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Non-Profit Company Registration in Pakistan u/s 42 Companies Act 2017
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To provide a comprehensive understanding of the process and documentation required for the renewal of a licence under Section 42 of the Companies Act 2017, for not-for-profit associations in Pakistan, let’s delve into each aspect:
- Timing of the Application:
- The application for renewal must be submitted to the Securities and Exchange Commission of Pakistan (SECP) three months before the current licence’s expiration date. This proactive approach ensures sufficient time for processing and review.
- Application Process:
- The renewal application must be formally prepared and signed by a responsible officer of the association, such as the chief executive, director, or company secretary. It should be addressed to the Commissioner (Company Law) at the SECP. This ensures the application is received by the appropriate authority and is accountable.
- Documentation Requirements:
- Original Bank Challan: Verified through an original bank challan, is required as part of the application process.
- Resumes of Executives and Directors: Updated resumes of each existing chief executive and directors, especially if changes have occurred since the last grant or renewal.
- Affidavits from Executives and Directors: These should affirm that they are not involved in activities like money laundering or terrorist financing and are not loan defaulters.
- Updated Member List: A list of current members with their details, reflecting any changes since the last Form-B filed.
- Financial Details: Documented details of local and foreign donations and grants received over the last five years, including donor information, certified by Chartered Accountants. This is critical for transparency and compliance.
- Work Statement: A statement detailing the work done or projects undertaken by the association in the last three years.
- Affidavit of Application Accuracy: An affidavit affirming the correctness of the contents of the application and its enclosures.
- Review and Approval by SECP:
- The SECP will review the application, conduct necessary enquiries, and may request additional information. This ensures that the renewal is granted based on comprehensive and current information about the association’s operations and compliance.
- Renewal Conditions and Post-Approval Compliance:
- Once the SECP is satisfied, it may renew the licence for a further period of five years, with specific conditions if deemed necessary. Post-renewal, the association must continue to comply with the set conditions to maintain its status.
- Memorandum of Association Requirements:
- The association must ensure that all conditions of the licence are mentioned in its Memorandum of Association, as required by SECP guidelines.
It’s imperative for the association to meticulously prepare and submit all the required documents to ensure the smooth renewal of its licence. Any uncertainties or specific conditions should be addressed by referring to the Companies Act 2017 , and allied laws or by consulting a professional legal advisor. This comprehensive approach helps in maintaining the legal and operational integrity of the not-for-profit association.
To incorporate a company under Section 42 of the Companies Act as a not-for-profit association (commonly referred to as an NGO or NPO) in Pakistan, the following documents and steps are required:
- Availability of Name:
- Application for the availability of the proposed name for the company, which can be done online through eServices or offline through physical filing at any of the Company Registration Offices (CROs) of the Securities and Exchange Commission of Pakistan (SECP).
- Application for Grant of Licence:
- Original Bank challan paid as an application fee.
- Copy of the letter received from the Company Registration Office confirming the availability of the proposed name.
- Printed copy of the Memorandum and Articles of Association.
- List of promoters with their occupations and addresses.
- Attested photocopies of CNICs (or passports for foreigners) of each promoter.
- Statement of names of companies, associations, and other institutions where promoters hold any office.
- Declaration of Compliance on stamp paper attested by an authorized person (e.g., advocate, chartered accountant).
- Undertaking on stamp paper from each promoter about their commitment and contribution.
- Estimate of future annual income and expenditure of the proposed company, including startup donations.
- Statement of work already done and proposed to be done after incorporation, detailing project features.
- Power of Attorney authorizing a person to represent the promoters before the Commission.
- Resumes of all promoters.
- Affidavit affirming that promoters are not associated with illegal activities and are not loan defaulters.
- Affidavit affirming the correctness of contents of the application and its enclosures.
- Statement clarifying whether the association is already in existence.
- If the entity is already existing (not as a company), additional documents like audited financial statements, certificate of registration, resolution for dissolution, etc., are needed.
- For an existing entity already registered as a company, special resolution for seeking licence under section 42 and amendments in its memorandum and articles of association are required.
- Incorporation as a Company:
- After obtaining the licence, the association must be incorporated as a company under the provisions of the Ordinance within three months from the date of issuance of the licence.
These steps and the associated documentation are necessary to ensure the lawful establishment and operation of a not-for-profit organization in Pakistan. It’s crucial to follow these guidelines carefully and seek professional assistance if needed to navigate the legal and administrative processes effectively.
For the renewal of a licence under Section 42 of the Companies Act 2017, for a not-for-profit association in Pakistan, the following steps and documents are required:
- Timing of Application:
- The application for renewal must be submitted to the Securities and Exchange Commission of Pakistan (SECP) three months before the expiration of the current licence.
- Application Submission:
- The application should be duly signed and made by a responsible officer of the association (such as a chief executive, director, or company secretary) and addressed to the Commissioner (Company Law) at the SECP.
- Required Documents:
- Original bank challan paid as an application fee.
- Resume of each existing chief executive and directors, especially if there has been any change since the last grant or renewal of the licence.
- Affidavit by the chief executive and all directors affirming that they are not involved in money laundering, terrorist financing activities, or defaulting on loans.
- Updated list of members with their occupations, residential addresses, contact numbers, and copies of CNICs, reflecting any changes from the last Form-B filed.
- Details of local and foreign donations and grants received during the last five years, along with donor information, certified by Chartered Accountants.
- Statement of work done or projects undertaken by the association in the last three years.
- Affidavit affirming the correctness of the contents of the application and its enclosures.
- Review by the Commission:
- The SECP will conduct an enquiry and may require further information to be satisfied about the past corporate behaviour of the company.
- Renewal Conditions:
- Upon satisfaction, the SECP may renew the licence for a further period of five years, subject to conditions deemed appropriate.
- Additional Requirements:
- At least three subscribers/members/promoters must have sufficient skills, expertise, and resources for the attainment of the company’s objectives.
- Each subscriber/promoter should contribute a reasonable amount as a startup donation.
- Subscribers shall continue as members of the company unless permitted by the Commission to quit.
- Payment of remuneration to members or their family members is prohibited for five years after quitting.
- Memorandum of Association:
- All conditions of the licence must be mentioned in the Memorandum of Association, as outlined in clauses IV to IX of the specimen provided by the SECP.
It is essential for the association to adhere to these guidelines and prepare the required documents with due diligence to ensure the smooth renewal of its licence. In case of any uncertainty, it is advisable to refer to the Companies Act 2017, and allied laws or consult a professional legal advisor.
The Articles of Association for a company set up under Section 42 , outline the regulations for the company’s governance and management. These articles encompass various aspects, such as membership, general meetings, voting, management, and administrative structure.
- Preliminary Definitions: The articles begin with definitions of key terms used throughout the document, like ‘The Company’, ‘The Office’, ‘The Directors’, and so on, to ensure clarity and precision in interpretation.
- Membership: The articles specify the number of members required for the company’s formation and maintain a minimum threshold. They also detail the conditions and qualifications for membership, asserting that membership is not transferable and ceases upon a member’s death or other cessation circumstances. Admission to membership requires a formal process involving the endorsement of an existing member and a decision by the board of directors.
- Cessation/Expulsion from Membership: Provisions are made for expulsion or suspension of members under certain conditions, such as failure to adhere to the company’s decisions, committing acts detrimental to the company’s interest, or legal issues like bankruptcy or incompetence. There are also stipulations for automatic termination of membership, notably in cases of death or non-payment of dues.
- General Meetings and Proceedings: The articles establish guidelines for conducting general meetings, including the annual general meeting. It specifies the notice period for meetings, the definition of special business, and the quorum requirements. Also, it details procedures for adjourning meetings, electing a chairman for meetings, and voting protocols.
- Voting and Polls: Procedures for voting at general meetings are outlined, including the use of show of hands and the demand for polls. The articles provide for a casting vote by the chairman in case of a tie and stipulate that every member has one vote.
- Management and Administration: The articles propose the creation of a Board of Directors for managing the company’s affairs, with directors being elected from among the members. Terms of office and eligibility criteria for directors are specified. Additionally, it is noted that no individual can simultaneously hold more than one executive position within the company.
These Articles of Association form the backbone of the company’s governance, providing a comprehensive framework for its operation and management. They are designed to ensure that the company functions efficiently and transparently, adhering to legal requirements and best practices in corporate governance.
The Memorandum of Association for a company set up under Section 42 of the Companies Act 2017, in Pakistan, serves as a crucial foundational document outlining the framework and primary objectives of the organization. This standard specimen reflects the essential aspects of such a Memorandum:
- Name of the Company: Clearly states the chosen name of the organization (e.g., “XYZ ASSOCIATION / FOUNDATION”).
- Registered Office: Specifies the location of the company’s registered office, either in Islamabad Capital Territory or in a specified province.
- Objectives: Enumerates the specific objectives for which the company is established. This section varies depending on the primary focus of the association, whether it’s education, research, special education, professional institutions, religious activities, social infrastructure, rural support, health services, arts and sciences, culture and heritage, charity, or sports. Each objective is tailored to the particular area of operation, detailing the activities and services the company intends to provide.
- Powers and Functions: Describes the broad range of activities and actions the company is empowered to undertake to achieve its objectives. This includes financial operations (like soliciting donations, operating bank accounts, and investing surplus funds), property dealings, representation in various forums, collaboration with similar entities, and conducting educational and promotional activities.
- Conditions and Restrictions: Outlines specific conditions that the company must adhere to. These include the structure of the company (a public company limited by guarantee without share capital), restrictions on remuneration to members and their families, necessity for SECP approval for any changes in the Memorandum and Articles of Association, and prohibitions on political activities, engaging in industrial and commercial activities, and offensive religious exploitation.
- Territorial Scope: Declares that the company’s activities extend throughout Pakistan.
- Liability of Members: Indicates that members’ liability is limited, outlining their financial commitment in the event of the company’s winding up.
- Winding Up: Details the procedure for distributing assets in case of dissolution, ensuring that any surplus assets are transferred to a similar company under Section 42.
- Subscribers to the Memorandum: Lists the founding members of the company, including their names, nationalities, occupations, addresses, and signatures. This section provides legal recognition and accountability for the founders.
This Memorandum serves as a legal declaration of the company’s purpose, structure, and governance. It is tailored to the specific activities and goals of the company, providing a clear and structured framework for its operation and ensuring compliance with the relevant legal requirements. The document is instrumental in guiding the company’s operations and ensuring accountability to its stakeholders and regulatory authorities.
