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Frequently Asked Questions (FAQs) about Company Law in Pakistan.
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A. According to Companies Ordinance, 1984 private company means a company, which, by its
articles, restricts the right to transfer its shares, if any. Limits the number of its members to fifty
not including persons who are in the employment of the company and prohibits any invitation to
the public to subscribe for the shares, if any, or debentures of the company.
A. Relevant laws are Companies Ordinance, 1984, Companies (General Provisions and Forms)
Rules, 1985, Single Member Companies Rules, 2003 and Code of Corporate Governance for
limited companies.
A. Companies Ordinance, 1984 mentions three types of companies i.e. company limited by
shares, company limited by guarantee and unlimited company. Companies which may be
registered in the mentioned categories in Pakistan are a single member company, a private
limited company, a public limited company; which may be listed or unlisted and a foreign
company.
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A. A public unlisted company must have at least three members/directors whereas the company
listed at stock exchange must have at least seven members/directors. A private company may
have only two members/directors and a single member company can be formed with one chief
executive and a company secretary.
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A. According to Companies Ordinance, 1984 Special Resolution means a resolution which has
been passed by a majority of not less than three-fourths of such members entitled to vote as are
present in person or by proxy at a general meeting of which not less than twenty-one days notice
specifying the intention to propose the resolution as a special resolution has been duly given.
Provided that, if all the members entitled to attend and vote at any such meeting so agree, a
resolution may be proposed and passed as a special resolution at a meeting of which less than
twenty-one days notice has been given.
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A. Memorandum of Association primarily specifies the framework of company¶s objectives and
capital boundaries. It is the constitution of a company, and is its main document. A company
cannot incorporate without a memorandum of association. It provides information about a
company, its financial structure, and its functions. Memorandum of Association governs a
company¶s business operations by highlighting clauses of what a company can do and what it
cannot. It includes Name clause, Registered Office Clause, Object Clause, Liabilities Clause, and
Authorized Capital Clause. The object clauses cannot be changed or enlarged without the
approval of Securities and Exchange Commission of Pakistan.
A. Articles of Association highlight internal regulations for the management of the company. It
states the roles and functions of the company¶s management. Articles of Association govern
company management¶s operations they transcribes rules for conducting its daily business in
accordance with applicable laws e.g. transfer and transmission of shares, mode of alteration in
capital, holding of meetings, voting, powers and duties of directors and chief executive,
distribution of dividends, capitalization of profits and reserves, preparation of accounts, winding
up, etc.
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A. Yes, a company can alter its articles of association anytime after passing of a special
resolution by the shareholders.
A. Yes, sole proprietor business can be converted into sole proprietor company or a private
limited company.
A. You can adopt any one option that is; by becoming a sole proprietor, by forming a single
member company, by forming a partnership and you can also form a private limited company.
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A. Yes, foreigner can be a director of a Pakistani Company after compliance with the Foreign
Exchange Regulations.
A. A director can resign anytime subject to the clearance of any liability against him.
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A. The minimum paid up capital at the time of incorporation of a private limited company has to
be Pakistani Rupees 1, 00,000. There is no upper limit on having the authorized capital and the
paid up capital. Capital can be increased any time.
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A. The authorized capital is the limit up to which the directors are competent to issue shares.
Paid up and subscribe capital means the capital actually issued in favor of the
directors/shareholders within the limits of authorized capital.
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A Yes, you can increase but subject to the compliance of the requirement of the Companies
Ordinance, 1984.
A. Foreign company can establish a principal place of business in Pakistan after complying with
the legal requirements laid down under section 452 to 460 of the Companies Ordinance, 1984.
A. Yes, a company name can be changed any time after the incorporation, by passing a special
resolution by the members and certificate of change of name is issued by the Securities and
Exchange Commission of Pakistan in whose jurisdiction the registered office of the company is
situated.
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A. Yes, you can set up a company. If a Chief Executive/director resides outside Pakistan for
more than three months then he can appoint an alternative director in his place.
A. You can choose any name but subject to the approval of the Securities & Exchange
Commission of Pakistan.
A. Non-profit companies are generally formed with the objective of promoting art, science,
social services, etc. and the members are prohibited from receiving any dividend. Such
companies are exempted from the requirements of using the word ³limited´ at the end of the
name and are authorized to operate under a license issued by the regulator.
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A. There is no restriction on foreigners to do business in Pakistan.
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A. Foreigner can form a company with 100% equity subject to the approval of Board of
Investment, Government of Pakistan otherwise they must have someone from Pakistan to be a
director.
A. Yes, every company is assigned a national tax number without it a company cannot file its
return. Documents which company requires for national tax number are photocopies of computer
national identity card of all the directors or passport (in case of foreigner), incorporation
certificate and application for national tax number by individual director in case they do not have
national tax number.
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A. The income tax payable by the companies in Pakistan is approximately 35% of the net profit
of the company.
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A. No, it is not necessary to form a company or a partnership firm to start a business in Pakistan.
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A. Yes anyone can be a company director provided he holds Computer National Identity Card
and he or she is not debarred from any competent court of law to become a director.
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A. Limited liability means, that if a company is put into liquidation, the people who own the
company will only be required to pay what they have already paid or agreed to pay towards
settling its debts. Limited liability gives the owners of the company protection if the company
fails. Liability of directors/members is limited to the extent of shares held by them in the
company.
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A. If you decide that you do not need a company that you have set up, you should consider
putting it into voluntary liquidation if the company is solvent and is in a position to pay its
liabilities within twelve months from the date of winding up, if the company cannot afford this
and is insolvent then you may apply for its compulsory liquidation through court or to apply for
it to be ³struck off the register´ if the company has no assets and liabilities.
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A Registered office is the official address of your company where the correspondence can be
exchanged between the company and his clients.
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A. A company can change the place of its registered office from province to province and from
place to place in the same province.
When a company intends to shift its registered office from one province to another it must pass a
special resolution, obtain confirmation of the change from the Securities and Exchange
Commission of Pakistan, file a certified copy of authority¶s order together with the altered
memorandum with the registrar of both the provinces, notice of new location shall also be given
to the registrar and every copy of memorandum and articles of association shall be amended
accordingly.
The office of a company may be removed from one place to another within the same province by
a special resolution and a notice to the registrar.
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A. Unregistered company means a company, which is not incorporated under the Companies
Ordinance, 1984.
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A. Yes, a private company may convert its status into public limited company by altering its
Articles of Association.
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A. Yes a public limited company can be converted into private limited company subject to the
approval of the Securities and Exchange Commission of Pakistan.
A. Yes, a private company can be converted into a single member company by passing a special
resolution for change of its status and make necessary alteration in its articles of association and
obtain approval of the Securities and Exchange Commission of Pakistan.
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A. Yes, single member company can be converted into private limited company.
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A certified copy of the charter, statute or Memorandum and Articles of the company
accompanied by Form 38. The certification is to be given by:- (a) the public officer in the
country where the company is incorporated to whose custody the original is committed or (b) a
notary public of the country where the company is incorporated; or (c) an affidavit of a
responsible officer of the company in the country where the company is incorporated. The
signature or seal of the person so certifying shall be authenticated by a Pakistani diplomatic
consular or consulate officer. If the document is not in English, duly certified translation in
English or Urdu language is provided
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A. Additional directors are those directors who are not required to acquire a share qualification
of a director, as they are the nominees of the financial institution who extended the credit
facilities to the companies.
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A. All companies are required to appoint a Chief Executive Officer except for a company
managed by a managing agent. The first Chief Executive Officer is appointed by the directors of
the company at the date of commencement of business or within 15 days from the date of
incorporation, whichever is earlier and thereafter within 14 days of the date of election of
directors.
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A. Failure to deliver documents on time is an offence under the Companies Ordinance, 1984. On
this failure, directors could be prosecuted and penalized.
A. Yes, shares holders can remove a director by passing a resolution in a general meeting.
A. Shares in a company are freely transferable, subject to certain conditions, such that no
shareholder is permanently or necessarily wedded to a company. When a member transfers his
shares to another person, the transferee steps into the shoes of the transferor and acquires all the
rights of the transferor in respect of those shares.
A. Yes. A company may by writing under its common seal, empower any person either generally
or in respect of any specified matters as its attorney, to execute deeds on its behalf in any place
either in or outside Pakistan and every deeds signed by such attorney on behalf of company and
under his seal, where sealing is required shall bind the company and have the same effect as if it
were under its common seal.
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0The information available above is not intended to be comprehensive, and many
details which may be relevant to particular circumstances have been omitted. Accordingly, it
should not be regarded as being complete source of company law information, and web users are
advised to seek independent professional advice before acting on anything contained herein.
AMLAW will not take any kind of responsibility for the consequences of errors or omissions.
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A Partnership in Pakistan is a business entered into by a formal agreement between two or more
persons or corporations carrying on a business in common. The capital for a Partnership is
provided by the partners who are liable for the total debts of the firms and who share the profits
and losses of the business concern according to the terms of the partnership agreement.
Partnership in Pakistan (other than banking companies) are generally limited in size to twenty
partners. The interest of a partner is transferable only with the prior consent of the other
partner(s). However, a partner¶s right to a share of the partnership income may be received in
trust for another person.
The income of the registered firm is subject to super tax before distribution to the partners. Also
the individual income of the partners is subject to income tax at the usual rates.
For unregistered firms, income tax is levied on the firm¶s income and the partners are not liable
to pay tax on the shares of profit received from the unregistered firm(s).