A comparison among various forms of company registration in Pakistan by foreigners / Non Pakistanis (choices and options for foreigners)

By: Muhammad Abdul Hannan

M.com, M.B.Econ, LLB, FPFA, ACIS

Former Assistant Registrar SECP
Corporate Consultant / Senior Partner
Synergy Business Consulting, Islamabad Pakistan
INTRODUCTION:

This article outlines the general requirements and comparison among various forms of company registration in Pakistan by foreigners / Non Pakistanis and how foreign companies can set up their offices in Pakistan. A company which is incorporated or formed outside Pakistan which establishes its place of business within Pakistan is called a ‘Foreign Company’. The article is intended as an introductory guide only. You can obtain, on request, further information from a consultant at Synergy Business Consulting. SECP also stated in one of its guide that it is advisable to consult a professional for detailed guidance. The relevant provisions of law are contained in Part XIV of the Companies Ordinance, 1984 (the Ordinance) and Rules 22 & 23 of the Companies (General Provisions and Forms) Rules, 1985 (the Rules). This is a guidance article only and should be read with the relevant legislation.

A place of business includes branch, management, share transfer or registration office, factory, mine or fixed place of business but does not include an agency unless the agent exercises a general authority to negotiate and conclude contract or maintains stock of merchandise on behalf of the company. Following are the exceptions: 1. Company shall not be deemed to have an established place of business in Pakistan merely because it carries on business dealings in Pakistan through a bona fide broker or general commission agent acting in the ordinary course of his business. 2. The fact that a company has a subsidiary which is incorporated, resident, or carrying on business in Pakistan, shall not of itself constitute the place of business of that subsidiary an established place of business of the company.

A foreign company is required to obtain a permission letter from the Board of Investment with a specific validity period for opening and maintaining of its branch/liaison office in Pakistan. Copy of such permission letter is required to be furnished with the documents meant for registration. Renewal/ extension of the permission to open/maintain a branch/liaison office is also required to be obtained from the Board of Investment on the expiry of the validity period of the permission originally granted. Whenever such renewal/extension is granted, a copy must be furnished to the registrar concerned.

 

A comparison among various forms of company registration in Pakistan by foreigners / Non Pakistanis is as under;

Description Single Member Private Limited Company – Only one natural persons as shareholder Private Limited Company – Two or more natural persons as shareholders Subsidiary of Foreign Company Branch Office of Foreign Company in Pakistan Liaison Office of Foreign Company in Pakistan Public Limited Company
HOW COMPANY NAME IS WRITTEN IN LEGAL DOCUMENTS? ……(SMC-PVT.) LTD. OR ……(SMC-PRIVATE) LIMITED  ……(PVT.) LTD. OR ……(PRIVATE) LIMITED  If 100% owned by the foreign company, then……(SMC-PVT.) LTD. OR ……(SMC-PRIVATE) LIMITED

 

If there are one or more than one shareholders beside that foreign company then

……(PVT.) LTD. OR ……(PRIVATE) LIMITED

 

The company will adopt the same name as is in country of origin / foreign country subject to approval by SECP. The company will adopt the same name as is in country of origin / foreign country subject to approval by SECP. ……..LTD 

OR

…….LIMITED

RELEVANT COMPANY REGISTRATION AUTHORITY Relevant Company Registration Office, Securities & Exchange Commission of Pakistan (SECP) Relevant Company Registration Office, Securities & Exchange Commission of Pakistan (SECP) Relevant Company Registration Office, Securities & Exchange Commission of Pakistan (SECP) Relevant Company Registration Office, Securities & Exchange Commission of Pakistan (SECP) Relevant Company Registration Office, Securities & Exchange Commission of Pakistan (SECP) Relevant Company Registration Office, Securities & Exchange Commission of Pakistan (SECP)
MINIMUM NUMBER OF MEMBERS OR SHAREHOLDERS  Only One (1) Two (2) Only One (1)  UNLISTED: Three (03)LISTED: Seven (07)
MAXIMUM NUMBER OF MEMBERS OR SHAREHOLDERS Only One (1) Fifty (50) Fifty (50) UNLIMITED
LOCAL RESIDENT SHAREHOLDERS / DIRECTORS Local Resident Shareholder(s) or Director(s) NOT mandatory Local Resident Shareholder(s) or Director(s) NOT mandatory Local Resident Shareholder(s) or Director(s) NOT mandatory Local Resident Shareholder(s) or Director(s) NOT mandatory Local Resident Shareholder(s) or Director(s) NOT mandatory Local Resident Shareholder(s) or Director(s) NOT mandatory
MINIMUM AUTHORIZED SHARE CAPITAL PKR 1 (However a standard capital of PKR 100,000 is being used / recommended) PKR 1 (However a standard capital of PKR 100,000 is being used / recommended) PKR 1 (However a standard capital of PKR 100,000 is being used / recommended) PKR 1 (However a standard capital of PKR 100,000 is being used / recommended) PKR 1 (However a standard capital of PKR 100,000 is being used / recommended) PKR 1 (However a standard capital of PKR 100,000 is being used / recommended)
MINIMUM PAID UP/SUBSCRIBED CAPITAL As decided by Company As decided by Company As decided by Company Same as in Foreign Company Same as in Foreign Company As decided and articulated by the Company in its Articles of Association.
WHO CAN BE DIRECTOR OF THE COMPANY? Only shareholders can be Director of the Company Only shareholders can be Director of the Company Nominee Director will act as Director N/A N/A Only shareholders can be Director of the Company
WHO CAN BE CEO OF THE COMPANY? Any Person whether shareholder or not Any Person whether shareholder or not Any Person whether shareholder or not N/A N/A Any Person whether shareholder or not
PRIOR LICENSE OR NOC FOR COMPANY REGISTRATION FROM GOVERNMENT OF PAKISTAN Not Required Not Required Not Required MANDATORY MANDATORY Not Required
TRADE LICENSE (PRIOR OR SUBSEQUENT TO REGISTRATION) Not Required Not Required Not Required Not Required Not Required Not Required
SECURITY CLEARANCE OF FOREIGNERS OR FOREIGN COMPANY Required. However process of security clearance will be initiated after the Company has been formed Required. However process of security clearance will be initiated after the Company has been formed Required. However process of security clearance will be initiated after the Company has been formed Required. However process of security clearance will be initiated after the Company has been formed Required. However process of security clearance will be initiated after the Company has been formed Required. However process of security clearance will be initiated after the Company has been formed
PHYSICAL REGISTERED OFFICE ADDRESS / PLACE OF BUSINESS IN PAKISTAN  Mandatory. It needs to be arranged before filing company registration with CRO  Mandatory. It needs to be arranged before filing company registration with CRO  Mandatory. It needs to be arranged before filing company registration with CRO  Mandatory. It needs to be arranged before filing company registration with CRO  Mandatory. It needs to be arranged before filing company registration with CRO  Mandatory. It needs to be arranged before filing company registration with CRO
PHYSICAL PRESENCE OF FOREIGN SHAREHOLDERS FOR COMPANY REGISTRATION PROCESS Not Required Not Required Not Required Not Required Not Required Not Required
PHYSICAL PRESENCE OF FOREIGN SHAREHOLDERS FOR TAX REGISTRATION Mandatory Mandatory Mandatory Resident Principal Officer may act on company behalf Resident Principal Officer may act on company behalf Mandatory
PHYSICAL PRESENCE OF FOREIGN SHAREHOLDERS FOR COMPANY BANK ACCOUNT OPENING Generally Required Generally Required Generally Required Generally Required Generally Required Generally Required
CORPORATE TAX RATE 25% 31% 25% 31% 31% 31%
AVERAGE NUMBER OF DAYS TO FORM 10 – 15 working days 10 – 15 working days 15-30 working days 90 -100 working days 90 -100 working days 20-30 working days
SCOPE OF ACTIVITIES A branch office is set up by a foreign firm to execute the contracts awarded to it. 

Activity will be restricted to the work mentioned in the agreement/ contract signed

 

Cannot indulge in commercial/ trading activities 

 

Activity is restricted to the promotion of product(s), provision of technical advise and assistance, exploring the possibility of joint collaboration and export promotion (these activities are to be mentioned in the application) 

 

Cannot undertake any commercial/ trading activities

MEETING EXPENSES All expenses will be met out of funds transferred from abroad through normal banking channel and converted to local currency account or from the amounts received through execution of the agreement / contract All expenses will be met out of funds transferred from abroad through normal banking channel and converted to local currency account
REMITTANCE FACILITY Remittance of profits etc. is allowed subject to submission of information / documents as required in terms of Para 13 Chapter XIV of the Foreign Exchange Manual of SBP. No remittance facility allowed.
HIRING OF FOREIGN NATIONALS Employment of foreign nationals shall be made subject to the prior approval of the Government as per policy and in accordance with the policy of Pakistanization. Employment of foreign nationals shall be made subject to the prior approval of the Government as per policy and in accordance with the policy of Pakistanization
IMPORT AND EXPORT OF MACHINERY Import/Export of machinery and equipment and its re-export shall be governed by the Import/Export policies of the Government Nil
REGISTRATION WITH SECP Mandatory Mandatory
FINALIZATION OF CASE 6-8 weeks 6-8 weeks
PERIOD OF PERMISSION 3-5 years; renewable 3-5 years; renewable
DOCUMENTS REQUIRED 1.        Six sets of the following documents are required:2.        Application form

3.        Copy of registration of the  foreign company duly attested by Pakistan Mission

4.        Copy of Articles and Memorandum of  Association

5.        Copy of agreement / contract in case of Branch Office

6.        Copy of Company Profile

7.        Copy of Resolution / Authority letter of the company to establish branch office in Pakistan.

 

Six sets of the following documents are required: 

1.       Application form

2.      Copy of registration of the foreign company duly attested by Pakistan Mission

3.     Copy of Articles and Memorandum of Association

4.       Copy of Company Profile

5.      Copy of Resolution / Authority letter of the company to establish liaison office in Pakistan

 

RENEWAL Following documents are required: 

1.      Copies of valid agreements/ contracts along with their duration

2.      Income tax returns (for the last 03 years)

3.      Copy of latest Audited Accounts

4.      Proceeds Realization Certificates

Following documents are required: 

1.    Performance/Activity report

2.      Receipt and Payment Statement

3.      Proceeds Realization Certificates

 

CHANGE OF ADDRESS / TELE ETC. Has to be intimated to the Board of Investment and other concerned quarters Has to be intimated to the Board of Investment and other concerned quarters
DOCUMENTS REQUIRED FOR CLOSURE The following documents are required:1. Request letter for closure

2.Activity Report, Proceeds Realization Certificates, and Audited Accounts for the last permitted period

3. Copies of press clippings regarding closure published in two national dailies.

4.   Confirmation from tax authorities that all assessments and dues are clear.

The following documents are required:1. Request letter for closure

2.Activity Report, Proceeds Realization Certificates, and Receipt and Payment Statement for the last permitted period

3. Copies of press clippings regarding closure published in two national dailies.

4. Confirmation from tax authorities that all dues are clear.

For more information or to speak to a Company Registration Consultant CONTACT US now.

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