Incorporation in Pakistan: Part 1

16 08 2012

This is an international corporate law site edited by an advocate of the High Court of Sindh, Pakistan. Therefore, as someone involved in producing this site, I am taking the opportunity to set things in motion by posting on Pakistani company law which is governed by the Companies Ordinance 1984 (the “Ordinance”). Compliance with the Ordinance is regulated by the Security and Exchange Commission of Pakistan (“SECP” or the “Commission”) which was established under the Securities and Exchange Commission Act 1997

SECP became operational in 1999 and it replaced the older Company Law Division. SECP’s central office is located in the federal capital Islamabad and the Commission also operates company registration offices (“CROs”) in other cities such as Karachi, Lahore, Quetta, Peshawar, Multan, Faisalabad and Sukkur. The SECP is divided into seven divisions and for business and financial law purposes the relevant sections are the (i) company law division; (ii) securities market division; (iii) specialised companies division; and (iv) insurance division.

The registration department in the company law division is responsible for registration of new companies. Incorporation under part IV, section 14 of the Ordinance requires that partnerships or associations with more than twenty members are obliged to register and comply with the provisions of the Ordinance.

Moreover, where three or more persons may subscribe their names to the Memorandum of Association (“MoA”) and comply with the requirements of the Ordinance: they may form a public company. Similarly, one or more person may form a private company. Equally, one member alone may form a private single member company.

Certain type of companies require prior approval:

(1)  Banking companies are approved by the Ministry of Finance/the State Bank of Pakistan

(2)  Non-banking finance companies (NBFC) are approved by Securities and Exchange Commission of Pakistan

(3)  Companies providing security services are approved by Interior Division

(4)  Corporate brokerage houses are approved by the Stock Exchange

(5)  Money exchange companies are approved by the State Bank of Pakistan

(6)  Associations (not for profit) under section 42 of the Ordinance must have a licence from the SECP

(7)  Trade organisations under the Ordinance must obtain a licence from the Ministry of Commerce

Incorporation in Pakistan is quicker, cheaper and generally more advantageous online. Moreover, only advocates or accountants can incorporate companies and the minimum authorised share capital must be at least Rs 100,000. Numerous post incorporation requirements exist. Non-exhaustively, these are listed below.

Private Companies

  • Directors of every company are required to appoint the first chief executive not later than fifteen days from the date of incorporation and thereafter within fourteen days from the date of election.
  • The first auditor is required to be appointed by the directors within sixty days from the date of incorporation and thereafter in each AGM of the company.
  • First directors (the directors appointed at the time of incorporation of the company) shall hold office till the election of directors in the first annual general meeting. The directors who are elected shall hold office for a period of three years. However, casual vacancies occurring on account of death, resignation or removal of any director may be filled up by the other directors for the remainder period of the term.
  • A single member company is also required to appoint a company secretary within fifteen days of incorporation or of becoming a single member company or of the office of company secretary falling vacant and notify such appointment within fourteen days of the date of such appointment.

Public Companies

In addition to the above listed requirements which also apply to public companies, some of the other (non-exhaustive) post-incorporation requirements are:

  • List of directors and consent of directors and chief executive are required to be filed within 14 days of after the election of directors and appointment of chief executive.
  • A private company may commence its business immediately after its incorporation. However, a public company shall be entitled to commence its business after obtaining commencement of business certificate from the registrar concerned (cf. section 146 of the Ordinance).
  • A statutory meeting is required to be held within a period of not less than three months but not more than six months from the date at which the company is entitled to commence business. A statutory report is required to be circulated to the members and five copies thereof certified in the prescribed manner are required to be filed with the registrar concerned, at least 21 days before the date of statutory meeting. A private company which converts itself to public company after one year of incorporation is not required to hold such statutory meeting and issue such statutory report (cf. section 157).
  • Two copies of the audited balance sheet and profit and loss accounts signed in the prescribed manner are required to be filed by public companies with the registrar concerned within 30 days from the date of their AGM (cf. sections 233 & 242).
  • Every listed company is required to file three copies of audited balance sheet and profit and loss accounts to the SECP, Stock Exchange and the registrar at the time of sending the notice of AGM to the members as well as within 30 days of holding the AGM.
  • A listed company is also required to appoint a company secretary.

 

Please see Incorporation in Pakistan: Part 2 for post incorporation requirements for foreign companies.  

Email: asadakhan@me.com 

 


Actions

Information

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




%d bloggers like this: