Legal Advice on Company Registration & Post Incorporation Compliance in Pakistan

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 [email protected] 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.