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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 nearly all countries in the world and are usually identified as such by the use of terms such as “Inc.” or “Limited” in their names.
Throughout the world, corporations are the most widely used legal vehicle for operating a business. While the legal details of a corporation’s formation and organization differs from jurisdiction to jurisdiction, most have certain elements in common.
Incorporation of a Company in Pakistan:
Any three or more persons associated for lawful purpose may, by subscribing their names to the Memorandum of Association and complying with the requirements of the Companies Act 2017 form a public company and any one or more persons so associated may, in like manner, form a private company. If only one member forms a private company, it is called a single member company.
Private Limited Company: A private company is required to have a minimum of 2 members and 2 directors. It may commence its business immediately after its 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.
Single-Member Company: Single Member Company as is evident from the name is the type of the company with only one member who is the sole director of the Company as well. All the shares are vested with single member; however, it is mandatory for the single member to nominate an individual as nominee director, to act as director in case of his death, and an alternate nominee director who will act as nominee director in case of non-availability of nominee director. A corporate entity cannot become its member or director.
Public Limited Company: A public unlisted company must have at least 3 members and 3 directors. It does not become entitled to commence its business unless it obtains ‘Certificate of Commencement of Business’ from the Registrar of Companies, Securities and Exchange Commission of Pakistan. There is no restriction on the maximum number of members and transfer of shares. A public company has option to list its securities/shares at any stock exchange in Pakistan. It must then have at least 7 members and 7 directors. Its minimum paid up capital should be Rs. 200 million and it is also required to make a public offer/issue of its shares which must be subscribed by at least 500 applicants. The post issue paid up capital is required to be at minimum Rs.500 million.
Approval Required of the Ministries/Departments:
Prior approval of the Ministries/Departments etc. noted against each category of the following companies is required to be obtained before incorporation of companies.
- A banking Company: (I) Ministry of Finance (II) State Bank of Pakistan
- A non-Banking finance Company (NBFC): SECP
- A company providing security service: Ministry of Interior
- A corporate brokerage house: Stock Exchange (for transfer of membership card in favour of proposed company)
- A money exchange company: State Bank of Pakistan
- An association not for profit u/s 42 of the Companies Act, 2017: License from SECP.
- A trade organization: License from Ministry of Commerce
REGISTRATION OF A COMPANY:
Following are the requirements for registration of a new company under the Companies Act, 2017.
Availability of Name:
The first step with regard to incorporation of a company is to seek the availability of the proposed name for the company from the registrar. An application is required to be made with prescribed fee seeking availability certificate for each name.
Documents for registration of a limited company:
The following documents are required to be filed with the registrar concerned for registration of a private limited company:
(I) Copy of national identity card or passport, in case of foreigner, of each subscriber and witness to the memorandum and article of association,
(II) Memorandum and articles of association: Four printed copies of Memorandum of Association in case of offline submission and one copy for online submission, duly signed by each subscriber in the presence of one witness. In order to facilitate general public, the standardized specimen of Memorandum of Association of various sectors has been provided on the Commission’s website.
(III) Form – 1: Declaration of applicant for compliance
(IV) Form – 21: Notice of situation of registered office of the company
(V) Form – 29: Particulars of first directors of the company
(VI) Registration/filing fee: Original paid challan evidencing the payment of 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 on to his/her account or signup, in case of a new user. User will receive an e-mail containing the user activation link. By clicking on the link, user account will be activated.
You already have one login/user ID which will be used for one Director of the proposed Company. For remaining directors create secondary user ids through login into existing user ID in SECP eServices for all directors.
Digital signatures are mandatory for submitting case through e services (online). For digital signature of directors, obtain the form and get it signed by each director (One form for one director). SBC will fill in the rest of NIFT Form and submit the same at National Institutional Facilitation Technologies (NIFT) counter at CRO-SECP along with following documents;
- Attested copies of CNIC of all Directors
- Attested copies of Availability of Name Letter issued by SECP.
NIFT will deliver digital signatures details through email. Download the signature at the same day while following the instructions given in that email. NIFT charges prescribed fee per director.
Additional Requirements for the Incorporation of a public Company:
In addition to the requirements for incorporation of a private limited company as stated above, the public companies are required to file the following documents at the time of incorporation:
- Form 27 (List of persons consenting to act as director)
- Form 28 (Consent of Directors)
Contractual Capacity & Right to Invest:
Immediately upon registration with SECP, the entity becomes eligible for entering 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 Pakistan.
Commencement of Business:
A Certificate of Incorporation issued by the Registrar of Companies is a conclusive proof of establishment of the entity in Pakistan. This also entitles a PLC to commence its business.
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