Setting Up An EPC Company in Pakistan by a Foreign Investor

Law book libraryClient Query 7845 of 2016 :Setting Up An EPC Company in Pakistan by a Foreign Investor

As a Foreign  EPC contractor we would like to set up a legal entity in Lahore Pakistan in order to do the EPC contracting business, for example, the residential and commercial building, waste water treatment, road, power, railways buildings. We would need information on registering such company (which form of entity is advisable?) so our entity it can freely operate such business in Pakistan? Please also indicate the process, required docs and timeline if possible as well as insights on registering with the PEC (Pakistan Engineering Council).

Opinion

Legal entity in Lahore Pakistan by Foreign EPC contractor

Thank you for your email yesterday. We need to confirm if your construction company is a ​“Foreign constructor or foreign operator” or ‘Foreign consulting engineer’. As you have mentioned you are an EPC company so it is fair to assume that you fall under the category of ​“Foreign constructor or foreign operator” as per PEC rules.

For the former, the requirements are more onerous, that is, you will require a 51% Pakistani share holding. I believe you may have already visited this link http://www.pec.org.pk/Foreign_Firms.aspx

If you are a consultancy firm or “Foreign Consulting Engineer) then PEC registration can be much easier for you. I believe this link at the PEC can help you save costs and apply on your own if you are going to apply and register at the PEC on a project by project basis http://www.pec.org.pk/reg_proc_foreign_ce.aspx

Now, if you wish to register your foreign company as a branch or a new company with foreign shareholders, we will be happy to help you.

The ambit of our advice will include :

  • Company Registration
  • Trade-name Registration
  • Advice on Permit Procurement from the relevant authorities (PEC) to commence business.​

​*These fees do not include ​ government fees, which vary depending on paid up capital.

​As this is a foreign company registration, please note that it will take a while for your security to clear as a foreigner.​
For more information on Company Registration please visit the following link on our website https://joshandmakinternational.com/company-registration-in-pakistan/

For more information on registering the branch office of a foreign company or a Franchise​

In Pakistan please visit https://joshandmakinternational.com/legal-services/special-advice-for-foreign-companies-setting-up-business-in-pakistan/

Foreign EPC constructors

If you were an EPC constructor then we would highly recommend that you should find local partners and make a new company with 51% shareholding with them. Once in a joint venture, it will be much easier for you to get a yearly PEC license, as the rules are very clear on this regard. If you need help with partnership agreements, our team will be happy to advise you.

Meanwhile, it is best that you should set up a local branch or company regardless of PEC registration as it will help you expedite any future business partnerships with much speed. We always advise our clients to keep their legal and tax status in order, so they do not miss any wonderful tendering opportunities available from the Government of Pakistan, based on the CPEC project.

 

Further related/ query :

For the foreign EPC contractor to set up an entity for the EPC contracting/construction business in Pakistan is it a must to have a local partner to hold 51% of shares of this local entity? Is there a way to have an entity controlled by Chinese company 100%?

Answer: No, this is not possible. As per the rules:

“A foreign constructor or foreign operator wishing to perform any construction or operation of engineering works in Pakistan shall obtain an appropriate license from the Council before initiating any activity which is a subject of these Bye-laws. The foreign constructor or foreign operator may be granted license only for specific projects, which need expertise and specialized technology of construction or operation not available with a Pakistani constructor or Pakistani operator. Any such foreign constructor or foreign operator shall enter into a joint venture agreement with the Pakistani constructor or Pakistani operator in which share of foreign constructor or foreign operator shall be limited to the expertise and technology not available with the Pakistani constructor or Pakistani operator. A Foreign Firm has to get ENLISTED with PEC before initiating any assignment in Pakistan. Upon enlistment a certificate on Form PEC-5B shall be issued to the foreign constructor, or as the case may be, foreign operator on payment of requisite fee for allowing him to operate in Pakistan.

“Foreign constructor or Foreign operator” means an enterprise fully owned by one or more foreign nationals having 51% shares or any enterprise incorporated with the Securities and Exchange Commission of Pakistan and having 51% shares with seventy per cent of its engineering staff from Pakistan.

After this, the:

  1. Foreign Constructor or operator will be eligible to work with Pakistani Constructor or operator, even if specialized technology is also available in Pakistan.
  2. Instead of issuance of “Project Specific license”, the council will issue license to foreign constructor or operator on yearly basis, which will have to be renewed after its expiry. However foreign firm will not be eligible to participate in bidding individually. Foreign firm shall enter into joint venture with Pakistani firm of appropriate category and submit the same to the employer before participating in bidding.
  3. After entering into joint venture, all the partners will be able to get the benefits of experience of the project and their experience will considered in future for similar projects irrespective of percentage of shares of partners of joint venture.

Foreign constructor or foreign operator is also required to get its Enlistment Certificate renewed as long as it intends or requires operating in Pakistan. However, for participating in bidding or negotiation for each specific project, a separate license shall be obtained for each such project.

For the foreign EPC contractor to set up an entity for the EPC contracting/construction business in Pakistan is it a must to have a local partner to hold 51% of shares of this local entity? Is there a way to have an entity 100% controlled by a foreign company ?

No, this is not possible. As per the rules:

“A foreign constructor or foreign operator wishing to perform any construction or operation of engineering works in Pakistan shall obtain an appropriate license from the Council before initiating any activity which is a subject of these Bye-laws. The foreign constructor or foreign operator may be granted license only for specific projects, which need expertise and specialized technology of construction or operation not available with a Pakistani constructor or Pakistani operator. Any such foreign constructor or foreign operator shall enter into a joint venture agreement with the Pakistani constructor or Pakistani operator in which share of foreign constructor or foreign operator shall be limited to the expertise and technology not available with the Pakistani constructor or Pakistani operator. A Foreign Firm has to get ENLISTED with PEC before initiating any assignment in Pakistan. Upon enlistment a certificate on Form PEC-5B shall be issued to the foreign constructor, or as the case may be, foreign operator on payment of requisite fee for allowing him to operate in Pakistan.

“Foreign constructor or Foreign operator” means an enterprise fully owned by one or more foreign nationals having 51% shares or any enterprise incorporated with the Securities and Exchange Commission of Pakistan and having 51% shares with seventy per cent of its engineering staff from Pakistan.

After this, the:

  1. Foreign Constructor or operator will be eligible to work with Pakistani Constructor or operator, even if specialized technology is also available in Pakistan.
  2. Instead of issuance of “Project Specific license”, the council will issue license to foreign constructor or operator on yearly basis, which will have to be renewed after its expiry. However foreign firm will not be eligible to participate in bidding individually. Foreign firm shall enter into joint venture with Pakistani firm of appropriate category and submit the same to the employer before participating in bidding.
  3. After entering into joint venture, all the partners will be able to get the benefits of experience of the project and their experience will considered in future for similar projects irrespective of percentage of shares of partners of joint venture.

Foreign constructor or foreign operator is also required to get its Enlistment Certificate renewed as long as it intends or requires operating in Pakistan. However, for participating in bidding or negotiation for each specific project, a separate license shall be obtained for each such project.

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