A company is a legal entity established by a group of people with the goal of running a business or undertaking, with a distinct legal and corporate identity from its members. Company law services, on the other hand, is the legislation that governs and regulates the establishment, registration, governance, and dissolution of an entity.

In order to encourage corporatisation through the growth and promotion of the corporate sector, company law has been revised to facilitate the use of technology in business operations by electronic means, as well as the regulation of such use. Company law services regulate businesses to safeguard the interests of shareholders, creditors, stakeholders, and the general public. It also promotes corporate governance principles, protects minority interests, and provides alternative mechanisms for the swift resolution of corporate disputes.

The international business law practice of SARDAR KHAN & CO is well-established and comprehensive. Our staff of attorneys focuses on business formation and similar matters.  The corporate sector in Pakistan is regulated by the SECP under the Companies Act, 2017.

The Companies Act allows for company registration, as well as formation by charter or by a specific Parliament Act. The charter, Act of Parliament, or memorandum of association typically (but not always) restricts the liability of its members. A firm may be a public limited company, in which case its shares may be held by and freely transferred between members of the general public. The designation (Pvt) Ltd. is used to refer to all private limited companies that are not public limited companies. Even though its members (i. e., shareholders) own the company, it is run by a board of directors. A corporation might be limited by shares, guaranteed, or be an unlimited business.

Applicability & Scope of Work

Sec. 1 of The Companies Act, 2017

The Companies Act, 2017, applies to the territory of Pakistan as per the Constitution of the Islamic Republic of Pakistan. In this connection, provinces of Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan and Islamabad Capital Territories belong to Pakistan and the Act applies to these provinces and territories.

Characteristic Features of Companies Act, 2017

The Companies Act, 2017 replaced the 33-year-old Companies Ordinance, 1984. There are 8 (eight) schedules and 515 (five hundred and fifteen) clauses in the Act. The most important legislative changes that align company law services in Pakistan with contemporary international standards are highlighted below.

Borrowing Powers

The memorandum and articles of association empower a company to obtain loans, advances, financing, or credit facilities.

Buy Back of Own Shares

Today, all companies are permitted to buy back their own shares. Previously, this facility was limited to listed companies. Shares bought by an unlisted public business or a privately held company are to be deleted. Such share cancellations will not be seen as a decrease in share capital u/Sec. 89. Such shares shall be cancelled as may be mandated in such manner and form. The Listed Company will repurchase via the securities exchange; the tender method of buyback is no longer allowed.

General Meeting through Video Link

At least seven days before the date of the meeting, a listed firm is required to provide the option of a video link to members living in a city who own at least 10% of the total paid-up capital, or any other percentage that may be specified, enabling them to attend its annual general meeting. Before this, shareholders did not have access to this facility.

National Tax Number (NTN) of Directors

A person cannot be appointed as a company director unless they have a National Tax Number (NTN) according to the rules in the Income Tax Ordinance of 2001. On June 8, 2017, the Securities & Exchange Commission of Pakistan (SECP) released Circular No. 15/2017, which allowed a general exemption for two years for all Small Sized Companies (SCCs), including Agriculture Promotion Companies, from needing an NTN. To be recognised as a Small-Sized Company, a business must have a paid-up capital of no more than PKR 10 million, a turnover that doesn’t go over PKR 100 million, and a workforce not exceeding 250 employees.

Women (Female) Representation in the Company Law Services

In a significant advancement for improving gender diversity on corporate boards in Pakistan, the Securities & Exchange Commission of Pakistan (SECP) has mandated that companies listed on the stock exchange include at least one female director. According to Section 154(d), companies that serve the public interest must have women represented on their boards as outlined by the Commission.

This adjustment is being put into effect through the updated Code of Corporate Governance introduced by the new Companies Act 2017, which dictates that public interest companies must include women directors as specified by the SECP. Consequently, the percentage of female directors in listed companies, which fall under the category of public interest companies, is anticipated to rise from 6.4 per cent to a minimum of 14.3%

Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR) requires companies to consider social and environmental responsibilities in their operations. Thanks to the great significance the consumers give to CSR, the private sector of business now spends quite a lot. From a socio-economic viewpoint, CSR projects in Pakistan are rather crucial for the transformation the nation urgently requires. Important is the part the corporate world plays in resolving Pakistan’s problems. This is the main driver of the recent increase in Pakistani CSR initiatives.

Dispute Resolution through Mediation / Conciliation

The Act allows any firm, its management, its members, or its creditors to submit a disagreement between them to the Mediation and Conciliation Panel established by the SECP for settlement. Though Sec 283 of the Companies Ordinance of 1984 previously applied the Arbitration Act of 1940, it is a new provision that has been added to the Companies Law.

Mergers & Acquisitions

The High Court was formerly intended to authorise de-mergers and schemes of arrangements involving two or more firms. Mergers between a holding company and its wholly-owned company, as well as companies controlled by the same person, do not call for formal authorisation from the High Court or the SECP under the Act. Only after board clearance may two firms be merged. 

Inactive Companies

The registrar can grant a company the formal status of an inactive company if it is inactive, not operational, or has few accounting operations.

Easy Exit for Defunct Company

The Act provides a streamlined mechanism for the voluntary dissolution of defunct companies. Under Section 426, upon receiving an application for dissolution from a defunct company, the registrar may strike the company’s name off the register after publication of notice in the Official Gazette.

Shariah Compliant Companies & Securities

No company will be entitled as a Shariah-compliant company or security, listed or unlisted, unless it has been authenticated/declared Shariah compliant by the SECP pursuant to Section 451. The companies will not be allowed to appoint or engage any person for Shariah compliance, Shariah advisory, or Shariah audit unless that person meets the fit and proper criteria laid down by the Companies Act, 2017.

Global Register of Beneficial Ownership

All substantial shareholders and officers of Pakistani companies are required to disclose any shareholding held in foreign companies or bodies corporate. The company will then be required to disclose such information to the registrar together with the annual return. The beneficial ownership of the shareholders and officers will be registered in the Global Register of Beneficial Owners in Securities & Exchange Commission of Pakistan (SECP), and copies will be furnished by it to the Federal Board of Revenue (FBR) or any other agency as per Sec 452(8).

Prevention of Money Laundering

It will be the duty of all companies to verify commission of fraud, money-laundering, including predicate offences, under the Anti-Money Laundering Act, 2010, under the provisions of Section 453. Under Section 258, the SECP will undertake a joint investigation in some of the serious cases, such as that of fraud. The SECP has the right to cancel the license of the companies incorporated with charitable and non-profit purposes, in case they are discovered to be managed and operated by individuals of terrorist-financing or money-laundering, according to the provisions of Section 42(5).

Real Estate Regulations

Any commercial entity introducing any real estate project and at the same time inviting the advances or deposits of people on the same will also be bound to seek permission and allowance of the SECP at various stages of the development of the projects including: (a) introduction of any real estate project; (b) introduction of a publication or advertisement of real estate projects; (c) before introduction of any advance or deposit towards any booking; (d) before introduction of a sum against purchase of the apartment, plot or building as well as before inviting people to purchase any piece of land, apartment or building.

Quota for Persons with Disabilities

The large public interest companies are also under the compulsion to ensure that they set 2% special quota on the employment of disabled persons under the influence of the Sec 459. The repealed Companies Ordinance, 1984, did not have the same provision.

Special Return to Rectify the Data

According to part 465, all companies are required to notify SECP of any changes of above 25% in their shareholding.

Penalties

The Act offers three layers of fines for each defaulted or non-filed day: PKR 500, PKR 1,000 and PKR 500,000, and the total penalty in every scenario of default is indicated as a max of PKR 25,000, PKR 500,000 and PKR 1,000,000, respectively, according to the sec 479.

Specialised Companies & Setup Procedure

Specialised firms listed below for additional details and the configuration instructions:

• Agribusiness Company
• Asset Management Company
• Brokerage Company
• Construction Company
• Foreign Exchange Company
• Insurance Company
• IT Services Company
• Liquified Natural Gas Company
• Modaraba Company
• Non-Banking Finance Company
• Offshore Company
• Pharmaceutical Company
• Recruitment Company
• Security Services Company
• Telecommunication Company
• Textile Company
• Travel Agency
• University Setup

Because we are experts in company law, our clients benefit from strategic legal positioning in complex corporate transactions. This is because, more and more, people need advice on strategic business contracts in the context of a corporate deal, for instance, to deal with issues related to transitional services or ongoing supply agreements. Combining specialist company law knowledge with industry experience produces a thorough awareness of the main commercial concerns that must be handled from a legal point of view, which can be especially beneficial for investment banks and private equity firms.

For local, national, and worldwide clients of SARDAR KHAN & CO, the company law service advice group offers a full spectrum of services. The group works on many different kinds of complicated deals, like mergers, buying and selling assets, joint ventures, leasing deals, financing, bankruptcy-related transactions, and starting new businesses. We draft, review, and negotiate complex commercial agreements. Furthermore, the Group assists in the structuring and documenting of significant domestic and foreign transactions and offers legal opinions needed at closing, since company law services are frequently chosen as the controlling law for such transactions and works with in-house as well as outside regular counsel.

Our Practice

We represent borrowers in relation to all facets of secured and unsecured finance agreements of all levels, as well as nationally and locally well-known commercial banks, finance companies, insurance firms, and other lenders. These include:

Contact SARDAR KHAN & CO today for expert guidance on all aspects of company law in Pakistan, from registration to complex corporate transactions.