Incorporation is the legal process used to form a corporate entity or company. A corporation is a separate legal entity from its owners, with its own rights and obligations. Corporations can be created in almost any country in the world and are generally identified as such by the use of terms such as “INC.” Prayed Limited in their names.

Throughout the world, corporations are the most widely used legal vehicle for operating a business. While the legal details of forming and organizing a corporation differ from jurisdiction to jurisdiction, most have certain elements in common.

Incorporation of a company in Pakistan:

Three or more associated persons for lawful purposes may, by signing their names in the Deed of Incorporation and complying with the requirements of the Companies Act 2017, form a public company and one or more associated persons may, in the same way, form a private company. If only one member forms a private company, it is called a sole proprietorship.

Limited Liability Company: A private company is required to have a minimum of 2 members and 2 directors. You can start your business immediately after incorporation. A private company, through its Articles of Association (AoA) restricts the right to transfer its shares, limits the number of its members to fifty (50) and prohibits any invitation to the public to subscribe for its shares.

Unipersonal Society: The single member company, as is clear from the name, is the type of company with a single member who is also the sole director of the company. All shares belong to a single member; however, it is mandatory for the sole shareholder to appoint a natural person as proprietary director, who will act as director in the event of his death, and an alternate proprietary director who will act as proprietary director in the event of the unavailability of a proprietary director. A corporate entity cannot become its member or director.

Public limited company: An unlisted public company must have at least 3 members and 3 directors. You are not entitled to start your business unless you get a ‘Business Start Certificate’ from Pakistan Securities and Exchange Commission, Registrar of Companies. There is no restriction on the maximum number of members and transfer of shares. A public company has the option to list its securities/shares on any stock exchange in Pakistan. So it must have at least 7 members and 7 directors. Your minimum paid-up capital must be Rs 200 million and you must also make a public offer/issue of your shares, which must be subscribed by at least 500 applicants. Post-issuance paid-up capital is required to be at least Rs 500 crore.

Approval required from Ministries/Departments:

Prior approval from Ministries/Departments, etc. scored against each category of the following companies is required to be obtained prior to company incorporation.

• A banking company: (I) Ministry of Finance (II) State Bank of Pakistan
• A Non-Bank Finance Company (NBFC): SECP
• A company that provides security service: Ministry of Interior
• A corporate brokerage house: Stock Exchange (by transfer of membership card in favor of the proposed company)
• A currency exchange company: State Bank of Pakistan
• A non-profit association u/s 42 of the Companies Act 2017: SECP license.
• A commercial organization: License from the Ministry of Commerce

REGISTRATION OF A COMPANY:

The following are the requirements for registering a new company under the Companies Act 2017.

Name Availability:

The first step in incorporating a business is to look up the availability of the registrar’s proposed business name. An application is required at the prescribed fee by finding the certificate of availability for each name.

Documents for registration of a limited company:

The following documents must be submitted to the appropriate registrar for the registration of a limited liability company:

(I) Copy of the identity card or passport, in case of being a foreigner, of each subscriber and witness of the deed of incorporation,

(II) Articles of incorporation and bylaws: Four printed copies of the articles of incorporation in case of offline filing and one copy for online filing, duly signed by each subscriber in the presence of a witness. In order to facilitate the general public, the standardized model of the Memorandum of Association of various sectors has been provided on the Commission’s website.

(III) Form – 1: Applicant Compliance Statement

(IV) Model – 21: Notice of the status of the company’s registered office

(V) Form – 29: Data of the first directors of the company

(SAW) Registration/presentation fee: Original Challan paid evidencing the payment of the fee as prescribed in any of the authorized branches of the bank.

Obtaining Digital Signature of Directors:

The client will connect to https://eservices.secp.gov.pk/eServices, to log in to their account or register, in case of a new user. The user will receive an email with the user activation link. Clicking on the link will activate the user account.

You already have a login/user ID that will be used for a director of the proposed company. For the remaining directors, create secondary user IDs by logging in to the existing user ID in SECP eServices for all directors.

Digital signatures are required to file a case through electronic (online) services. For the digital signature of directors, obtain the form and have it signed by each director (One form for one director). SBC will complete the remainder of the NIFT form and submit it to the National Institutional Facilitation Technologies (NIFT) counter at CRO-SECP along with the following documents;

• Certified copies of the CNIC of all Directors
• Certified copies of Name Availability Letter issued by the SECP.

NIFT will deliver the details of the digital signatures by email. Download the signature on the same day following the instructions given in that email. NIFT charges a prescribed fee per director.

Additional Requirements for the Incorporation of a Limited Company:

In addition to the requirements for the incorporation of a limited liability company as indicated above, public companies must present the following documents at the time of incorporation:

1. Model 27 (List of people who agree to act as director)
2. Model 28 (Consent of Directors)

Contractual capacity and right to invest:

Immediately after registration with the SECP, the entity becomes eligible to enter into contracts or arrangements with resident or non-resident entities or individuals. The right to invest is an inherent right of a limited liability company inside or outside of Pakistan.

Start of business:

A Certificate of Incorporation issued by the Registrar of Companies is a conclusive proof of the establishment of the entity in Pakistan. This also entitles a PLC to start your business.