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In this article, you will get an overview of different legal entities available for foreign investors. We will also share the step-by-step guide to company registration in Pakistan.
The information presented continues to change depending on the laws and amendments made in Pakistan. We update our articles accordingly.
Allowed Foreign Ownership in Pakistan
Unlike many other similar markets, Pakistan is very welcoming towards foreign investors. The country has significantly opened up to foreign investment over the past years.
For example, you can even import some products without acquiring an import license.
Moreover, foreign investors can set up 100% of foreign-owned companies in most business lines. The shareholders can be of any nationality, except for Israeli nationals.
Minimum Capital Requirement in Pakistan
There are two types of share capitals in Pakistan, paid-up capital and authorized capital. Both capitals must be declared in the Articles of Association when you register your company.
Paid-up capital is the amount of money that the company receives from its shareholders. On the other hand, authorized capital is the maximum amount of share capital that the company is allowed to authorize to issue to its shareholders.
There is no official minimum capital requirement for private limited companies in Pakistan. For this reason, a common practice is to consider PKR 100,000 as the minimum capital.
In reality, however, the paid-up capital you inject must be in compliance with your planned expenses. For example, if you plan on building a factory for your business, you must also have sufficient capital for that.
Types of Legal Entities in Pakistan
More and more foreign investors recognize Pakistan as a market to invest in. If you are planning to invest in Pakistan, here are the types of legal entities that you can choose from.
#1 Private Limited Company
Foreign investors can set up fully foreign-owned private limited companies in Pakistan. The minimum number of shareholders needed in order to register this kind of company is two. Any foreign national can be a shareholder in this kind of company, except for those coming from Israel.
In general, PKR 100,000 is considered to be the minimum capital requirement. However, take note that the actual minimum capital you need to inject depends on your planned expenses.
Another requirement is that the registered address of the company’s office must be located in Pakistan.
The incorporation time of a limited liability company in Pakistan is generally six weeks. The registration is also subject to approval from the Board of Investment, and you also need to obtain clearance from the Ministry of Interior.
#2 Single Member Company
Apart from Israeli nationals, foreign investors can also set up a single-member company in Pakistan with only one shareholder.
Just like a limited liability company, you can also set up a single-member company in Pakistan with PKR 100,000 of minimum capital.
The standard time of incorporation is four weeks and makes sure that the company’s registered address will be in Pakistan.
#3 Public Limited Company
Generally speaking, a public limited company has its shares offered to the general public. Those shares are with limited liability.
Anyone can acquire the shares. It may be through a public offering or trading in the stock market.
There are two types of public limited companies in Pakistan, unlisted and listed.
How to register a company in Pakistan
The Step by Step Procedure of Private Limited Liability Company Registration in Pakistan
The procedure of registering a public limited company is the same as above. However, they may require you to submit more documents.
Step 1: Approval of Company Name
This is the first step of company registration in Pakistan. It is choosing the company’s name. It is essential to devise a unique company name that would set you apart from the industry.
You must follow the restrictions and guidelines. For example, make sure that your company’s name does not include any prohibited words.
Step 2: Submission of Documents
Once the company name gets approval, you need to submit the incorporation documents to the Securities and Exchange Commission of Pakistan (SECP).
Step 3: Certificate of Incorporation
After submitting the documents, the SECP evaluates them. They check their validity. A digital signature is granted by the National Institutional Facilitation Technologies (NIFT) and can be acquired through the SECP.
Also, they issue the certificate of incorporation. Presentation of the company may be needed. However, this depends on where the business started.
Step 4: Deposit of Shares
After the registration, shareholders must deposit their corresponding amount of shares to the company’s bank account.
Step 5: Registration of Income, Sales, and Professional Taxes
In conclusion, the last step of company registration in Pakistan is the registration with the Federal Board of Revenue (FBR) and issuance of a national tax number (NTN). A sales tax registration number may be registered if applicable.
Alternatives to company registration in Pakistan
A branch office is a suitable alternative to company registration if your company wants to have a Pakistan presence without setting up a separate legal entity.
Branches are carrying out a contract in Pakistan. However, a branch office cannot take part in any commercial or trading activities of whatever nature. Therefore, your actions depend on the contract you signed. The agreement restricts your movements.
The parent company owns 100% of the branch office in the country of origin. Since it is not a limited liability company, it does not require any minimum capital either.
Process time for the registration takes up to seven weeks. The permit can be valid for 1 to 5 years if it has approval from the Board of Investment (BOI).
If you want to promote your products in Pakistan, you can set up a 100% foreign-owned liaison office.
Besides product promotion, you can also provide technical advice and assistance, explore the various possibilities of collaboration and export promotion in Pakistan.
However, this type cannot engage in commercial or trading activities, and it is not subject to any minimum capital either.
A liaison office can only function according to the provisions of the contract or the assignment.
While part of the contract states that you can only provide technical assistance and product promotion, you cannot engage in export promotion and other activities.
Hence, it is similar to the branch office. Therefore, there will be no shareholding since it will only be in the country of origin.
The standard time for establishing a liaison office in Pakistan is seven (7) weeks. Therefore, once granted, your permit would have a validity period of 1 to 5 years. Also, the Board of Investment (BOI) needs to approve it.
How to start with company registration in Pakistan?
If you are planning on investing in Pakistan, get in touch with INU Corporate Tax Consultants, and we will handle the process of company registration on your behalf.
All you need to send us to get started is:
- Name, addresses, and shareholding of each of the shareholders
- The amount of share capital
- Passport copies of the shareholders
- Proposed name of the company