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 every country in the world and are generally identified as such through the use of terms such as “INC.” gold Limited in their names.
Throughout the world, corporations are the most widely used legal vehicle to operate 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 persons associated for lawful purposes may, by subscribing their names in the Memorandum of Association and meeting the requirements of the Companies Act 2017, form a public company and one or more associated persons may likewise 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 its shares.
Unipersonal Society: Sole member company, as is clear from the name, is the type of company with only one member who is also the sole director of the company. All shares belong to a single member; however, it is mandatory that the sole shareholder appoint a natural person as proprietary director, who will act as director in the event of his death, and a substitute proprietary director who will act as proprietary director in the event of the non-availability of the proprietary director. A corporate body cannot become its member or director.
Public limited company: An unlisted public company must have at least 3 members and 3 directors. You do not have the right to start your business unless you obtain a ‘Business Start Certificate’ from the Registrar of Companies, Pakistan Securities and Exchange Commission. 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. Its minimum paid-up capital must be Rs 200 crore and it must also make a public offering/issue of its shares, which must be subscribed to 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. noted 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 Market (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 with regard to incorporating a business is to seek the availability of the proposed business name from the registrar. An application with the prescribed fee is required by seeking the certificate of availability for each name.
Documents for registration of a limited company:
The following documents must be filed with the appropriate registrar for the registration of a limited liability company:
(YO) Copy of the identity card or passport, in case of being a foreigner, of each subscriber and witness of the deed of incorporation,
(II) Memorandum and Bylaws: Four printed copies of the Memorandum of Association 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 Association Memorandum of various sectors has been provided on the Commission’s website.
(III) Form – 1: Declaration of compliance of the applicant
(IV) Model – 21: Notice of location of the company’s registered office
(V) Form – 29: Data of the first directors of the company
(SAW) Registration/presentation fee: Original paid Challan evidencing payment of the fee as prescribed at any of the bank’s authorized branches.
Obtaining the Digital Signature of Directors:
The client will connect to https://eservices.secp.gov.pk/eServices, to log into 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 into the existing user ID in SECP eServices for all directors.
Digital signatures are required to file a case through electronic (online) services. For directors’ digital signature, obtain the form and have each director sign it (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 the Name Availability Letter issued by the SECP.
NIFT will deliver the details of the digital signatures by email. Download the same-day signature by following the instructions given in that email. NIFT charges a fee prescribed by the director.
Additional Requirements for the Constitution of a Public 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:
- Model 27 (List of people who agree to act as director)
- Model 28 (Consent of Directors)
Contractual capacity and right to invest:
Immediately upon 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 within 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 you to a PLC to start your business.
