Decoding Company Registration in Pakistan: A Detailed FAQ Guide
Disclaimer: The information provided here is for general guidance only and should not be considered as legal advice. For property and real estate legal advice and consulting, please contact City Laws Associates.
Understanding Private Company:
– Q. What is meant by a Private Company?
– A. A private company, as per the Companies Ordinance, 1984, restricts share transfers, limits members to fifty (excluding company employees), and prohibits public invitation for share or debenture subscription.
Applicable Laws for Incorporation:
– Q. Which laws govern company incorporation?
– A. Relevant laws include the Companies Ordinance, 1984, Companies (General Provisions and Forms) Rules, 1985, Single Member Companies Rules, 2003, and the Code of Corporate Governance for limited companies.
Types of Companies:
– Q. How many types of companies exist?
– A. Three types: company limited by shares, company limited by guarantee, and unlimited company. Variations include single-member, private limited, public listed/unlisted, and foreign companies.
Minimum Members for Formation:
– Q. What’s the minimum number of members for a company?
– A. Public unlisted companies need at least three members/directors, while listed companies require seven. Private companies can have two members, and a single-member company can consist of one chief executive and a company secretary.
Special Resolution:
– Q. What constitutes a Special Resolution?
– A. A resolution passed by a majority of at least three-fourths of eligible members in person or by proxy at a general meeting, preceded by a minimum 21-day notice specifying the intention.
Memorandum of Association:
– Q. What is the Memorandum of Association?
– A. It outlines a company’s objectives and capital limits. It includes clauses like Name, Registered Office, Object, Liabilities, and Authorized Capital. Amendments need approval from the Securities and Exchange Commission of Pakistan.
Articles of Association:
– Q. What do Articles of Association cover?
– A. Internal regulations for management, specifying roles, functions, and rules for daily business operations, like share transfer, capital alteration, meetings, voting, director duties, dividends, and more.
Alteration of Articles of Association:
– Q. Can Articles of Association be altered post-incorporation?
– A. Yes, through a special resolution passed by shareholders.
Conversion of Business Type:
– Q. Can a sole proprietor business be converted into a company?
– A. Yes, it can become a sole proprietor or private limited company.
Foreign Directors and Shareholders:
– Q. Can a foreigner be a director in a Pakistani company?
– A. Yes, after compliance with Foreign Exchange Regulations.
Director Resignation:
– Q. How can a director resign from a Private Limited Company?
– A. Directors can resign at any time, subject to clearing liabilities.
Minimum Paid-Up Capital:
– Q. What’s the minimum paid-up capital for a Private Limited Company?
– A. At incorporation, it must be PKR 100,000, with no upper limit.
Authorized vs. Paid-Up Capital:
– Q. Explain the difference between authorized and paid-up capital.
– A. Authorized is the limit for issuing shares, while paid-up is the actual issued capital.
Capital Increase:
– Q. Can a company increase its paid-up capital in the future?
– A. Yes, with compliance with the Companies Ordinance, 1984.
Foreign Company Branch:
– Q. What are the requirements for a foreign company opening a branch in Pakistan?
– A. Compliance with sections 452 to 460 of the Companies Ordinance, 1984, including necessary documents and permissions from the Board of Investment.
Company Name Change:
– Q. Can a company change its name after incorporation?
– A. Yes, through a special resolution and approval from the Securities and Exchange Commission of Pakistan.
Company Establishment Abroad:
– Q. Can a non-resident set up a company in Pakistan?
– A. Yes, with a Chief Executive/director residing outside for over three months appointing an alternative director.
Company Name Approval:
– Q. Can I choose any name for my new company?
– A. Yes, subject to approval from the Securities & Exchange Commission of Pakistan.
Non-Profit Companies:
– Q. What are non-profit companies?
– A. Companies promoting art, science, social services, etc., with members prohibited from receiving dividends. They operate under a license and are exempt from using “limited” in their name.
Foreign Business Restrictions:
– Q. Are there restrictions for foreigners doing business in Pakistan?
– A. No, there are no restrictions on foreigners.
National Tax Number:
– Q. Does a company need a separate National Tax Number?
– A. Yes, it’s essential for filing returns.
Taxation Rates for Companies:
– Q. What are the taxation rates for companies in Pakistan?
– A. Approximately 35% of the net profit.
Business Formation Necessity:
– Q. Is it necessary to form a company or partnership to start a business in Pakistan?
– A. No, it’s not necessary.
Director Eligibility:
– Q. Can anyone be a director in a company?
– A. Yes, with a valid Computer National Identity Card and no debarment from any competent court of law.
Limited Liability Definition:
– Q. What does Limited Liability mean?
– A. Owners’ liability is limited to their investment, protecting them if the company fails.
Company Closure Process:
– Q. What if I no longer need my company in Pakistan?
– A. Consider voluntary liquidation or “striking off the register” based on solvency.
Modes of Winding Up:
– Q. What are the modes of winding up a company in Pakistan?
– A. By the Court, voluntary winding up, winding up subject to the supervision of the Court, and creditors’ winding-up.
Registered Office:
– Q. What is the meaning of a Registered Office?
– A. It’s the official address for company correspondence.
Change of Registered Office:
– Q. Can I change my registered office address from one city to another?
– A. Yes, by passing a special resolution, obtaining confirmation from the Securities and Exchange Commission, and filing necessary documents.
Unregistered Company:
– Q. What is an unregistered company?
-A. an unregistered company typically refers to a business entity that has not been formally registered with the appropriate government authorities. In many jurisdictions, businesses are required to register with government agencies to obtain legal recognition and certain privileges. The registration process often involves providing information about the company’s structure, ownership, activities, and financial details.
Unregistered companies may operate informally, without legal recognition, and may not be subject to the same regulations and requirements as registered entities. However, operating an unregistered company can have legal implications, and it may limit the company’s ability to engage in certain activities or enjoy legal protections.
It’s important for businesses to comply with registration requirements in their jurisdiction to ensure legal standing, protection of rights, and access to various benefits, such as liability protection and tax advantages. The specific requirements for registration vary from country to country and sometimes even within different regions of a country.