Due diligence is the process of gathering information about a company before investing in it. It is important to do due diligence on any company, but it is especially important in Pakistan, where there is a high risk of fraud and corruption in the corporate sector.
There are a number of steps you can take to do due diligence on a private limited company in Pakistan. These steps include:
- Check the company’s registration: The first step is to check the company’s registration with the Securities and Exchange Commission of Pakistan (SECP). You can do this by obtaining a copy of the company’s certificate of incorporation from the SECP. The certificate of incorporation will show the company’s name, address, and registered capital.
- Inspect the company’s financial statements: Once you have checked the company’s registration, you should inspect the company’s financial statements, memorandums and articles of association.Check carefully if the business being conducted by the company is in line with their Articles of Association and Memorandum.This includes looking at the company’s income statement, balance sheet, and cash flow statement. The financial statements will show the company’s financial performance over time.You should check carefully if the company is filling their annual returns.
- Conduct a background check on the company’s management: A background check on the company’s management will help you identify any red flags, such as a history of fraud or bankruptcy. You can do a background check by searching online or by contacting the company’s previous employees or clients.
- Get everything in writing: Make sure all agreements with the company are in writing and signed by both parties. This will help to avoid any disputes down the road.
- Be particular about making any payments into the company’s official accounts.
By following these steps, you can reduce the risk of investing in a company that is fraudulent or that has financial problems.
Here are some additional tips for doing due diligence on a private limited company in Pakistan:
- Ask for references: Ask the company for references from previous investors. This will give you an idea of the company’s reputation.
- Check the company’s industry: Do some research on the company’s industry. This will help you understand the risks and opportunities associated with the industry in Pakistan.
- Get the best legal advice from Josh and Mak International: It is always advisable to get legal advice before investing in a company especially if you or your company are not from Pakistan. A lawyer can help you understand the legal implications of investing in the company and can represent you in any negotiations with the company.
By following these tips, you can protect yourself from making a bad investment in a private limited company in Pakistan.We can be contacted at aemen@joshandmak.com
The most common queries we receive from foreign clients dealing with Pakistani Limited Companies are for :
- Certificate of incorporation
- Current Memorandum and Articles of Association
- Latest annual return and filed documents after this to update company information
- Current director and shareholder information
- Current status of the company, namely registered or not in registry
- Name change evidence for the company, if any.
Send us an email for quick response and quote if you are looking for these items of information or a more thorough background check on a company you are dealing with.
