency, arbitration and sector-specific licensing.

No article, however comprehensive, can replace advice based upon the facts of a specific transaction.

This guide is intended to give business owners, investors and corporate advisers a serious understanding of the architecture within which those decisions are made.

For company formation, Pakistani corporate structuring, shareholder arrangements, foreign investment, corporate compliance, acquisitions, restructuring, company disputes or corporate exit, enquiries may be directed to:

Josh and Mak International

Your Gateway to Honest and Accurate Legal Advice

Website: joshandmakinternational.com

Email: aemen@joshandmak.com

WhatsApp: +92-304-8734889

Pakistan Corporate and Commercial Legal Advisory

This publication provides general legal information as at August 2026. Company, tax, foreign-exchange and regulatory requirements can change and may depend upon the company’s sector, ownership, province, capital, tax year and transaction. Matter-specific advice should be obtained before implementation.

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Our older (pre-2025 ) article appears below:

At Josh and Mak International, we are dedicated to providing a wide range of exceptional corporate services to meet all your business needs. Our team of experienced lawyers and corporate advisors is committed to delivering top-notch solutions with professionalism and expertise. Today, we are thrilled to highlight some of the exceptional services we offer to our valued clients. Read on to discover how we can assist your company in Pakistan:

• Company Formation: We will guide you through the process of registering and incorporating your company, ensuring compliance with all legal requirements. Our experts will prepare and file the necessary documents with the relevant authorities, making the entire process smooth and hassle-free.
• Corporate Governance: We provide expert advice and assistance in corporate governance matters. Our team will ensure that your company complies with all applicable laws and regulations, including drafting and reviewing corporate policies, codes of conduct, and internal control mechanisms.
• Shareholders’ Agreements: Our skilled attorneys will draft, review, and negotiate shareholders’ agreements tailored to your specific requirements. We will establish the rights and obligations of shareholders, ensuring clarity and fairness in the governance of your company.
• Directors’ Duties and Liabilities: We offer guidance on directors’ duties, responsibilities, and potential liabilities under company law. Our team will ensure that your directors are aware of their obligations and assist in compliance with statutory requirements.
• Corporate Restructuring: If your company is considering corporate restructuring, mergers, acquisitions, or consolidations, our experts are here to assist you. We will conduct thorough due diligence, negotiate transaction terms, and prepare the necessary agreements to facilitate a smooth process.
• Corporate Compliance: We understand the importance of compliance and will ensure that your company meets all legal and regulatory requirements. Our team will assist with annual filings, maintenance of statutory registers, and updating company records as necessary.
• Corporate Contracts: We specialize in drafting, reviewing, and negotiating a wide range of corporate contracts. Whether it’s commercial agreements, joint venture agreements, or licensing agreements, our experts will protect your interests and ensure favorable terms.
• Corporate Disputes: Our skilled litigators will represent your company in corporate disputes. Whether it’s shareholder disputes, breach of contract claims, or enforcement of rights, we will advocate for your interests and seek the most favorable resolution through negotiation, mediation, or litigation.

In addition to these services, we offer corporate compliance training programs for corporate environments, regulatory compliance assistance, corporate secretarial services, guidance on corporate ethics and sustainability, and much more. We are your trusted partner in navigating the complex corporate landscape of Pakistan.

Contact Us Today! If you are seeking comprehensive and reliable corporate services, look no further than Josh and Mak International.

Update June 2024

The Companies Regulations 2024 introduce significant amendments and enhancements to the Companies Act 2017, aimed at modernising corporate governance, improving compliance, and facilitating ease of doing business in Pakistan. Key changes include:

1. Reservation of Name and Change Thereof: The new regulations streamline the process for reserving and changing the name of a company. Regulations 4 and 7 under Chapter II specify the procedures and timelines for these actions, making the process more transparent and efficient.
2. Provisions Related to Foreign Companies: Chapter IV, encompassing Regulations 20 to 28, introduces new compliance requirements for foreign companies operating in Pakistan. These regulations mandate detailed reporting and disclosure obligations to ensure foreign entities align with local corporate governance standards.
3. Reporting and Compliance: Chapter V addresses comprehensive reporting and compliance requirements. Specific provisions, such as Sr. Nos. 3, 6, 7, 11, 14, and 15 to 19 of Regulation 30(1), enhance the disclosure standards for companies. The inclusion of detailed annexures and forms ensures uniformity in reporting practices.
4. Companies Registration Offices: Regulations 81(2) and 82 under Chapter VI enhance the operational efficiency of Companies Registration Offices. These changes focus on improving the accessibility and reliability of company registration services across the country.
5. Easy Exit of Defunct Companies: Chapter XII introduces Regulations 144 to 146, which provide a streamlined process for the dissolution of defunct companies. This includes simplified procedures for winding up and removing defunct companies from the register, thus reducing the administrative burden on both the companies and the regulatory authorities.
6. Penalties for Non-Compliance: Chapter XIII specifies penalties for contraventions of the regulations. Regulation 147 imposes strict penalties to ensure compliance, thus reinforcing the regulatory framework’s robustness.
7. Repeal and Savings: Regulation 148 repeals several existing regulations, including the Companies (Incorporation) Regulations 2017, and integrates their provisions into the new regulatory framework. This consolidation aims to eliminate redundancy and streamline the regulatory landscape .
8. Principal Line of Business Reporting: Regulation 36 mandates companies to report their principal line of business within a specified period, ensuring that the registrar has up-to-date information on the nature of business activities conducted by the companies .
9. Alteration of Memorandum and Articles of Association: Regulation 37 introduces a structured process for altering the memorandum and articles of association. This includes requirements for special resolutions, petitions to the Commission, and no-objection certificates from creditors and relevant authorities .
10. Forms and Documentation: The regulations also introduce several new forms and documentation requirements, such as Form-A for annual returns, Form-4 for reporting changes in the principal line of business, and detailed annexures for various compliance aspects .

Overall, the Companies Regulations 2024 represent a comprehensive overhaul of the existing regulatory framework, aligning it with international best practices and addressing the evolving needs of the corporate sector in Pakistan. These changes are designed to enhance transparency, improve corporate governance, and facilitate a more business-friendly environment.

17th of October 2023

Client Alert: Important Compliance Requirements for Annual General Meetings and Statutory Filings under the Companies Act, 2017

To: Our Esteemed Clients

Subject: Mandatory Compliance Post Annual General Meetings (AGM) as per the Companies Act, 2017

Dear Client,

As a part of our ongoing commitment to keep you informed and compliant with the legal requirements, we wish to remind you of the essential obligations under the Companies Act, 2017, particularly concerning the conduct of Annual General Meetings (AGMs) and subsequent statutory filings.

1. Annual General Meeting (AGM) Requirements: Under Section 132 of the Companies Act, 2017 (“the Act”), every company, barring a single member company, must hold an AGM within sixteen months of its incorporation. Subsequently, an AGM is required once every calendar year, no later than 120 days after the financial year’s closure.

2. Post-AGM Statutory Filings: Post holding of the AGM, your company is obliged to file the following documents/statutory returns under the relevant provisions of the Act along with the prescribed filing fees:

a) Annual Return Filing: As mandated under sections 130 and 424(5) of the Act, companies must file: – Form-A for companies with share capital. – Form-B for companies without share capital. – Form-C for companies with no changes in the last filed annual return (except Single member companies & private companies with paid-up capital not exceeding Rs.3.0 Million). – Form-D for inactive companies.

b) Director and Officer Appointments: Form-28 and Form-29 must be filed, if applicable, regarding the appointment/election of directors, Chief Executives, auditors, or other officers, as required under sections 167, 197, and 246 of the Act.

c) Financial Statements Submission: In accordance with sections 233 and 223 of the Act: – Listed Companies must submit within 30 days post-AGM. – Public companies, Section 42 companies, Trade Organizations, and Private companies (with paid-up capital over Rs. 10 Million) must submit within 15 days post-AGM.

d) Declaration of Ultimate Beneficial Owners: Form-45 must be filed as required under section 123-A of the Act and regulation 19-A of the Companies (General Provisions & Forms) Regulations, 2018.

e) Global Register of Beneficial Ownership: Form-31 and Form-32, if applicable, must be filed under section 452 of the Act and regulation 37 of the Regulations.

3. Reminder for Timely Compliance: We urge you to take the necessary steps for the timely filing of the above-mentioned documents/returns. Non-compliance may lead to penal actions under the law against the company and its management.

Note: Please disregard this notice if you have already complied with these filings, if they are not applicable under any other provision of the Act, or if the matter is currently sub-judice in a legal forum or court of law.

For any assistance or clarification, please feel free to contact us. We are here to support you in maintaining compliance and navigating through these legal requirements.

Sincerely,

Josh and Mak International 

1st of October, 2023

Client Information Article: Post-Incorporation Statutory Filing and Statutory Requirements Under the Companies Act, 2017

Introduction: After a company is incorporated under the Companies Act, 2017, there are several statutory filings and requirements that must be adhered to. This article provides a comprehensive overview of these obligations to ensure your company remains compliant with the law.

A. Immediate Filing After Incorporation:

1. Establishment of Registered Office Address (Section 21)
   • Applicable to: All companies
   • Time Frame: Within 30 days of incorporation
   • Return to be filed: Form 21
   • Note: Applicable if the correspondence address instead of the registered office address is provided in the incorporation application (Annexure IV).
2. Payment of Subscription Money (Section 17)
   • Applicable to: All companies having share capital
   • Time Frame: Payment within 30 days of incorporation; Reporting within 45 days from incorporation.
   • Return to be filed: Annexure VII along with a certificate from a practicing CA or CMA.
3. Appointment of First Auditor(s) (Sections 246(1), 223(5), 197)
   • Applicable to: All companies
   • Time Frame: Within 90 days of incorporation
   • Return to be filed: Form 29 within 15 days from the appointment of auditor(s).

B. Annual Filing:

1. Annual Return (Section 130)
   • Applicable to: All Companies (in case of changes in particulars in the last annual return)
   • Time Frame: Within 30 days of AGM; for listed companies, an extension of up to 15 days is possible.
   • Return to be filed: Form A (companies with share capital) or Form B (companies without share capital).
   • Note: Filing not required if no change of particulars since the last annual return.
2. Filing of Financial Statements (Sections 233, 234)
   • Applicable to: Listed companies, other companies excluding private and single-member companies with paid-up capital not exceeding Rs. 10 million, foreign companies.
   • Time Frame: Listed companies – 21 days before AGM; Other companies – 30 days of AGM (listed) or 15 days (others).
   • Return to be filed: Financial statements in compliance with financial reporting standards.

C. Quarterly Filing:

1. Filing of Quarterly Financial Statements (Section 237)
   • Applicable to: Listed companies
   • Time Frame: Within 30 days of the close of 1st and 3rd quarters; 60 days for the 2nd quarter.
   • Return to be filed: Quarterly financial statements.

D. Event-Based Filing After Incorporation:

1. Appointment of Directors, Chief Executive (Sections 187, 167, 197)
   • Applicable to: All companies
   • Time Frame: Within 14 days from the election or office falling vacant.
   • Return to be filed: Form 28 and 29 within 15 days from appointment.
2. Appointment of Subsequent Auditor(s) (Section 246(2), 223(5), 197)
   • Applicable to: All companies
   • Time Frame: At AGM or within 30 days after a casual vacancy.
   • Return to be filed: Form 29 within 15 days of appointment.

Disclaimer: This article is intended to provide a basic guideline and is not a substitute for the bare provisions of law. For a detailed understanding, it is advised to consult the Companies Act, 2017 and its subsidiary regulations.For more information please email us at aemen@joshandmak.com or send us a WhatsApp Message at  +92-304-8734889

Can A Company in Pakistan Alter Its Memorandum?

Update 12 July 2023

Easy Exit Regulations and Section 426 of the Companies Act 2017. For more information click here

Section 426 of the Companies Act 2017 provides a convenient solution for defunct companies that have ceased operations and have no known assets and liabilities. This provision, commonly known as the “easy exit” provision, allows such companies to apply to the registrar to strike their names off the register of companies and dissolve their legal entity.

Key Provisions:

1. Application for Striking off: A defunct company that meets the criteria mentioned in Section 426(1) may apply to the registrar in the specified manner. The application should be accompanied by the prescribed fee mentioned in the Seventh Schedule of the Act.
2. Examination and Notice: Upon receipt of the application, the registrar will examine its merits. If satisfied, the registrar may publish a notice as per Section 425(3) of the Companies Act, 2017. This notice will be published in the Official Gazette and on the Securities and Exchange Commission of Pakistan’s website. It will state that unless cause is shown to the contrary, the name of the applicant company will be struck off the register of companies and the company will be dissolved.
3. Dissolution of the Company: At the expiration of the time mentioned in the notice, unless any objection is received, the registrar may strike off the name of the company from the register. A notice of such striking off will be published in the Official Gazette. Upon publication of this notice, the company shall stand dissolved. It is important to note that the liability, whether criminal, civil, or otherwise, of every director, officer, and member of the company will continue and may be enforced as if the company had not been dissolved.

Benefits and Considerations:

• The easy exit provision streamlines the dissolution process for defunct companies, eliminating the need for a formal winding up procedure.
• By availing themselves of this provision, companies can save time, effort, and resources that would otherwise be required for a traditional winding up process.
• It is crucial to ensure compliance with the eligibility criteria and procedural requirements outlined in Section 426 and other relevant provisions of the Companies Act 2017.
• Directors, officers, and members should be aware that their liabilities may continue even after the company is dissolved, as specified in the proviso to Section 426(3).

Companies (Easy Exit) Regulations, 2014 for Streamlined Dissolution of Companies

The Companies (Easy Exit) Regulations, 2014 under section 426 of the Companies Act 2017 introduced by the Securities and Exchange Commission of Pakistan (SECP) provide a simplified and streamlined process for companies in Pakistan that have ceased operations and wish to strike off their names from the Register of Companies. This regulatory framework offers an efficient avenue for companies to conclude their business journey and dissolve their legal entity without undergoing a traditional winding up process.

Eligibility and Advantages:

• Private or public unlisted companies that have ceased operations and have no significant assets or liabilities are eligible for the easy exit process.
• The Companies (Easy Exit) Regulations provide advantages such as a simplified procedure, cost-effectiveness, and efficient closure of business operations.
• By opting for the easy exit route, companies can save time, effort, and resources associated with a voluntary winding up process.

Application Process:

1. Prepare Documentation: Companies must gather and prepare the necessary documents, including a formal request for striking off, a statement of assets and liabilities, and a board resolution approving the dissolution.
2. Submit Application: The application, along with supporting documents, should be submitted to the registrar.
3. Registrar’s Review: The registrar will review the application and accompanying documents to ensure compliance with the Companies (Easy Exit) Regulations, 2014.
4. Striking Off: If the application is deemed valid, the registrar will proceed with striking off the company’s name from the Register of Companies.

Foreign Companies and Exclusions:

• Foreign companies, as defined under the Companies Act 2017, are not eligible for the Easy Exit Regulations.
• Certain categories of companies, including subsidiaries of listed companies, public sector companies, trade organizations, companies with outstanding liabilities, companies involved in illegal activities, and others, are excluded from the provisions of the Companies (Easy Exit) Regulations, 2014.

Companies seeking to dissolve their entities can take advantage of the Companies (Easy Exit) Regulations, 2014 to save time, costs, and administrative burdens associated with traditional winding up procedures. It is recommended to consult legal professionals familiar with company law and regulations to ensure compliance throughout the process.

Due Diligence Process with Certified Copies of Company Documents (Memorandum and Articles of Association, Certificate of Incorporation)

Clarification (2nd July 2023) about Registration of Pakistani companies with foreign directors and shareholders.

Special advice for Foreign Companies Setting Up Business in Pakistan

Legal Note: SECP Instruction No.4 of 2011 Revision – Facilitating Foreign Investors

As per the revised SECP Instruction No.4 of 2011, companies with foreign shareholders and directors are now required to obtain a No Objection Certificate (NOC) from the Ministry of Interior Islamabad during the company incorporation process. The SECP collects information related to foreign shareholders and directors and forwards it to the Board of Investment, which then submits it to the Ministry of Interior/Security Agencies for security clearance.

Previously, this security clearance process took around 3-4 months after the SECP application filing, causing significant delays and complexities in the incorporation process. Consequently, foreign investors were discouraged from investing in Pakistan. To address this issue, the Pakistan Board of Investment revised the rule to accommodate the interests of foreign investors.

Under the new revision, companies incorporated with foreign shareholders and directors are issued a ‘Certificate of Incorporation’ to initiate their business activities in Pakistan before receiving the security clearance from the Ministry of Interior. The only condition is that foreign directors/shareholders must submit an undertaking stating their subscription to shares and/or agreement to serve as directors, and they will appoint replacements if their security clearances are refused. The security clearance process, still taking 3-4 months, proceeds separately.

This positive development allows foreign entities to commence business within a few days of filing their incorporation application, eliminating unnecessary delays and frustrations for foreign investors. As a result, foreign investors can access the Pakistani market more efficiently, fostering a conducive environment for foreign investment in Pakistan.

Update 1 July 2023

Post Incorporation Compliance in Pakistan

Legal Update: Compliance with Section 123A of Companies Act, 2017 and Regulation 19A of Companies (General Provisions and Forms) Regulations, 2018

In accordance with the amendment/insertion of Section 123A of the Companies Act, 2017 through the Companies (Amendment) Act, 2020 on August 26, 2020, and the subsequent insertion of regulation 19A and additional Forms including Form 45 in the Companies (General Provisions and Forms) Regulations, 2018, vide SRO 928(I)/2020 dated September 28, 2020, it is now mandatory for all companies to obtain, maintain, and update timely particulars of ultimate beneficial owners, including any changes therein.

Under Section 123A of the Act, the term “ultimate beneficial owner” refers to a natural person who directly or indirectly owns or controls a company, holding at least twenty-five percent shares or voting rights or exercising effective control through other specified means.

Consequently, every company is required to file a declaration of compliance with Section 123A of the Act to the relevant registrar by filing Form 45, ensuring compliance with the provisions of regulation 19A of the Regulations. Compliance with the amendment in Section 123A of the Act was required within three months from its enforcement, i.e., by August 26, 2020.

Based on the records maintained by this office, it has been observed that your company has not filed Form 45 with the registrar, thereby prima facie violating the mandatory provisions of sub-section (2) of Section 123A of the Act and regulation 19A of the Regulations. Such non-compliance attracts penalties as specified in sub-section (3) of Section 123A of the Act, reproduced below:

“(3) Any contravention or default in complying with the requirements of this section shall be liable in case of: (a) a director or officer of the company or any other person, to a penalty which may extend to one million rupees; and (b) the company, to a penalty which may extend to ten million rupees.”

Therefore, all companies in Pakistan, as well as their chief executives and directors, are hereby urged to ensure immediate compliance with the provisions of sub-section (2) of Section 123A of the Act read with regulation 19A of the Regulations by filing Form 45. Failure to comply may result in legal proceedings being initiated against the company, its chief executive, and directors for violating the aforementioned provisions of the Act.

Do you wish to know about Company Registration  in Pakistan? Read our FAQS  below  to help you in registering a company in Pakistan.

Below are a few frequently asked questions about Company Registration in Pakistan from our clients, and members of the public.

What are the benefits of registering a private limited company in Pakistan?

As per the Companies Act, 2017 in Pakistan, there are numerous benefits of registering a private limited company, including limited liability protection to its shareholders, legal recognition, perpetual succession, and the ability to raise capital through the issuance of shares. Additionally, private limited companies in Pakistan are subject to a favorable tax regime, allowing for tax incentives and exemptions, which can significantly reduce the tax burden of the company. Furthermore, private limited companies can take advantage of the ease of transferability of shares, greater access to funding, and the ability to attract talented employees through the grant of employee stock options. Registering a private limited company in Pakistan can provide numerous benefits for entrepreneurs and businesses looking to establish a strong and sustainable business presence in the country.

How to register a private limited company in Pakistan and what are the legal requirements?

Step 1: Name Reservation The first step is to apply for name reservation with the Securities and Exchange Commission of Pakistan (SECP) through their online eServices portal. The name should not be similar to any other company’s name already registered with the SECP and should not contain any prohibited terms. The SECP will generally approve or reject the name within 2-3 working days.

Step 2: Preparation of Documents The next step is to prepare the necessary documents, including the Memorandum and Articles of Association (MOA and AOA), Form 1 (Declaration of Compliance), Form 21 (Notice of Situation of Registered Office), and Form 29 (Consent to Act as Director). The MOA and AOA set out the company’s objectives, share capital, and internal management rules.

Step 3: Submission of Documents After preparing the documents, they need to be submitted to the SECP through their online eServices portal, along with the required fee. The SECP will review the documents and may ask for additional information or clarification.

Step 4: Certificate of Incorporation Once the SECP is satisfied with the documents, they will issue a Certificate of Incorporation, which signifies the legal recognition of the company’s existence. The certificate contains the company’s name, registration number, date of incorporation, and registered office address.

Step 5: Registration with Other Authorities After getting the Certificate of Incorporation, the company needs to get registered with other authorities, such as the Federal Board of Revenue (FBR) for tax purposes, the Employees’ Old-Age Benefits Institution (EOBI), and the Social Security Institution (SSI) for employee benefits.

Legal Requirements:

– At least two shareholders and two directors are required to incorporate a private limited company in Pakistan.

– Foreign nationals and companies can also register a private limited company in Pakistan, subject to certain conditions.

– The minimum authorized share capital required for a private limited company is Rs. 100,000. – The registered office of the company must be in Pakistan.

– The directors and shareholders must obtain a National Tax Number (NTN) and a Sales Tax Registration Number (STRN) from the FBR.

– Annual filings, such as the annual return, audited financial statements, and tax returns, must be submitted to the SECP and the FBR.

What are the documents needed for company registration in Pakistan and how to prepare them?

Memorandum of Association (MOA): MOA is a legal document that sets out the company’s objectives and purpose, along with the authorized share capital of the company. The MOA should be prepared in accordance with the Companies Act, 2017 and should be signed by the subscribers to the memorandum.

Articles of Association (AOA): AOA is another legal document that outlines the rules and regulations governing the internal management of the company. The AOA should be prepared in accordance with the Companies Act, 2017 and should be signed by the subscribers to the memorandum.

Form 1 (Declaration of Compliance): Form 1 is a declaration that the requirements of the Companies Act, 2017 have been complied with. This form should be signed by the company’s directors and filed with the SECP.

Form 21 (Notice of Situation of Registered Office): Form 21 provides the details of the company’s registered office address. The form should be signed by a director or company secretary and filed with the SECP.

Form 29 (Consent to Act as a Director): Form 29 provides the details of the company’s directors, along with their consent to act as directors. The form should be signed by the director and filed with the SECP.

Bank Certificate: A bank certificate is required to verify that the company’s paid-up capital has been deposited in the company’s bank account.

CNIC and Passport Copies: Copies of the national identity card (CNIC) and passport of all directors and shareholders are needed for company registration. To prepare these documents, we do recommend  seeking the assistance of a legal expert or a company registration service provider in Pakistan. Josh and Mak International can assist you with the Company Registration process for an affordable legal fee which comes with high quality legal services for all aspects of your business start ups legal requirements.

Foreign Investments in Startups in Pakistan

The recent rise in foreign investment in startup businesses in Pakistan can be attributed to the significantly lower taxes imposed on such businesses and the potential for high profits. This article aims to provide a legal opinion on raising foreign investments for startups in Pakistan and the procedures involved.

Discouragement of Cash Transactions: The Government of Pakistan has implemented various policies to discourage undocumented transactions and promote a transparent economy. Cash transactions pose several drawbacks, particularly in legal disputes. If a party alleges a cash payment without proper evidence, it becomes challenging to establish the veracity of such transactions. Conversely, transactions made through banking channels carry a presumption of authenticity and can be easily substantiated in court.

Procedure for Foreign Investment in Startups: The Foreign Exchange Manual, specifically Sub-Clause B of Clause 13 in Chapter 20, issued by the Exchange Policy Department of the State Bank of Pakistan, outlines the detailed procedure for raising capital from non-resident individuals or entities for innovative and scalable businesses with high growth potential. This procedure not only safeguards the interests of foreign investors but also ensures documentation of investments.

Eligibility for Foreign Investment: Any non-resident individual or entity established outside Pakistan, including foreign individuals residing abroad, can make foreign investments in startup businesses in Pakistan.

General Requirements for Foreign Investment in Startups: To be eligible for foreign investment, a startup business in Pakistan must meet the following criteria:

1. It must be registered as a company under the Companies Act, 2017.
2. The company’s age must not exceed seven years.
3. The company’s revenue since its incorporation must be below PKR 2 billion.
4. The company’s equity, as per the latest audited accounts, must be below PKR 300 million.

Procedure for Foreign Investment in Startups: The step-by-step procedure for raising foreign investment in startups in Pakistan is as follows:

1. The eligible company can incorporate a holding company abroad and remit initial incorporation expenses not exceeding USD 10,000.
2. Existing shareholdings of the resident company can be swapped to mirror the shareholding in the holding company within 30 days.
3. The resident company must acquire shares issued by the holding company by making a payment in Pakistani Rupees. The resident company can issue shares of equal value to the holding company on a repatriation basis.
4. Non-resident investors can subscribe to shares of the holding company as per their equity investment.
5. The holding company shall repatriate funds raised from abroad to Pakistan as equity-based investments in the resident company.
   • At least 80% of funds raised annually (up to USD 1 million) must be remitted to Pakistan.
   • Subsequently, at least 50% of funds raised annually (up to USD 10 million) must be remitted to Pakistan on a cumulative basis.
6. Once the shares are subscribed, the resident company can remit dividends to the holding company. Non-resident directors/shareholders will receive their respective transfer payments in their overseas accounts.

Tax on Remittance of Dividends to Non-resident Persons: In Pakistan, businesses are allowed to deduct all legitimate business expenses in compliance with the procedure described in Section 21 of the Income Tax Ordinance, 2001. Taxes are levied on the net income of business entities, and dividends from net income can be transferred to the holding company for distribution among non-resident directors/shareholders.

Foreign investments in startup businesses in Pakistan offer attractive incentives due to favorable taxation and high profit potential. By following the prescribed procedures and adhering to legal requirements, foreign investors can engage in secure and transparent transactions. It is essential to consult legal professionals for guidance and to ensure compliance with Pakistani laws and regulations.

How much does it cost to register a private limited company in Pakistan?

The cost of registering a private limited company in Pakistan depends on various factors, such as the authorized share capital, legal fees, and other related expenses. Here is a breakdown of the estimated costs:

1. SECP Fee: The SECP fee for name reservation is Rs. 200, and the fee for incorporation is based on the authorized share capital of the company and online and offline registration. For example, if the authorized share capital is up to Rs. 100,000, the SECP fee for online filing is Rs. 2200, and if it is between Rs. 100,001 to Rs. 500,000, the SECP fee is starting from Rs. 2200 to 5000.
2. SECP Fee for authorized share capital: SECP fee is payable based on the authorized share capital of the company. The duty can be calculated on the SECP website for both online and offline registration; here https://www.secp.gov.pk/company-formation/fee-calculator/company-incorporation-fee-calculator/
3. Other Expenses: Other expenses may include bank charges for opening a company bank account, notary fees for attesting documents, and other miscellaneous expenses. These expenses can range from Rs. 5,000 to Rs. 10,000 or more

What are the tax implications of registering a private limited company in Pakistan?

    Registering a private limited company in Pakistan has various tax implications, some of which are as follows

1. Corporate Income Tax: Private limited companies in Pakistan are subject to corporate income tax on their taxable income. The current corporate income tax rate in Pakistan is 29% for companies with an annual turnover of up to Rs. 50 million, and 30% for companies with an annual turnover exceeding Rs. 50 million.
2. Withholding Tax: Private limited companies are required to deduct withholding tax on payments made to suppliers, contractors, employees, and other parties. The withholding tax rates vary depending on the nature of the payment and the status of the recipient.
3. Sales Tax: Private limited companies are required to register for sales tax with the Federal Board of Revenue (FBR) if their annual turnover exceeds Rs. 10 million. The current sales tax rate in Pakistan is 17%.
4. Capital Gains Tax: Private limited companies are subject to capital gains tax on the disposal of assets, such as property, shares, and other investments. The capital gains tax rate varies depending on the nature of the asset and the holding period.
5. Dividend Tax: Private limited companies are required to pay dividend tax on the distribution of profits to shareholders. The dividend tax rate is currently 15% for resident shareholders and 20% for non-resident shareholders.
6. Annual Filings: Private limited companies are required to file annual tax returns, audited financial statements, and other related documents with the FBR and the Securities and Exchange Commission of Pakistan (SECP).

What are the compliance requirements for private limited companies in Pakistan?

Private limited companies in Pakistan are required to comply with various legal and regulatory requirements. These requirements are aimed at ensuring transparency, accountability, and protection of stakeholders’ interests. Some of the key compliance requirements for private limited companies in Pakistan are:

1. Registration: Private limited companies are required to register with the Securities and Exchange Commission of Pakistan (SECP) under the Companies Act, 2017. The registration process involves filing of various documents and information, including the company’s memorandum and articles of association, directors’ details, share capital structure, etc.
2. Annual General Meeting: Private limited companies are required to hold an Annual General Meeting (AGM) of shareholders within six months of the end of each financial year. The AGM is required to approve the company’s financial statements, appoint auditors, and transact any other business related to the company’s affairs.
3. Financial Reporting: Private limited companies are required to prepare and file annual financial statements with the SECP within 30 days of holding the AGM. The financial statements must comply with the International Financial Reporting Standards (IFRS) and include a balance sheet, profit and loss account, cash flow statement, and notes to the accounts.
4. Audit: Private limited companies are required to appoint a qualified auditor to audit their financial statements. The auditor’s report must be included in the company’s annual financial statements.
5. Tax Compliance: Private limited companies are required to comply with various tax laws and regulations, including the Income Tax Ordinance, 2001, Sales Tax Act, 1990, and Federal Excise Act, 2005. The company is required to file tax returns and pay taxes on time.
6. Statutory Registers: Private limited companies are required to maintain various statutory registers, including the register of members, directors, charges, and transfers of shares. These registers must be updated and made available for inspection by shareholders and other stakeholders.
7. Corporate Governance: Private limited companies are required to comply with the Code of Corporate Governance issued by the SECP. The code sets out principles and guidelines for ensuring transparency, accountability, and protection of stakeholders’ interests. Failure to comply with these compliance requirements can result in penalties, fines, and legal action against the company and its directors. Therefore, it is important for private limited companies in Pakistan to ensure timely and accurate compliance with all legal and regulatory requirements.

What are the legal liabilities of directors and shareholders of a private limited company in Pakistan?

In Pakistan, the legal liabilities of directors and shareholders of a private limited company are governed by the Companies Act, 2017. Below are some of the key provisions of the law that outline these liabilities:

1. Directors’ liabilities: Section 182 of the Companies Act, 2017 outlines the liabilities of directors of a company. It states that a director of a company shall be personally liable for any act or omission that is in breach of his/her duties as a director, or that is in contravention of any provision of the Companies Act, 2017. In addition, a director may also be held liable for any loss or damage suffered by the company or its shareholders as a result of his/her breach of duty or negligence.
2. Shareholders’ liabilities: Under the Companies Act, 2017, shareholders of a private limited company are generally not personally liable for the debts and liabilities of the company. However, there are some exceptions to this rule. For example, if a shareholder has personally guaranteed a loan or debt of the company, he/she may be held liable for the repayment of that debt. In addition, if a shareholder has acted in a manner that is fraudulent or unlawful, he/she may be held personally liable for any loss or damage suffered by the company or its shareholders. Overall, it is important for directors and shareholders of a private limited company in Pakistan to be aware of their legal liabilities and to act in accordance with their duties and obligations under the Companies Act, 2017.

How to choose a suitable name for a private limited company in Pakistan?

Choosing a suitable name for a private limited company in Pakistan requires careful consideration and adherence to legal requirements. Here are some suggestions to follow:

1. Check availability: Conduct a search on the Securities and Exchange Commission of Pakistan (SECP) website to ensure that the name you want is available. You should also check the Trademark Registry to ensure that the name is not already registered.Application for availability of company name is processed as per section 10 and 26 of the Companies Act, 2017 read with regulation 3 and 4 of the Companies Incorporation Regulations, 2017
2. Follow legal requirements: According to the Companies Act 2017, the name of the company must end with the words “(Pvt) Ltd” and should not be similar or identical to an existing company name. The name must also not contain any prohibited words or phrases.Prohibited words /restricted words are available in Regulation 4(2) of the Companies Incorporation Regulations, 2017 along with criteria
3. Reflect the company’s nature: The name should reflect the nature of your business and be easy to remember. Avoid using generic names that do not differentiate your company from others.

If you are using the word ‘Group of Companies’ then please refer to  Regulation 4(2)(xix) of the Companies (Incorporation) Regulations, 2017. The word GROUP may be allowed to company where it implies several companies under single corporate ownership and applicants have to provide evidence of subsidiary/associate relationship with two or more companies. In case if there already are  two companies, the proposed company has to provide board resolution from the already incorporated companies to form a group company.

As per Regulation 4(2)(xx) of the Companies (Incorporation) Regulations, 2017. The word Holding may be allowed in case of a company where it qualifies to be a holding company as defined in clause 37 of sub-section (1) of section 2 of the Companies Act, 2017.

As per Regulation 4(2)(xxiii) of the Companies (Incorporation) Regulations, 2017. Name of Company containing names of two countries i.e., Pakistan an any other foreign country may be allowed in case of companies where documentary evidence is provided to support the fact that the company is a Joint Venture of two Governments or companies or individuals of two relevant countries.

If any foreign company is incorporating a subsidiary in Pakistan they are required to provide duly signed board resolution of their foreign company/parent company at the time of name reservation for the Pakistani Subsidiary.

What are the common challenges faced by private limited companies in Pakistan and how to overcome them?

Private limited companies in Pakistan often face a range of legal challenges that can impede their ability to operate effectively and efficiently. Some of the most common challenges include compliance with tax laws and regulations, maintaining proper records and financial statements, ensuring corporate governance and compliance with statutory requirements, dealing with disputes and litigation, and managing risks associated with business operations. One of the most effective ways to overcome these challenges is to work closely with a qualified legal advisor who has experience in Pakistani company law.

Our team of seasoned experts at Josh and Mak International can help companies navigate the complexities of the legal landscape and ensure that they are meeting their obligations and operating within the bounds of the law. For example, we can help a Pakistani company ensure that it is in compliance with tax laws and regulations by providing guidance on tax planning, filing requirements, and remittance of taxes. We can also help a Pakistani company maintain proper records and financial statements by providing assistance with accounting principles and practices, financial reporting, and auditing.

Corporate governance is another area where our legal advisors can provide valuable assistance. We can help companies establish effective corporate governance structures, develop policies and procedures to ensure compliance with statutory requirements, and provide guidance on risk management and mitigation strategies. When it comes to disputes and litigation, legal advisors can provide representation and guidance on dispute resolution strategies, alternative dispute resolution methods, and litigation management. They can also provide guidance on risk management and insurance strategies to help companies minimize their exposure to legal liabilities. With the right guidance and legal support, Pakistani companies can navigate the legal landscape and ensure that they are meeting their obligations and operating within the bounds of the law.

What happens once the Public/Private Company is registered?

The subscriber/entrepreneur will receive a Certificate of Incorporation issued electronically or in physical form. Once the certificate of incorporation is received, a private company /single member company can start its function.

A public company can start its business after a duly verified declaration (as per the format provided in the Companies (Compliance and Reporting) Regulations, 2017) regarding compliance with the conditions specified in Section 19(1) of the Act has been filed by the chief executive / one of its director and the secretary and the same has been accepted and registered by the registrar.

What additional documents are required in case of a foreign company registering as a subscriber or director in Pakistan?

Duly certified copies of the following documents, (to be certified by public officers/notaries public of the country of origin and signed by a Pakistani diplomat posted in that country)

• BOD (Board of Directors) resolution of the foreign company specifying proposed shareholding and name of nominee director
• Certificate of incorporation/business license of the foreign company
• Copy of the statute/charter/memorandum & articles of association or other instrument constituting or defining the constitution of the foreign company
• An Undertaking by the foreign company and the nominee director/foreign director
• Latest Annual Return of the foreign subscriber company showing the details of its directors
• Business Profile of the foreign company (attestation not required)
• Biodata of the Company (attestation not required)

How can someone get a certificate of incorporation?

The company incorporation process in Pakistan is end-to-end digitized. After the company is incorporated, a digitally signed certificate of incorporation is sent to companies through email, the same can also be downloaded after login to e-Services at the SECP Website.

Where can you get a combined certificate of EOBI, PESSI & SESSI?

SECP data is integrated with EOBI, PESSI, SESSI, and Labour, excise & Taxation, and Anti-Narcotics Department for registration with these departments. This information is optional while submitting an application for incorporation. The combined certificate is uploaded on the eService portal once the company is incorporated

Where can you get an NTN for a Pakistani company?

SECP data is integrated with FBR for registration of NTN. Information provided by the applicant during the filling incorporation process is forwarded to FBR for registration of NTN. NTN is issued by FBR if complete/accurate information has been provided by the applicant.

Q and A on the Companies Act 2017

Who is an advocate under the Companies Act 2017?

An“advocate” shall has the same meaning as assigned to it in section 2 of the Legal Practitioners and Bar Councils Act, 1973 (XXXV of 1973);

What are associated companies” and “associated undertakings” under the Companies Act 2017?

 “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 if 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 percent 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 percent of the voting power in that company or undertaking; or if the companies or undertakings are under common management or control or one is the subsidiary of another.

What is authorised capital” or “nominal capital”?

 As per the Companies Act 2017 “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.

What is a banking company?

 A“banking company” as referred to in the 2017 Act means a banking company as defined in clause (c) of section 5 of the Banking Companies Ordinance, 1962 (LVII of 1962);

 What does “beneficial ownership of shareholders or officer of a company” mean?

As per the 2017 Act,  ownership of securities beneficially owned, mean 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.

Control in relation to securities means the power to exercise a controlling influence over the voting power attached thereto.Provided further that in case a substantial shareholder is a non-natural person, only those securities will be treated beneficially owned by it, which are held in its name.

For the purpose of the 2017 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 percent 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;

What does the term book and paper refer to under the Companies Act 2017?

The term “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.

Furthermore  “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;

What does “central depository” mean under the Companies Act 2017?

 The term “central depository” has the same meaning as assigned to it under the Securities Act, 2015 (III of 2015);

Other significant definitions under the Companies Act 2017 include :

• A “chartered accountant” has the same meaning as assigned to it under the Chartered Accountants Ordinance, 1961 (X of 1961);
• A “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;
• A “chief financial officer” means an individual appointed to perform such functions and duties as are customarily performed by a chief financial officer;
• The SECP “Commission” shall have the same meaning as assigned to it under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997)

What laws have been repealed by the Companies Act 2017 ?

 Companies Act, 1913 (VII of 1913), Companies Ordinance, 1984(XLVII of 1984), Companies Ordinance, 2016 (VI of 2016) have been repealed by the new law.

What is the difference between a company limited by guarantee and company limited by shares as per the Companies Act 2017?

A “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.A “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;

What is a Company Secretary under the Companies Act 2017?

A “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;

What is a “cost and management accountant” under the Companies Act 2017?

It has the same meaning as assigned to it under the Cost and Management Accountants Act, 1966 (XIV of 1966);

Are electronic documents recognized under the Companies Act 2017?

A “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;Also “e-service” means any service or means provided by the Commission for the lodging or filing of electronic documents and an “electronic document” includes documents in any electronic form and scanned images of physical documents.

How is a private company defined in the Companies Act 2017 ?

A“private company” under the Companies Act 2017 means a company which, by its articles-

(a) restricts the right to transfer its shares (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.

What is a special resolution under the Companies Act 2017?

 A “special resolution” under the Companies Act 2017 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.Given 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;

How does the Companies Act 2017 define Startup Company/Companies?

As per the Companies Act a “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

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

What kind of a company is not a startup company under the Companies Act 2017?

As per the Companies Act 2017, a company formed by the splitting up or re-construction of an existing company shall not be considered as a startup company.

What is a subsidiary company under the Companies Act 2017?

 A“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,

For the purposes of the 2017 Act:

 (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;

A“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.

What is an unlimited Company under the Companies Act 2017?

An  “unlimited company” means a company not having any limit on the liability of its members.

 Which court has jurisdiction under the Companies Act 2017?

Jurisdiction of the Court and creation of Benches.The Court having jurisdiction under this Act shall be the High Court having jurisdiction in the place at which the registered office of the company is situated.This means that no civil court as provided in the Code of Civil Procedure, 1908 (Act V of 1908) or any other court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Court is empowered to determine by or under this Act.

What factors determine the territorial jurisdiction of the high court to wind up a company?

For the purposes of jurisdiction to wind up companies, the expression “registered office” means the place which has longest been the registered office of the company during the one hundred and eighty days immediately preceding the presentation of the petition for winding up.

In each High Court of cities across Pakistan, one or more benches on permanent basis, each to be known as the Company Bench, are constituted by the Chief Justice of the High Court to exercise the jurisdiction vested in the High Court under the Companies Act 2017 Act.The Benches constituted under the Companies Ordinance, 1984 (XLVII of 1984), continue to function accordingly unless otherwise notified by the respective Chief Justice of the High Court:There is a Registrar to be known as “Registrar of the Company Bench” duly notified by the Chief Justice of the respective High Court who is assisted by such other officers as may be assigned by the Chief Justice of the respective High Court.The Registrar of the Company Bench performs all the functions assigned to it under this Act including all ministerial and administrative business of the Company Bench such as the receipt of petitions, applications, written replies, issuance of notices, service of summons and such other functions or duties as may be prescribed under section 423 of the Companies Act 2017.The Chief Justice of the respective High Court, if deemed appropriate, may also establish a secretariat in each Company Bench of the respective High Court in such form and manner to provide secretarial support and to perform such functions as may be prescribed under section 423 of the Companies Act 2017.

What is the procedure of the Court and appeal under the Companies Act 2017?

All written submissions to the Court under this Act shall be filed with the Registrar of the Company Bench.

For the purposes of this Act, written submissions include :

• a petition or application setting out a concise statement of facts,
• grounds and the relief claimed;
• a written reply with particulars of set off, if any;
• an affidavit of facts by the petitioner or applicant, or respondent, as the case may be, including affidavits, if required, of other persons in support of the case, duly attested by the oath commissioner, or as may be provided under the rules;
• any other relevant documents in possession of the petitioner or applicant or respondent, as the case may be;
• any application for discovery of documents 3[or any category or classes of documents] or interim injunction, if required;
• a list of any case law along with a summary of the same on which the petitioner or applicant is placing reliance;
• address for effecting service, mobile number, email and fax or any other mode notified by the Court; and
• any other document as may be required by the Registrar of the Company Bench.

Where any petition or application is filed under any provision of this Act, it may be issued by the Registrar of the Company Bench along with a copy of the petition or application and the documents annexed therewith and the same shall be served on the respondent through the bailiff or process-server of the Court, through registered post, acknowledgement due, by courier and by publication in one English language and one Urdu language daily newspaper and, in addition, if so directed by the Court through electronic modes, and the service duly effected through any one of the modes mentioned under this sub-section shall be deemed to be valid service.

Where the respondent fails to file the written reply a report shall be submitted by the Registrar of the Company Bench before the Court and the Court may pass necessary orders to proceed exparte and announce the final order on the basis of the documents available on record.

The Registrar of the Company Bench, on completion of receipt of all written submissions and after ensuring that all copies of such written submissions are duly supplied to the parties as per procedure laid down by the Court, shall present the case file to the Court on a day fixed under notice to the parties, within forty-five days of the first service of notices or such extended time as may be granted by the Court.

The Court after consulting the counsel of the parties shall fix a date and allocate time for hearing of the case. No adjournment shall be granted once the Court has fixed a date of hearing under the 2017 Act and it will be duty of the parties to ensure the presence of their respective counsel or in absence of the counsel make alternate arrangements.Only in exceptional circumstances beyond control of a party, the Court may grant another opportunity of hearing subject to the payment of an amount of rupees ten thousand or such higher amount as may be determined by the Court as costs to be paid to the Court.

The Registrar of the Company Bench shall have all the powers of the Civil Court under the Code of Civil Procedure, 1908 (V of 1908) for the purposes of execution of service and summoning of deponents and conducting cross examination in accordance with the directions of the Court.

The petition presented before the Court shall be decided within a period of one hundred and twenty days from the date of presentation of the case and for this purpose the Court may, if it is in the interest of justice, conduct the proceedings on a day to day basis and if the Court deems fit it may impose costs which may extend to one hundred thousand rupees per day or such higher amount as the Court may determine against any party to the proceeding causing the delay.

The Court may, at any time, take notice of serious misstatements and material non-disclosure of facts by any party to the proceedings and dismiss the petition or application or close the right of defence of the respondent with costs of the proceedings and impose a fine which may extend to one hundred thousand rupees whichever is higher and pass a final order.

The Registrar of the Company Bench shall place any application for interim relief including any interlocutory order before the Court for adjudication immediately upon its filing.

Any person aggrieved by any judgment or final order of the Court passed in its original jurisdiction under this Act may, within sixty days, file a petition for leave to appeal in the Supreme Court of Pakistan but no appeal or petition shall lie against any interlocutory order of the Court.

The provisions of the Qanun-e-Shahadat (Order)1984 (P.O. No. X of 1984) and the Code of Civil Procedure, 1908 (Act V of 1908) do not apply to the proceedings under the Companies Act 2017 except to such extent as the Court may determine in its discretion.

Is there a legal obligation in Pakistan  to register certain associations, partnerships as companies?

 Under Section 9(1) of the Companies Act 2017 no association, partnership or entity consisting of more than twenty persons shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association, partnership or entity, or by the individual members thereof, unless it is registered as a company under the Companies Act 2017.

This section does not apply to :

 (a) any society, body or association, other than a partnership, formed or incorporated under any law for the time being in force in Pakistan; or

(b) a joint family carrying on joint family business; or

(c) a partnership of two or more joint families where the total number of members of such families, excluding the minor members, does not exceed twenty; or

(d) a partnership formed to carry on practice as lawyers, accountants or any other profession where practice as a limited liability company is not permitted under the relevant laws or regulations for such practice.

What types of names are prohibited under the Companies Act 2017?

Under section 10 of Companies Act 2017 there is a prohibition on the use of certain names

Subsection (1)states that  no company shall be registered by a name which contains such word or expression, as may be notified by the Commission or in the opinion of the registrar is—

(a) identical with or resemble or similar to the name of a company; or

(b) inappropriate; or

(c) undesirable; or

(d) deceptive; or

(e) designed to exploit or offend religious susceptibilities of the people; or

(f) any other ground as may be specified.

(2) Except with prior approval in writing of the Commission, no company shall be registered by a name which contains any word suggesting or calculated to suggest—

(a) the patronage of any past or present Pakistani or foreign head of state;

(b) any connection with the Federal Government or a Provincial Government or any department or authority or statutory body of any such Government;

(c) any connection with any corporation set up by or under any Federal or Provincial law;

(d) the patronage of, or any connection with, any foreign Government or any international organisation;

(e) establishing a modaraba management company or to float a modaraba; or

(f) any other business requiring licence from the Commission.

Whenever a question arises as to whether or not the name of a company is in violation of the foregoing provisions of this section, decision of the Commission shall be final.

A person may make an application, in such form and manner and accompanied by such fee as may be specified, to the registrar for reservation of a name set out in the application for a period not exceeding sixty days.Where it is found that a name was reserved by furnishing false or incorrect information, such reservation shall be cancelled and in case the company has been incorporated, it shall be directed to change its name. If the name applied for is refused by the registrar, the aggrieved person may within thirty days of the order of refusal prefer an appeal to the Commission.In this regard an order of the Commission shall be final and shall not be called in question before any court or other authority.

How can a company name be rectified or changed after an order under Section 10 of the Companies Act 2017?

Under section 11 of the Companies Act 2017, a company which, through inadvertence or otherwise, is registered by a name in contravention of the provisions of section 10 or the name was obtained by furnishing false or incorrect information—

(a) may, with approval of the registrar, change its name; and

(b) shall, if the registrar so directs, within thirty days of receipt of such direction, change its name with approval of the registrar:

The registrar shall, before issuing a direction for change of the name, afford the company an opportunity to make representation against the proposed direction.

What happens when a company fails to change its name under an order under Section 10 of the Companies Act 2017?

If the company fails to report compliance with the direction issued within the specified period, the registrar may enter on the register a new name for the company selected by him, being a name under which the company may be registered under this Act and issue a certificate of incorporation on change of name for the purpose of section 13 of the Companies Act 2017.

How does the process work for Company Name Change in General under the Companies Act 2017?

As per Section 12 , a company may, by special resolution and with approval of the registrar signified in writing, change its name.Note that no approval under this section shall be required where the change in the name of a company is only the addition thereto, or the omission therefrom, of the expression “(Private)” or “(SMC-Private)” or “(Guarantee) Limited” or “Limited” or “Unlimited”, as the case may be, consequent upon the conversion of the status of a company in accordance with the provisions of sections 46 to 49 of the Companies Act 2017.

As per Section 13, where a company changes its name the registrar shall enter the new name on the register in place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case and, on the issue of such a certificate, the change of name shall be complete.Where a company changes its name it shall, for a period of ninety days from the date of issue of a certificate by the registrar under sub-section continue to mention its former name along with its new name on the outside of every office or place in which its business is carried on and in every document or notice referred to in section 22.The change of name shall not affect any rights or obligations of the company, or render defective any legal proceedings by or against the company and any legal proceedings that might have been continued or commenced against the company by its former name may be continued by or commenced against the company by its new name.

What is the process or mode of forming a public , private or single member Company under the Companies Act 2017?

(a) Three or more persons associated for any lawful purpose may, by subscribing their names to a memorandum of association and complying with the requirements of this Act in respect of registration, form a public company; or

(b) Two or more persons so associated may in the like manner form a private company; or

(c) One person may form a single member company by complying with the requirements in respect of registration of a private company and such other requirement as may be specified. The subscriber to the memorandum shall nominate a person who in the event of death of the sole member shall be responsible to-

• transfer the shares to the legal heirs of the deceased subject to succession to be determined under the Islamic law of inheritance and in case of a non-Muslim members, as per their respective law; and
• manage the affairs of the company as a trustee, till such time the title of shares are transferred:
• Provided that where transfer by virtue of this sub-section is made to more than one legal heir, the company shall cease to be a single member company and comply with the provisions of section 47.

A company formed under this Act may be a company with or without limited liability, that is to say—

(a) a company limited by shares; or

(b) a company limited by guarantee; or

(c) an unlimited company.

Is there liability for carrying on business with less than three in case of public or in the case of a private company, two members?

As per section 15 of the Companies Act 2017, if at any time the number of members of a company is reduced, in the case of a private company other than a single member company, below two or in the case of any other company, below three and the company carries on business for more than one hundred and eighty days while the number is so reduced, every person who is a member of the company during the time that it so carries on business after those one hundred and eighty days and is cognizant of the fact that it is carrying on business with fewer than two members or three members, as the case may be, shall be severally liable for payment of whole debts of the company contracted during that time and may be sued therefor without joinder in the suit of any other member.

What is the effect of memorandum and articles on a company under the Companies Act 2017?

The memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member and contained a covenant on the part of each member, his heirs and legal representatives, to observe and be bound by all the provisions of the memorandum and of the articles, subject to the provisions of the 2017 Act.

What is the legal effect of registration of a company under the Companies Act 2017?

The registration of the company has the following effects, as from the date of incorporation—

(a) the subscribers to the memorandum, together with such other persons as may from time to time become members of the company, are a body corporate by the name stated in the certificate of incorporation;

(b) the body corporate is capable of exercising all the functions of an incorporated [company and having perpetual succession];

(c) the status and registered office of the company are as stated in, or in connection with, the application for registration;

(d) in case of a company having share capital, the subscribers to the memorandum become holders of the initial shares; and

(e) the persons named in the articles of association as proposed directors, are deemed to have been appointed to that office.

What provisions of the Companies Act 2017 relate to registered office and publication of the company name?

As per section 21 of the Companies Act 2017, a company shall have a registered office to which all communications and notices shall be addressed and within a period of thirty days of its incorporation, notify to the registrar in the specified manner.Notice of any change in situation of the registered office shall be given to the registrar in a specified form within a period of fifteen days after the date of change.The change of registered office of a company from—

(a) one city in a Province to another; or

(b) a city to another in any part of Pakistan not forming part of a Province,

 shall require approval of general meeting through special resolution.

As per section 22 of the Companies Act 2017 relating to publication of name by a company. every company shall (a) display in a conspicuous position, in letters easily legible in English or Urdu characters its name and incorporation number outside the registered office and every office or the place in which its business is carried on; (b) display a certified copy of certificate of incorporation at every place of business of the company; (c) get its name, address of its registered office, telephone number, fax number, e-mail and website addresses, if any, printed on letter-head and all its documents, notices and other official publications; and (d) have its name mentioned in legible English or Urdu characters, in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company and in all bills of parcels, invoices, receipts and letters of credit of the company.Furthermore under section 23 the company is also required to have a common seal which must be a seal having the company’s name engraved on it in legible form.

Is a company required to publish paid up capital alongwith authorized capital under the Companies Act 2017?

Yes, under section 25 of the Companies Act 2017 where any notice, advertisement or other official publication of a company contains a statement of amount of authorised capital of the company, such notice, advertisement or other official publication shall also contain a statement in an equally prominent position and in equally conspicuous characters of amount of the paid up capital.

What does the Companies Act 2017 state about the principle Line of Business and objects of a company?

As per Section 26 of the Companies Act 2017, a company may carry on or undertake any lawful business or activity and do any act or enter into any transaction being incidental and ancillary thereto which is necessary in attaining its business activities:

 (i) the principal line of business of the company shall be mentioned in the memorandum of association of the company which shall always commensurate with name of the company; and

(ii) any change in the principal line of business shall be reported to the registrar within thirty days from the date of change, on the form as may be specified and registrar may give direction of change of name if it is in violation of this section.

As per section 26, a “principal line of business” means the business in which substantial assets are held or likely to be held or substantial revenue is earned or likely to be earned by a company, whichever is higher.

Further under this section, a company shall not engage in a business which is—(a) prohibited by any law for the time being in force in Pakistan; or (b) restricted by any law, rules or regulations, unless necessary licence, registration, permission or approval has been obtained or compliance with any other condition has been made.

How can a memorandum be altered under the Companies Act 2017?

As per section 32 of the Companies Act 2017, a company may by special resolution alter the provisions of its memorandum so as to—

(a) change the place of its registered office from

(i) one Province to another Province or Islamabad Capital Territory and vice versa; or

(ii) one Province or Islamabad Capital Territory to a part of Pakistan not forming part of a Province and vice versa; or

(b) change its principal line of business; or

(c) adopt any business activity or any change therein which is subject to licence, registration, permission or approval under any law.

Such an  alteration shall not take effect until and except in so far as it is confirmed by the Commission on petition:However an alteration so as to change the principal line of business of a company does not require confirmation by the Commission.

A copy of the memorandum of association as altered pursuant to the order under this section shall within thirty days from the date of the order be filed by the company with the registrar, who shall register the same and issue a certificate which shall be conclusive evidence that all the requirements of this Act with respect to the alteration and the confirmation thereof have been complied with and thenceforth the memorandum so filed shall be the memorandum of the company:

Where the alteration involves a transfer of registered office from the jurisdiction of one company registration office to another, physical record of the company shall be transferred to the registrar concerned of the company registration office in whose jurisdiction the registered office of the company has been shifted.

Where the alteration involves change in principal line of business, the company shall file the amended memorandum of association with the registrar within thirty days, which shall be recorded for the purposes of this Act.

What is the effect of alteration in memorandum or articles on company members?

Under section 35, no member of the company shall be bound by an alteration made in the memorandum or articles after the date on which he became a member if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made or in any way increases his liability as at that date to contribute to the share capital of or otherwise to pay money to the company:This section shall not apply in any case where the member agrees in writing either before or after the alteration is made to be bound thereby.

How are Articles of Association altered under the Companies Act 2017?

As per Section 38 of the Companies Act 2017, subject to the provisions of this Act andto the conditions contained in its memorandum, a company may, by special resolution, alter its articles and any alteration so made shall be as valid as if originally contained in the articles and be subject in like manner to alteration by special resolution.

Where such alteration affects the substantive rights or liabilities of members or of a class of members, it shall be carried out only if a majority of at least three-fourths of the members or of the class of members affected by such alteration, as the case may be, exercise the option through vote personally or through proxy vote for such alteration.

(2) A copy of the articles of association as altered shall, within thirty days from the date of passing of the resolution, be filed by the company with the registrar and he shall register the same and thenceforth the articles so filed shall be the articles of the company.

How to convert status of private company into a single-member company and vice-versa under the Companies Act 2017?

As per section 47 of the Companies Act 2017, a private company may be converted into a single- member company with prior approval of the Commission in writing by passing a special resolution in this behalf by the private company amending its memorandum and articles of association, in such a manner that they include the provisions relating to a single-member company in the articles and complying with all the requirements as may be specified.

On an application for change in status of a company under sub- section (1), if the SECP/ Commission is satisfied that the company is entitled to be so converted, such conversion shall be allowed by an order in writing.A copy of the memorandum and articles of association as altered pursuant to this order shall, within fifteen days from the date of the order, be filed by the company with the registrar and he shall register the same and thenceforth the memorandum and articles so filed shall be the memorandum and articles of the newly converted company.

Furthermore, If a company, being a single member company, alters its articles in such a manner that they no longer include the provisions which are required to be included in the articles of a company in order to constitute it a single member company, the company shall—

(a) as on the date of the alteration, cease to be a single member company; and

(b) file with the registrar a copy of the memorandum and articles of association as altered along with the special resolution.

What are the provisions of the Companies Act 2017 on the Service and Authentication of documents?

Section 53. Service of documents on a company.—A document or information may be served on the company or any of its officers at the registered office of the company against an acknowledgement or by post or courier service or through electronic means or in any other manner as may be specified.

Section 54. Service of documents on Commission or the registrar.—A document or information may be served on the Commission or the registrar against an acknowledgement or by post or courier service or through electronic means or in any other manner as may be specified.

Section 55. Service of notice on a member.—

(1) A document or information may be served on a member at his registered address or, if he has no registered address in Pakistan, at the address supplied by him to the company for the giving of notices to him against an acknowledgement or by post or courier service or through electronic means or in any other manner as may be specified.

(2) Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the notice and, unless the contrary is proved, to have been effected at the time at which the letter will be delivered in the ordinary course of post.

(3) A notice may be given by the company to the joint-holders of a share by giving the notice to the joint-holder named first in the register in respect of the share.

(4) A notice may, in the manner provided under sub-section (1), be given by the company to the person entitled to a share in consequence of death or insolvency of a member addressed to him by name or by the title or representatives of the deceased or assignees of the insolvent or by any like description, at the address supplied for the purpose by the person claiming to be so entitled.

Section 56. Authentication of documents and proceedings.—Save as expressly provided in this Act, a document or proceeding requiring authentication by a company may be signed either by an officer or a representative authorized by the board.

How can rights of shareholders be varied under the Companies Act 2017?

Under section 59 of the Companies Act 2017, the variation of the right of shareholders of any class shall be effected only in the manner laid down in section 38 of the Companies Act 2017.Not less than ten percent of the class of shareholders who are aggrieved by the variation of their rights under sub-section (1) may, within thirty days of the date of the resolution varying their rights, apply to the Court for an order cancelling the resolution.

The Court shall not pass such an order unless it is shown to its satisfaction that some facts which would have had a bearing on the decision of the shareholders were withheld by the company in getting the aforesaid resolution passed or, having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant.

How are shares transferred upon death of the shareholder?

Section 78 of the Companies Act 2017 deals with succession of share interests.

The shares or other securities of a deceased member shall be transferred on application duly supported by succession certificate or by lawful award, as the case may be, in favour of the successors to the extent of their interests and their names shall be entered in the register of members.

Under 79 of the Companies Act 2017 there can also be a transfer to nominee of a deceased member.Notwithstanding anything contained in any other law for the time being in force or in any disposition by a member of a company of his interest represented by the shares held by him as a member of the company, a person may on acquiring interest in a company as member, represented by shares, at any time after acquisition of such interest deposit with the company a nomination conferring on a person the right to protect the interest of the legal heirs in the shares of the deceased in the event of his death, as a trustee and to facilitate the transfer of shares to the legal heirs of the deceased subject to succession to be determined under the Islamic law of inheritance and in case of a non-Muslim members, as per their respective law.

The person nominated under section 79 of the Companies Act 2017 shall, after the death of the member, be deemed as a member of company till the shares are transferred to the legal heirs and if the deceased was a director of the company, not being a listed company, the nominee shall also act as director of the company to protect the interest of the legal heirs.Furthermore the person to be nominated under this section shall not be a person other than the relatives of the member, namely, a spouse, father, mother, brother, sister

The nomination shall in no way prejudice the right of the member making the nomination to transfer, dispose of or otherwise deal in the shares owned by him during his lifetime and, shall have effect in respect of the shares owned by the said member on the day of his death.

Under section 80, the transferor or transferee, or the person who gives intimation of the transmission by operation of law, as the case may be, aggrieved by the refusal of transfer under section 75 to 79 may appeal to the Commission within a period of sixty days of the date of refusal.

Section 83 deals with further issue of capital.—(1) Where the directors decide to increase share capital of the company by issue of further shares, such shares shall be offered:

(a) to persons who, at the date of the offer, are members of the company in proportion to the existing shares held by  [such members through] sending a letter of offer subject to the following conditions, namely—

(i) the shares so offered shall be strictly in proportion to the shares already held in respective kinds and classes;

(ii) the letter of offer shall state the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;

(iii) in the case of a listed company any member, not interested to subscribe, may exercise the right to renounce the shares offered to him in favour of any other person, before the date of expiry stated in the letter of offer; and

(iv) if the whole or any part of the shares offered under this section is declined or is not subscribed, the directors may allot such shares in such manner as they may deem fit within a period of thirty days from the close of the offer as provided under sub-clause (ii) above or within such extended time not exceeding thirty day with the approval of the Commission.

Section 85 deals with the power of a company to alter its share capital.—(1) A company having share capital may, if so authorised by its articles, alter the conditions of its memorandum through a special resolution, so as to-

(a) increase its authorised capital by such amount as it thinks expedient;

(b) consolidate and divide the whole or any part of its share capital into shares of larger amount than its existing shares;

(c) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum:

(d) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the share so cancelled:

In the event of consolidation or sub-division of shares, the rights attaching to the new shares shall be strictly proportional to the rights attached to the previous shares so consolidated or sub-divided.Where any shares issued are of a class which is the same as that of shares previously issued, the rights attaching to the new shares shall be the same as those attached to the shares previously held. The new shares issued by a company shall rank pari passu with the existing shares of the class to which the new shares belong in all matters, including the right to such bonus or right issue and dividend as may be declared by the company subsequent to the date of issue of such new shares.

A cancellation of shares is not deemed to be a reduction of share capital within the meaning of the Companies Act 2017.

Can a subsidiary company hold shares in its holding company as per the Companies Act 2017?

As per section 87, no company shall, either by itself or through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void:

However a subsidiary shall not be barred—

(a) from acting as a trustee unless its holding company is beneficially interested in the trust; and

(b) from dealing in shares of its holding company in the ordinary course of its business, on behalf of its clients only subject to non-provision of any financial assistance where such subsidiary carries on a bona fide business of brokerage.

It is provided further that a subsidiary dealing in shares of its holding company in the ordinary course of its brokerage business, shall not exercise the voting rights attached to such shares.The provisions of this section shall not be applicable where such shares are held by a company by operation of law.

Can a company buy its own shares?

As per section 88 of the Companies Act 2017, unless  the memorandum and articles, state so, a company may, purchase its own shares.The shares purchased by the company may, in accordance with the provisions of this section and the regulations, either be cancelled or held as treasury shares.

Provided further that cancellation of shares under this section shall not be deemed to be a reduction of share capital within the meaning of section 89 and such shares shall be cancelled in such form and manner as may be specified.

The shares held by the company as treasury shares shall, as long as they are so held, in addition to any other conditions as may be specified, be subject to the following conditions, namely—

(a) the voting rights of these shares shall remain suspended; and

(b) no cash dividend shall be paid and no other distribution, whether in cash or otherwise of the company’s assets, including any distribution of assets to members on a winding up shall be made to the company in respect of these shares:

Nothing in this section shall prevent—

(a) an allotment of shares as fully paid bonus shares in respect of the treasury shares; and

(b) the payment of any amount payable on the redemption of the treasury shares, if they are redeemable.

The board shall recommend to the members purchase of the shares. The decision of the board shall clearly specify the number of shares proposed to be purchased, purpose of the purchase i.e. cancellation or holding the shares as treasury shares, the purchase price, period within which the purchase shall be made, source of funds, justification for the purchase and effect on the financial position of the company.

The purchase of shares shall be made only under authority of a special resolution.

The purchase of shares shall be made within a period as specified in the regulations.

The proposal of the board to purchase shares shall, on conclusion of the board’s meeting, be communicated to the Commission and to the securities exchange on which shares of the company are listed.

The purchase of shares shall always be made in cash and shall be out of the distributable profits or reserves specifically maintained for the purpose.

The purchase of shares shall be made through the securities exchange as may be specified.

The company may dispose of the treasury shares in a manner as may be specified.

Can a company reduce its Share Capital?

As per section 89 of the Companies Act subject to confirmation by the Court a company limited by shares, if so authorised by its articles, may by special resolution reduce its share capital in any way, namely—

• cancel any paid-up share capital which is lost or un-represented by available assets;
• pay off any paid-up share capital which is in excess of the needs of the company.

Can a limited company may have directors with unlimited liability under the Companies Act 2017?

(1) In a limited company, the liability of the directors or of any director may, if so provided by the memorandum, be unlimited.

(2) In a limited company in which the liability of any director is unlimited, the directors of the company, if any, and the member who proposes a person for election or appointment to the office of director, shall add to that proposal a statement that the liability of the person holding that office will be unlimited and the promoters and officers of the company, or one of them shall, before that person accepts the office or acts therein, give him notice in writing that his liability will be unlimited.

As per Section 99 a limited company, if so authorised by its articles, may, by special resolution, alter its memorandum so as to render unlimited the liability of its directors or of any director.An alteration of the memorandum making the liability of any of the directors unlimited shall not apply, without his consent, to a director who was holding the office from before the date of the alteration, until the expiry of the term for which he was holding office on that date.

What provisions of the Companies Act 2017 deal with the issue of ultimate beneficial owners?

As per section 123A a company shall maintain information of its ultimate beneficial owners in such form and manner, within such period and obtain such declaration from its members as may be specified.For the purpose of this section, the term “ultimate beneficial owner” means a natural person who ultimately owns or controls a company, whether directly or indirectly, through at least twenty five percent shares or voting rights or by exercising effective control in that company through such other means, as may be specified.Every company shall, in such form and manner as may be specified, maintain a register of its ultimate beneficial owners and shall timely record their accurate and updated particulars, including any change therein, and provide a declaration to this effect to the registrar and where any government is a member of a company such particulars of the relevant government shall be entered in the register of ultimate beneficial owners in the specified manner.

What can the court do to address prevention or oppression or mismanagement in a Pakistani Company under the Companies Act 2017?

Under section 286 If any member or members holding not less than ten percent of the issued share capital of a company, or a creditor or creditors having interest equivalent in amount to not less than ten percent of the paid up capital of the company, complains, or complain, or the Commission or registrar is of the opinion, that the affairs of the company are being conducted, or are likely to be conducted, in an unlawful or fraudulent manner, or in a manner not provided for in its memorandum, or in a manner oppressive to the members or any of the members or the creditors or any of the creditors or are being conducted in a manner that is unfairly prejudicial to the public interest, such member or members or, the creditor or creditors, as the case may be, the Commission or registrar may make an application to the Court by petition for an order under this section.

If, on any such petition, the Court is of opinion—

(a) that the company’s affairs are being conducted, or are likely to be conducted, as aforesaid; and

(b) that to wind-up the company will unfairly prejudice the members or creditors;

The Court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company’s affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of purchase by the company, for, the reduction accordingly of the company’s capital, or otherwise.

Where an order under this section makes any alteration in, or addition to, a company’s memorandum or articles, then, notwithstanding anything in any other provision of this Act, the company shall not have power without the leave of the Court to make any further alteration in or addition to the memorandum or articles inconsistent with the provisions of the order; and the alterations or additions made by the order shall be of the same effect as if duly made by resolution of the company and the provisions of this Act shall apply to the memorandum or articles as so modified accordingly.

How can a Company be  wound up under the Companies Act 2017?

Section 293  provides the modes of winding up of a company

The winding up of a company may be either—

(a) by the Court or

(b) voluntary; or

(c) subject to the supervision of the Court.

(2) Save as otherwise expressly provided, the provisions of this Act with respect to winding up shall apply to the winding up of a company in any of the modes specified in sub-section (1).

Section 294 deals with liability as contributories of present and past members.—

As per 294 (1) In the event of a company being wound up, every present and past member shall, subject to the provisions of section 295, be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, with the following qualifications, that is to say—

(a) a past member shall not be liable to contribute if he has ceased to be member for one year or upwards before the commencement of the winding up;

(b) a past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member;

(c) a past member shall not be liable to contribute unless it appears to the Court that the present members are unable to satisfy the contributions required to be made by them in pursuance of this Act;

(d) in the case of a company limited by shares, no contribution shall be required from any past or present member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such member;

Section 295 deals with the liability of directors whose liability is unlimited in the event of winding up.The section states that in the winding up of a limited company any director, whether past or present, whose liability is, in pursuance of this Act, unlimited, shall, in addition to his ability, if any, to contribute as an ordinary member, be liable to make a further contribution as if he were, at the commencement of the winding up, a member of an unlimited company:

Provided that—

(a) a past director shall not be liable to make such further contribution if he has ceased to hold office for a year or upwards before the commencement of the winding up;

(b) a past director shall not be liable to make such further contribution in respect of any debtor liability of the company contracted after he ceased to hold office;

subject to the articles, a director shall not be liable to make such further contribution unless the Court deems it necessary to require that contribution in order to satisfy the debts and liabilities of the company, and the costs, charges and expenses of the winding up.

Section 296 deals with the liability of Contributory having fully paid share.—A person holding fully paid-up shares in a company shall be considered as a contributory but shall have no liabilities of a contributory under this Act while retaining rights of such a contributory.

The term “contributory” means a person liable to contribute towards the assets of the company on the event of its being wound up.Section 297 deals with the nature of liability of contributory.—The liability of a contributory shall create a debt accruing due from him at the time when his liability commenced, but payable at the time specified in calls made on him for enforcing the liability.

Section 298 deals with Contributories in case of death of member.—If a contributory dies, whether before or after being placed on the list of contributories of a company:

(a) his legal representatives shall be liable, in due course of administration, to contribute to the assets of the company in discharge of his liability, and shall be contributories accordingly; and

(b) if the legal representatives make default in paying any money ordered to be paid by them, proceedings may be initiated for administering the property of the deceased contributory, and of compelling payment of the money due, out of assets of the deceased.

Section 299 deals with contributory in case of insolvency of member.—If a contributory is adjudged insolvent whether before or after he has been placed on the list of contributories of a company, then—

(a) his assignees in insolvency shall represent him for all the purposes of the winding up, and shall be contributories accordingly, and may be called on to admit to proof against the estate of the insolvent, or otherwise to allow to be paid out of his assets in due course of law, any money due from the insolvent in respect of his liability to contribute to the assets of the company; and

(b) there may be proved against the estate of the insolvent the estimated value of his liability to further calls as well as calls already made.

Section 300 deals with contributories in case of winding up of a body corporate which is a member.—If a body corporate that is a contributory is ordered to be wound up, whether before or after it has been placed on the list of contributories of a company—

(a) the liquidator of the body corporate shall represent it for all purposes of the winding up of the company and shall be a contributory accordingly, and may be called on to admit to proof against the assets of the body corporate, or otherwise to allow to be paid out of its assets in due course of law, any money due from the body corporate in respect of its liability to contribute to the assets of the company; and

(b) there may be proved against the assets of the body corporate the estimated value of its liability to future calls as well as calls already made.

When can a company be wound up by the Court under the Companies Act 2017?

Section 301 deals with the circumstances in which a company may be wound up by Court. A company may be wound up by the Court in the following circumstances:

(a) if the company has, by special resolution, resolved that the company be wound up by the Court; or

(b) if default is made in delivering the statutory report to the registrar or in holding the statutory meeting; or

(c) if default is made in holding any two consecutive annual general meetings; or

(d) if the company has made a default in filing with the registrar its financial statements or annual returns for immediately preceding two consecutive financial years; or

(e) if the number of members is reduced, in the case of public company, below three and in the case of a private company below two; or

(f) if the company is unable to pay its debts; or

(g) if the company is—

(i) conceived or brought forth for, or is or has been carrying on, unlawful or fraudulent activities; or

(ii) carrying on business prohibited by any law for the time being in force in Pakistan; or restricted by any law, rules or regulations for the time being in force in Pakistan; or

(iii) conducting its business in a manner oppressive to the minority members or persons concerned with the formation or promotion of the company; or

(iv) run and managed by persons who fail to maintain proper and true accounts, or commit fraud, misfeasance or malfeasance in relation to the company; or

(v) managed by persons who refuse to act according to the requirements of the memorandum or articles or the provisions of this Act or failed to carry out the directions or decisions of the Commission or the registrar given in the exercise of powers under this Act; or

(h) if, being a listed company, it ceases to be such company; or

(i) if the Court is of opinion that it is just and equitable that the company

should be wound up; or

(j) if a company ceases to have a member; or

(k) if the sole business of the company is the licensed activity and it ceases to operate consequent upon revocation of a licence granted by the Commission or any other licencing authority; or

(l) if a licence granted under section 42 to a company has been revoked or such a company has failed to comply with any of the provisions of section 43 or where a company licenced under section 42 is being wound up voluntarily and its liquidator has failed to complete the winding up proceedings within a period of one year from the date of commencement of its winding up; or

(m) if a listed company suspends its business for a whole year.

Explanation I.—The promotion or the carrying on of any scheme or business, howsoever described—

(a) whereby, in return for a deposit or contribution, whether periodically or otherwise, of a sum of money in cash or by means of coupons, certificates, tickets or other documents, payment, at future date or dates of money or grant of property, right or benefit, directly or indirectly, and whether with or without any other right or benefit, determined by chance or lottery or any other like manner, is assured or promised; or

(b) raising un-authorised deposits from the general public, indulging in referral marketing, multi-level marketing (MLM), Pyramid and Ponzi Schemes, locally or internationally, directly or indirectly; or

(c) any other business activity notified by the Commission to be against public policy or a moral hazard; shall be deemed to be an unlawful activity.

Explanation II.—”Minority members” means members together holding not less than ten percent of the equity share capital of the company.

When is a company deemed to be unable to pay its debts for the purposes of winding up under the Companies Act 2017?

As per section 302 of the Companies Act 2017 , company is deemed to be unable to pay its debts–

(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one hundred thousand rupees, then due, has served on the company, by causing the same to be delivered by registered post or otherwise, at its registered office, a demand under his hand requiring the company to pay the sum so due and the company has for thirty days thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; or

(b) if execution or other process issued on a decree or order of any Court or any other competent authority in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company.

(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by an agent or legal adviser duly authorised on his behalf.

Section 303 deals with the transfer of proceedings to other Courts.—Where the Court makes an order for winding up a company under this Act, it may, if it thinks fit, direct all subsequent proceedings to be held in any other High Court, with the consent of such court and thereupon, for the purposes of the winding up of the company, such Court shall be deemed to be the “Court” within the meaning of this Act and shall have all the powers and jurisdiction of the Court thereunder.

What is the law on winding up petitions Under the Companies Act 2017?

As per Section 304 of the Companies Act 2017, an application to the Court for the winding up of a company shall be by a petition presented, subject to the provisions of this section, either by the company, or by any creditor or creditors (including any contingent or prospective creditor or creditors), or by any contributory or contributories, or by all or any of the aforesaid parties, together or separately or by the registrar, or by the Commission or by a person authorised by the Commission in that behalf.

Provided that—

(a) a contributory shall not be entitled to present a petition for winding up a company unless-

(i) either the number of members is reduced, in the case of a private company, below two, or, in the case of public company, below three; and

(ii) the shares in respect of which he is a contributory or some of them either were originally allotted to him or have been held by him, and registered in his name, for at least one hundred and eighty days during the eighteen months before the commencement of the winding up, or have or devolved on him through the death of a former holder;

(b) the registrar shall not be entitled to present a petition for the winding up of a company unless the previous sanction of the Commission has been obtained to the presentation of the petition:

Provided that no such sanction shall be given unless the company has first been afforded an opportunity of making a representation and of being heard;

(c) the Commission or a person authorized by the Commission in that behalf shall not be entitled to present a petition for the winding up of a company unless an investigation into the affairs of the company has revealed that it was formed for any fraudulent or unlawful purpose or that it is carrying on a business not authorised by its memorandum or that its business is being conducted in a manner oppressive to any of its members or persons concerned in the formation of the company or that its management has been guilty of fraud, mis-feasance or other misconduct towards the company or towards any of its members; and such petition shall not be presented or authorised to be presented by the Commission unless the company has been afforded an opportunity of making a representation and of being heard:

Provided that if sole business of the company is the licensed activity and that licence is revoked, no investigation into the affairs of the company shall be required to present the petition for winding up of the company;

(d) the Court shall not give a hearing to a petition for winding up a company by a contingent or prospective creditor until such security for costs has been given as the Court thinks reasonable and until a prima facie case for winding up has been established to the satisfaction of the Court;

(e) the Court shall not give a hearing to a petition for winding up a company by the company until the company has furnished with its petition, in the prescribed manner, the particulars of its assets and liabilities and business operations and the suits or proceedings pending against it.

Section 305 of the Companies Act 2017 deals with the right to present winding-up petition where company is being wound up voluntarily or subject to Court’s supervision.—

(1) Where a company is being wound up voluntarily or subject to the supervision of the Court, a petition for its winding up by the Court may be presented by any person authorised to do so under section 304 and subject to the provisions of that section.

(2) The Court shall not make a winding up order on a petition presented to it under sub-section (1) unless it is satisfied that the voluntary winding up or winding up subject to the supervision of the Court cannot be continued with due regard to the interests of the creditors or contributories or both or it is in the public interest so to do.

What are the powers of the Court hearing the winding up application under the Companies Act 2017?

As per Section 307 the Court may, at any time after presentation of the petition for winding up a company under this Act, and before making an order for its winding up, upon the application of the company itself or of any its creditors or contributories, restrain further proceedings in any suit or proceeding against the company, upon such terms as the Court thinks fit.

Section 308 deals with the  powers of Court on hearing petition.—

The Court may, on  receipt of a petition for winding up under section 304 pass any of the following orders, namely—

(a) dismiss it, with or without costs;

(b) make any interim order as it thinks fit;

(c) appoint a provisional manager of the company till the making of a winding up order;

(d) make an order for the winding up of the company with or without costs; or

(e) any other order as it thinks fit:

Provided that an order under this sub-section shall be made within ninety

days from the date of presentation of the petition:

Provided further that before appointing a provisional manager under clause (c), the Court shall give notice to the company and afford a reasonable opportunity to it to make its representations, if any, unless for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice:

Provided also that the Court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged for an amount equal to or in excess of those assets, or that the company has no assets.

Section 308 (2) Where a petition is presented on the ground that it is just and equitable that the company should be wound up, the Court may refuse to make an order of winding up, if it is of the opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing the other remedy.

Section 308 (3) Where the Court makes an order for the winding up of a company, it shall forthwith cause intimation thereof to be sent to the official liquidator appointed by it and to the registrar.

Is there an option for easy exit of a defunct company in Pakistan, so it does not have to go through the complex winding up process?

The Companies Easy Exit Regulations 2014 and Section 426 of the Companies Act 2017, govern the  easy exit of a defunct company in Pakistan.To read in detail about Easy Exit Regulations click here.

(1) A company which ceases to operate and has no known assets and liabilities, may apply to the registrar in the specified manner, seeking to strike its name off the register of companies on payment of such fee mentioned in the Seventh Schedule.

(2) After examination of the application, the registrar on being satisfied, may publish a notice in terms of sub-section (3) of section 425 of this Act, in the Official Gazette stating that at the expiration of ninety days from the date of that notice, unless cause is shown to the contrary, the name of the applicant company will be struck off the register of companies and the company will be dissolved. Such notice shall also be posted on the Commission’s website.

(3) At the expiration of the time mentioned in the notice, the registrar may, unless any objection to the contrary is received by him, strike its name off the register, and shall publish a notice thereof in the official Gazette, and, on the publication of such notice, the company shall stand dissolved:

Provided that the liability criminal, civil or otherwise (if any) of every director, officer, and member of the company shall continue and may be enforced as if the company had not been dissolved.

Below are a few more  frequently asked questions about Company Registration in Pakistan from our clients, which we have answered for your knowledge.

Josh and Mak International can assist you with the Company Registration process for an affordable legal fee which comes with high quality legal services for all aspects of your business start ups legal requirements.

1. How much does it cost to register a private limited company in Pakistan?

The cost of registering a private limited company in Pakistan depends on various factors, such as the authorized share capital, legal fees, and other related expenses. Here is a breakdown of the estimated costs:

1. SECP Fee: The SECP fee for name reservation is Rs. 200, and the fee for incorporation is based on the authorized share capital of the company and online and offline registration. For example, if the authorized share capital is up to Rs. 100,000, the SECP fee for online filing is Rs. 2200, and if it is between Rs. 100,001 to Rs. 500,000, the SECP fee is starting from Rs. 2200 to 5000.
2. SECP Fee for authorized share capital: SECP fee is payable based on the authorized share capital of the company. The duty can be calculated on the SECP website for both online and offline registration; here https://www.secp.gov.pk/company-formation/fee-calculator/company-incorporation-fee-calculator/
3. Other Expenses: Other expenses may include bank charges for opening a company bank account, notary fees for attesting documents, and other miscellaneous expenses. These expenses can range from Rs. 5,000 to Rs. 10,000 or more.

2. What are the tax implications of registering a private limited company in Pakistan?

    Registering a private limited company in Pakistan has various tax implications, some of which are as follows :

1. Corporate Income Tax: Private limited companies in Pakistan are subject to corporate income tax on their taxable income. The current corporate income tax rate in Pakistan is 29% for companies with an annual turnover of up to Rs. 50 million, and 30% for companies with an annual turnover exceeding Rs. 50 million.
2. Withholding Tax: Private limited companies are required to deduct withholding tax on payments made to suppliers, contractors, employees, and other parties. The withholding tax rates vary depending on the nature of the payment and the status of the recipient.
3. Sales Tax: Private limited companies are required to register for sales tax with the Federal Board of Revenue (FBR) if their annual turnover exceeds Rs. 10 million. The current sales tax rate in Pakistan is 17%.
4. Capital Gains Tax: Private limited companies are subject to capital gains tax on the disposal of assets, such as property, shares, and other investments. The capital gains tax rate varies depending on the nature of the asset and the holding period.
5. Dividend Tax: Private limited companies are required to pay dividend tax on the distribution of profits to shareholders. The dividend tax rate is currently 15% for resident shareholders and 20% for non-resident shareholders.
6. Annual Filings: Private limited companies are required to file annual tax returns, audited financial statements, and other related documents with the FBR and the Securities and Exchange Commission of Pakistan (SECP).

3. What are the compliance requirements for private limited companies in Pakistan?

Private limited companies in Pakistan are required to comply with various legal and regulatory requirements. These requirements are aimed at ensuring transparency, accountability, and protection of stakeholders’ interests. Some of the key compliance requirements for private limited companies in Pakistan are:

1. Registration: Private limited companies are required to register with the Securities and Exchange Commission of Pakistan (SECP) under the Companies Act, 2017. The registration process involves filing of various documents and information, including the company’s memorandum and articles of association, directors’ details, share capital structure, etc.

2. Annual General Meeting: Private limited companies are required to hold an Annual General Meeting (AGM) of shareholders within six months of the end of each financial year. The AGM is required to approve the company’s financial statements, appoint auditors, and transact any other business related to the company’s affairs.

3. Financial Reporting: Private limited companies are required to prepare and file annual financial statements with the SECP within 30 days of holding the AGM. The financial statements must comply with the International Financial Reporting Standards (IFRS) and include a balance sheet, profit and loss account, cash flow statement, and notes to the accounts.

4. Audit: Private limited companies are required to appoint a qualified auditor to audit their financial statements. The auditor’s report must be included in the company’s annual financial statements.

5. Tax Compliance: Private limited companies are required to comply with various tax laws and regulations, including the Income Tax Ordinance, 2001, Sales Tax Act, 1990, and Federal Excise Act, 2005. The company is required to file tax returns and pay taxes on time.

6. Statutory Registers: Private limited companies are required to maintain various statutory registers, including the register of members, directors, charges, and transfers of shares. These registers must be updated and made available for inspection by shareholders and other stakeholders.

7. Corporate Governance: Private limited companies are required to comply with the Code of Corporate Governance issued by the SECP. The code sets out principles and guidelines for ensuring transparency, accountability, and protection of stakeholders’ interests. Failure to comply with these compliance requirements can result in penalties, fines, and legal action against the company and its directors. Therefore, it is important for private limited companies in Pakistan to ensure timely and accurate compliance with all legal and regulatory requirements.

4. What are the legal liabilities of directors and shareholders of a private limited company in Pakistan?

In Pakistan, the legal liabilities of directors and shareholders of a private limited company are governed by the Companies Act, 2017. Below are some of the key provisions of the law that outline these liabilities:

1. Directors’ liabilities: Section 182 of the Companies Act, 2017 outlines the liabilities of directors of a company. It states that a director of a company shall be personally liable for any act or omission that is in breach of his/her duties as a director, or that is in contravention of any provision of the Companies Act, 2017. In addition, a director may also be held liable for any loss or damage suffered by the company or its shareholders as a result of his/her breach of duty or negligence.

2. Shareholders’ liabilities: Under the Companies Act, 2017, shareholders of a private limited company are generally not personally liable for the debts and liabilities of the company. However, there are some exceptions to this rule. For example, if a shareholder has personally guaranteed a loan or debt of the company, he/she may be held liable for the repayment of that debt. In addition, if a shareholder has acted in a manner that is fraudulent or unlawful, he/she may be held personally liable for any loss or damage suffered by the company or its shareholders. Overall, it is important for directors and shareholders of a private limited company in Pakistan to be aware of their legal liabilities and to act in accordance with their duties and obligations under the Companies Act, 2017.

5. How to choose a suitable name for a private limited company in Pakistan?

Choosing a suitable name for a private limited company in Pakistan requires careful consideration and adherence to legal requirements. Here are some suggestions to follow:

1. Check availability: Conduct a search on the Securities and Exchange Commission of Pakistan (SECP) website to ensure that the name you want is available. You should also check the Trademark Registry to ensure that the name is not already registered.Application for availability of company name is processed as per section 10 and 26 of the Companies Act, 2017 read with regulation 3 and 4 of the Companies Incorporation Regulations, 2017

2. Follow legal requirements: According to the Companies Act 2017, the name of the company must end with the words “(Pvt) Ltd” and should not be similar or identical to an existing company name. The name must also not contain any prohibited words or phrases.Prohibited words /restricted words are available in Regulation 4(2) of the Companies Incorporation Regulations, 2017 along with criteria

3. Reflect the company’s nature: The name should reflect the nature of your business and be easy to remember. Avoid using generic names that do not differentiate your company from others.

If you are using the word ‘Group of Companies’ then please refer to  Regulation 4(2)(xix) of the Companies (Incorporation) Regulations, 2017. The word GROUP may be allowed to company where it implies several companies under single corporate ownership and applicants have to provide evidence of subsidiary/associate relationship with two or more companies. In case if there already are  two companies, the proposed company has to provide board resolution from the already incorporated companies to form a group company.

As per Regulation 4(2)(xx) of the Companies (Incorporation) Regulations, 2017. The word Holding may be allowed in case of a company where it qualifies to be a holding company as defined in clause 37 of sub-section (1) of section 2 of the Companies Act, 2017.

As per Regulation 4(2)(xxiii) of the Companies (Incorporation) Regulations, 2017. Name of Company containing names of two countries i.e., Pakistan an any other foreign country may be allowed in case of companies where documentary evidence is provided to support the fact that the company is a Joint Venture of two Governments or companies or individuals of two relevant countries.

If any foreign company is incorporating a subsidiary in Pakistan they are required to provide duly signed board resolution of their foreign company/parent company at the time of name reservation for the Pakistani Subsidiary.

6. What are the common challenges faced by private limited companies in Pakistan and how to overcome them?

Private limited companies in Pakistan often face a range of legal challenges that can impede their ability to operate effectively and efficiently. Some of the most common challenges include compliance with tax laws and regulations, maintaining proper records and financial statements, ensuring corporate governance and compliance with statutory requirements, dealing with disputes and litigation, and managing risks associated with business operations. One of the most effective ways to overcome these challenges is to work closely with a qualified legal advisor who has experience in Pakistani company law. Our team of seasoned experts at Josh and Mak International can help companies navigate the complexities of the legal landscape and ensure that they are meeting their obligations and operating within the bounds of the law. For example, we can help a Pakistani company ensure that it is in compliance with tax laws and regulations by providing guidance on tax planning, filing requirements, and remittance of taxes. We can also help a Pakistani company maintain proper records and financial statements by providing assistance with accounting principles and practices, financial reporting, and auditing. Corporate governance is another area where our legal advisors can provide valuable assistance. We can help companies establish effective corporate governance structures, develop policies and procedures to ensure compliance with statutory requirements, and provide guidance on risk management and mitigation strategies. When it comes to disputes and litigation, legal advisors can provide representation and guidance on dispute resolution strategies, alternative dispute resolution methods, and litigation management. They can also provide guidance on risk management and insurance strategies to help companies minimize their exposure to legal liabilities. With the right guidance and legal support, Pakistani companies can navigate the legal landscape and ensure that they are meeting their obligations and operating within the bounds of the law.

7.What happens once the Public/Private Company is registered?

The subscriber/entrepreneur will receive a Certificate of Incorporation issued electronically or in physical form. Once the certificate of incorporation is received, a private company /single member company can start its function.

A public company can start its business after a duly verified declaration (as per the format provided in the Companies (Compliance and Reporting) Regulations, 2017) regarding compliance with the conditions specified in Section 19(1) of the Act has been filed by the chief executive / one of its director and the secretary and the same has been accepted and registered by the registrar.

9.How can someone get a certificate of incorporation?

The company incorporation process in Pakistan is end-to-end digitized. After the company is incorporated, a digitally signed certificate of incorporation is sent to companies through email, the same can also be downloaded after login to e-Services at the SECP Website.

10.Where can you get a combined certificate of EOBI, PESSI & SESSI?

SECP data is integrated with EOBI, PESSI, SESSI, and Labour, excise & Taxation, and Anti-Narcotics Department for registration with these departments. This information is optional while submitting an application for incorporation. The combined certificate is uploaded on the eService portal once the company is incorporated

11.Where can you get an NTN for a Pakistani company?

SECP data is integrated with FBR for registration of NTN. Information provided by the applicant during the filling incorporation process is forwarded to FBR for registration of NTN. NTN is issued by FBR if complete/accurate information has been provided by the applicant.

12. What is a private limited company in Pakistan and how is it different from other business structures?

In Pakistan, a private limited company is a type of business structure in which the liability of the shareholders is limited to the amount of capital they have invested in the company. This means that the shareholders are not personally liable for the company’s debts or liabilities beyond their investment. A private limited company is different from other business structures such as a sole proprietorship or a partnership, as those structures do not provide limited liability protection. In a sole proprietorship or partnership, the owners are personally liable for all the debts and liabilities of the business. In addition, a private limited company is a separate legal entity from its shareholders. This means that the company can enter into contracts, sue and be sued in its own name, and own property in its own name. The company’s existence is not affected by changes in its ownership, and it can continue to operate even if some of its shareholders leave or die. To register a private limited company in Pakistan, the company must have at least two shareholders and two directors. The company must also have a registered office in Pakistan, and must comply with various legal and regulatory requirements, such as filing annual tax returns and maintaining proper accounting records. Overall, a private limited company offers several advantages over other business structures, including limited liability protection, separate legal entity status, and the ability to raise capital through the sale of shares. However, it also involves greater regulatory compliance and administrative requirements.

13. What are the benefits of registering a private limited company in Pakistan?

As per the Companies Act, 2017 in Pakistan, there are numerous benefits of registering a private limited company, including limited liability protection to its shareholders, legal recognition, perpetual succession, and the ability to raise capital through the issuance of shares. Additionally, private limited companies in Pakistan are subject to a favorable tax regime, allowing for tax incentives and exemptions, which can significantly reduce the tax burden of the company. Furthermore, private limited companies can take advantage of the ease of transferability of shares, greater access to funding, and the ability to attract talented employees through the grant of employee stock options. Registering a private limited company in Pakistan can provide numerous benefits for entrepreneurs and businesses looking to establish a strong and sustainable business presence in the country.

14. How to register a private limited company in Pakistan and what are the legal requirements?

Step 1: Name Reservation The first step is to apply for name reservation with the Securities and Exchange Commission of Pakistan (SECP) through their online eServices portal. The name should not be similar to any other company’s name already registered with the SECP and should not contain any prohibited terms. The SECP will generally approve or reject the name within 2-3 working days.

Step 2: Preparation of Documents The next step is to prepare the necessary documents, including the Memorandum and Articles of Association (MOA and AOA), Form 1 (Declaration of Compliance), Form 21 (Notice of Situation of Registered Office), and Form 29 (Consent to Act as Director). The MOA and AOA set out the company’s objectives, share capital, and internal management rules.

Step 3: Submission of Documents After preparing the documents, they need to be submitted to the SECP through their online eServices portal, along with the required fee. The SECP will review the documents and may ask for additional information or clarification.

Step 4: Certificate of Incorporation Once the SECP is satisfied with the documents, they will issue a Certificate of Incorporation, which signifies the legal recognition of the company’s existence. The certificate contains the company’s name, registration number, date of incorporation, and registered office address.

Step 5: Registration with Other Authorities After getting the Certificate of Incorporation, the company needs to get registered with other authorities, such as the Federal Board of Revenue (FBR) for tax purposes, the Employees’ Old-Age Benefits Institution (EOBI), and the Social Security Institution (SSI) for employee benefits.

Legal Requirements:

– At least two shareholders and two directors are required to incorporate a private limited company in Pakistan.

– Foreign nationals and companies can also register a private limited company in Pakistan, subject to certain conditions.

– The minimum authorized share capital required for a private limited company is Rs. 100,000. – The registered office of the company must be in Pakistan.

– The directors and shareholders must obtain a National Tax Number (NTN) and a Sales Tax Registration Number (STRN) from the FBR.

– Annual filings, such as the annual return, audited financial statements, and tax returns, must be submitted to the SECP and the FBR.

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Private Limited Company Registration Pakistan | SECP Company Registration | Companies Act 2017 Pakistan | Companies Regulations 2024 | Register a Company in Pakistan | Foreign Company Registration Pakistan | Corporate Lawyer Pakistan | Company Incorporation Islamabad | Pakistani Company Law | SECP Compliance