Corporate law

To register a company in Pakistan:
1. Reserve a company name with SECP.
2. Submit the incorporation documents: Memorandum of Association (MOA), Articles of Association (AOA), and forms for director and company secretary details.
3. Pay the required registration fee and submit the application through SECP’s online portal.
4. Upon approval, SECP issues a Certificate of Incorporation, legally establishing the company.

In Pakistan, the Companies Act, 2017, allows the formation of different types of companies, including:
Private limited companies (Ltd.): Restricted to fewer shareholders, with limited liability.
Public limited companies (Plc): Can offer shares to the public and have broader shareholder access.
Single-member companies (SMC): Owned by a single individual.
Non-profit organizations (NPO): Established for public welfare without profit motives.
Foreign companies: Foreign entities operating in Pakistan.

The SECP is the regulatory authority overseeing corporate and financial markets in Pakistan. It administers company registration, monitors corporate governance, enforces compliance with the Companies Act, and regulates stock exchanges, mutual funds, and insurance companies. The SECP ensures transparency, investor protection, and fair market practices.

Company directors in Pakistan have several legal duties, including:
Fiduciary duties: Acting in the best interest of the company and its shareholders.
Duty of care: Making informed decisions for the company.
Compliance obligations: Ensuring the company complies with SECP regulations, tax laws, and labor laws.
Disclosure: Reporting any conflicts of interest and disclosing accurate financial information. Failure to meet these duties can lead to legal consequences under corporate law.

The Companies Act, 2017 modernized corporate governance and introduced measures for greater transparency, accountability, and regulatory compliance. It provides detailed regulations on director roles, shareholder rights, auditing standards, and financial disclosures. It also offers simplified registration for startups and introduced compliance requirements for foreign companies.

A private limited company in Pakistan must meet the following requirements:
Minimum of two shareholders and two directors (except for a single-member company).
Submit MOA and AOA specifying the company’s objectives and internal governance.
Conduct annual general meetings (AGM) and file annual returns with SECP.
Maintain financial records and conduct regular audits if required.

Shareholders in Pakistan are entitled to several rights, including:
Voting rights: On major company decisions and director appointments.
Dividends: Entitled to a share of profits if dividends are declared
Right to information: Access to financial statements and relevant company documents.
Inspection: Ability to inspect books and records in certain cases.
Legal action: Right to take legal action if director misconduct harms shareholder interests.

A foreign company can operate in Pakistan by:
Registering a branch or liaison office with the Board of Investment (BOI) and SECP.
Complying with foreign investment rules and obtaining licenses for specific sectors.
Filing annual financial reports and tax returns with Pakistani authorities. Foreign companies are subject to local regulations and may need government approval for operations in certain sectors.

Companies in Pakistan are subject to several tax obligations, including:
Corporate income tax: Applied on taxable income, with rates varying by sector and company type.
Withholding tax: Deducted at source on payments like dividends, salaries, and interest.
Sales tax: Applied to goods and services at specified rates.
Annual tax filings: Companies must file annual tax returns with the Federal Board of Revenue (FBR).

Corporate governance in Pakistan refers to the rules, practices, and processes that direct and control companies. SECP’s corporate governance code emphasizes transparency, accountability, and ethical behavior among directors, shareholders, and stakeholders. Good governance includes regular audits, financial disclosures, and compliance with the Companies Act, 2017.

Yes, a company can change its name by:
Passing a special resolution by shareholders.
Applying to SECP with the proposed new name.
SECP reviews the application and, if approved, issues a certificate of incorporation with the new name.

Mergers and acquisitions in Pakistan are governed by the Companies Act, 2017, which outlines the procedures for asset acquisition, merger approvals, and shareholder agreements. M&A transactions require approval from the SECP, and companies must notify the Competition Commission of Pakistan (CCP) to prevent anti-competitive practices.

Dissolving a company involves:
Voluntary winding-up by shareholders or a compulsory winding-up by a court. Appointing a liquidator to settle the company’s debts and distribute assets.
Filing necessary documents with SECP to complete the dissolution. Once completed, SECP strikes the company off the registry, and it ceases to exist.

Companies in Pakistan are required to: Maintain accurate financial statements that include balance sheets, profit and loss accounts, and cash flow statements.
Submit annual audited accounts to SECP.
Conduct audits by SECP-approved auditors if they meet certain size and revenue thresholds. Financial reporting ensures transparency and accountability to shareholders and regulators.

The board of directors is responsible for:
Setting the company’s strategic direction and overseeing management.
Ensuring compliance with legal and regulatory requirements.
Approving major business decisions, including budgets and financial plans.
Acting in the best interests of shareholders while adhering to corporate governance practices. Directors must fulfill their fiduciary and legal responsibilities or face penalties.

A single-member company (SMC) is a private limited company with only one shareholder. SMCs in Pakistan provide limited liability protection to the sole owner and are suitable for small businesses. The SMC structure simplifies governance, requiring fewer compliance steps, while still adhering to the SECP’s regulations for private companies.

SECP has issued Anti-Money Laundering (AML) guidelines for companies, requiring them to:
Conduct due diligence on customers and business partners.
Monitor transactions for suspicious activity.
Report suspicious transactions to the Financial Monitoring Unit (FMU). These requirements aim to prevent illegal financial activities and promote corporate transparency.

The Companies Act, 2017, is Pakistan’s primary corporate law framework, replacing the previous Companies Ordinance, 1984. It introduces modern corporate governance standards, simplifies company registration, and strengthens SECP’s regulatory powers. The Act enhances transparency, investor protection, and legal clarity for businesses.

Disputes between shareholders and directors are typically resolved by: Internal dispute resolution mechanisms, as defined in the company’s articles of association. Filing a complaint with SECP for corporate governance violations. Pursuing legal action in civil court if necessary. Mediation and arbitration are encouraged to settle disputes outside of court when possible.