Tax Planning and Strategy Development

Business Law in Pakistan

 

This overview of business laws of Pakistan is a very brief description of common forms of businesses adopted by private and public sector investors in Pakistan. An attempt has also been made to outline general requirements and regulatory regimes for each of these forms of businesses in Pakistan. These brief notes are for general guidance only and should not be taken as a substitute for thorough and professional legal advice.

 

What are the common forms of business in Pakistan?

Main forms of business organizations adopted by private sector in Pakistan are as follows:

  • Sole proprietorship in Pakistan
  • Partnership in Pakistan
  • Limited liability Company in Pakistan
  • Joint venture in Pakistan

Main forms of business organizations adopted by the public sector, where the government wishes to undertake an enterprise, in Pakistan are either a limited liability company or a statutory corporation.

Out of these diverse forms of business set ups in Pakistan, a limited liability company remains the most favorable form of business organization for medium and large-scale businesses in Pakistan.

Companies Ordinance, 1984

Companies General Provisions and Forms Rules, 1985

Single Member Companies Rules, 2003

Schedule of Filing Fee

Companies remain the most favorite form of business organization in Pakistan especially for medium and large-scale business enterprises. Legal regime for establishment and regulation of companies in Pakistan is given in the Companies Ordinance, 1984. Whereas the function of administration of these companies is vested in the Securities and Exchange Commission of Pakistan and the Registrar of Companies appointed by the Securities and Exchange Commission of Pakistan for a province of Pakistan where such company is to be registered.

 

Under the provisions of the Companies Ordinance, 1984 a company is a body corporate with separate legal entity and a perpetual succession and a company may be formed by persons associating for any lawful purpose by subscribing their names to the Memorandum of Association and complying with other requirements for registration of a company under the provisions of the Ordinance.

 

The Companies Ordinance, 1984 provides for three different types of companies:

 

A company limited by shares

A company limited by guarantee

An unlimited liability company

Further, under the Companies Ordinance, 1984 two types of limited liability companies are provided for, namely:

 

A private limited company

A public limited company (which may be listed or unlisted)

Any one or more persons associated for any lawful purpose by subscribing their name(s) to the Memorandum of Association and complying with other registration specific requirements of the Companies Ordinance, 1984 may incorporate a private limited company. Provided that where a company has only one subscriber to the Memorandum of Association then such a company is called a Single Member Company, however, a Single Member Company remains a private limited company for all intents and purposes of the Ordinance. Whereas any three or more persons so associated may form a public limited company. A company limited by shares, whether a private company or a public company, is the most common vehicle for carrying out a business enterprise in Pakistan. .

 

 

Registration of a Company and Commencement of Business in Pakistan

 

The first step toward incorporation of a company in Pakistan is to file an application before the Registrar of Companies for availability of name. If the proposed name of the company is available and it is not in contravention to the provisions of the Companies Ordinance, 1984 and the Rules formed there under, then the Registrar shall issue a certificate stating that the proposed name is available to be adopted.

 

The next step is to file the Memorandum of Association and Articles of Association, which in effect is the constitution of any company, with the Registrar of Companies in the Province where proposed company is to be incorporated, along with other necessary forms prescribed under the Companies Ordinance, 1984. When the company has been registered, the Registrar issues a Certificate of Incorporation. Once such a certificate has been issued by the Registrar a private limited company may commence its business immediately. Nonetheless, a public limited company cannot commence its business or exercise its borrowing powers yet unless the Registrar has issued a Certificate for Commencement of Business. The Registrar issues the Certificate for Commencement of Business only if the following requirements have been fulfilled:

 

Shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription

Every director of the company has paid to the company the full amount on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash

No money is or may become liable to be repaid to applicants for any shares or debentures which have been offered for public subscription by reason of any failure to apply for or to obtain permission for the shares or debentures to be dealt in on any stock exchange

There has been filed with the Registrar of Companies a duly verified declaration by the chief executive or one of the directors and the secretary in the prescribed form that the aforesaid conditions have been complied with and the Registrar of Companies has issued a Certificate of Commencement of Business

In the case of a company which has not issued a prospectus inviting the public to subscribe for its shares, there has been filed with the Registrar of Companies, a statement in lieu of prospectus

A public limited company may either be listed or unlisted. In case of a listed company its shares may be quoted and dealt with on one of the three stock exchanges of Pakistan viz. Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange. Whereas the shares of an unlisted public limited company may not listed on a stock exchange. A public limited company that intends to have its shares listed on a stock exchange must obtain permission from the relevant stock exchange under the listing regulations of that stock exchange.

 

We are currently dealing or have dealt with various business sectors in Pakistan including the following and the list is growing all the time:

Information technology

Construction & Development

Real Estate

Telecommunications

Oil and gas

Cement

Sugar

Hotel

Textile

Automobiles

Apparel

Sports goods & equipment

Leather goods and products

Electrical goods

Import/export

Restaurants

Travel & Tour

Wood & furniture

Agriculture and agricultural products

Printing & publishing

Cosmetics & toiletries