A construction company setup is a business that people create to build different kinds of structures. It can work on houses, apartment buildings, commercial plazas, infrastructure projects, roads, motorways, pavements, bridges, housing schemes, and many other development projects. In simple words, if something needs to be built from the ground up, a construction company is the kind of business that handles it .The word “construction” is a broad term. It refers to the skill and technical knowledge used to create structures, systems, and organised setups. The term comes from the Latin word constructio and the Old French word construction. When we use it as a verb, “to construct” means to build something. As a noun, “construction” explains how something is built and what type of structure it has.

Common usage defines construction as the whole process of providing structures, infrastructure, and industrial projects. This encompasses all, from early project design and financial setup to actual construction. The procedure goes until the structure is fit for use. Construction work involves upkeep, extensions, improvements, renovations, and even demolition or disassembly when a building reaches its end.

Construction Company Law & Legal Framework in Pakistan

A construction company is a business entity that focuses on building houses, commercial buildings, bridges, and similar structures. In general, construction companies fall into eight main categories:

Types of Construction Companies in Pakistan

• Little Renovation Contractors: Managing limited investment small-scale projects are small renovation contractors. Usually handling small repairs or renovations, they lack the operating style of major construction companies.
  
  
• General Contractors: These companies usually specialise in constructing new buildings or carrying out major alterations and remodelling work.
  
  
• Owner-Builder: This type of company builds properties for its own ownership. After completing the project, it may either sell the property or rent it out and manage it.
  
  
• Real Estate Developer: This is a form of owner-builder. Besides constructing projects for ownership, a real estate developer may also build properties specifically to sell them before or after completion.
  
  
• Professional Construction Manager: This company manages construction projects on behalf of the owner. It performs all necessary project functions as an agent, almost as if the owner’s own staff were handling the job.
  
  
• Programme Manager: This type of company provides wider services, including full project management. It may oversee demolition of existing structures, carry out financial assessments, and even arrange design professionals.
  
  
• Package Builders: These builders handle both the design and construction under one contract. They often show potential clients examples or prototype buildings they have already completed.
  
  
• Sponsor Builder: This type of builder works on government-supported projects and also manages the design stages while coordinating with government authorities.

2020 Construction Amnesty Scheme & Fixed Tax Regime

The Pakistan Government unveiled an Amnesty Scheme in 2020 to promote construction and housing sector investment. The goal was to increase development projects throughout the nation. With completion schedules reaching to 2023, the government offered a fixed tax system for construction projects registered through December 31, 2021. To profit from this plan, builders and developers had to declare their projects with the Federal Board of Revenue (FBR).

Key Benefits of the Construction Amnesty Scheme

The Amnesty Scheme provided several benefits:

• It allowed exemption from withholding tax on the purchase of building materials, except for cement and steel.
  
  
• It offered exemption from withholding tax on construction-related services, except when services were obtained from companies.
• It reduced the fixed tax rate for low-cost housing projects.
  
  
• It declared that dividends paid by builder or developer companies would not be subject to tax, and no withholding tax would apply on such dividend payments.
  
  
• It allowed companies to incorporate up to ten times the fixed tax paid as declared income.
• It granted exemptions under Section 111 of the Income Tax Ordinance 2001 (ITO) for individuals, companies, and associations of persons.
  
  
• It also provided exemption under Section 111 of the ITO for plots purchased before December 31, 2021, provided construction on those plots was completed before 2023.

Eligibility Criteria for Construction Company Registration in Pakistan

To set up and register a construction company in Pakistan, you need to deal with three main authorities:

• Securities & Exchange Commission of Pakistan (SECP)
  
  
• Federal Board of Revenue (FBR)
  
  
• Pakistan Engineering Council (PEC)
  
  
• Associations of Builders and Developers of Pakistan (ABAD)

SECP Registration Process for Construction Companies

The SECP regulates the corporate sector in Pakistan. It handles the incorporation of both public and private companies. The incorporation process generally involves three main steps:

Step 1: Company Name Reservation under Companies Act 2017

The first step in forming a company is reserving a suitable name under Section 10 of the Companies Act 2017. You must propose three different names that meet the legal criteria. You can apply for name reservation separately or along with your incorporation application. If you reserve the name together with incorporation, you do not pay any extra fee. However, if you apply separately, you must pay Rs. 200 for an online application and Rs. 500 for a physical submission. After reviewing the application and fee, the registrar checks the proposed names. If they meet the requirements, the registrar issues a name reservation certificate valid for 60 days. You must apply for incorporation within this period.

Step 2: Application for Company Incorporation

You can submit the incorporation application separately or together with the name reservation request. The incorporation fee depends on the type of company, its authorized capital, and its size, as provided in the Seventh Schedule of the Companies Act 2017.

You must submit the following documents with the application:

• Memorandum of Association signed by all subscribers. If you submit it physically, you must stamp it under the Stamp Act 1877.
  
  
• Articles of Association signed by all subscribers.
  
  
• Copies of CNIC or NICOP of subscribers, directors, and the chief executive.
  
  
• Copy of CNIC of the witness in case of physical submission.
  
  
• A stamped authority letter from the subscriber or intermediary authorising document submission, if filing physically.
  
  
• Original paid bank challan for physical submissions.
  
  
• For online applications, you must scan and upload all required documents. The system generates the memorandum and articles online.

Step 3: Issuance of Certificate of Incorporation

The registrar goes over all your documents to make sure you have fulfilled all legal criteria once you hand them in. The registrar records the memorandum and associated documents if all is complete and compliant. Then the registrar officially signed and sealed a Certificate of Incorporation. This certificate confirms the legal existence of your company.

FBR Registration & NTN for Construction Companies

Previously, companies had to apply separately to the FBR to obtain a Business NTN number. Now, the SECP offers a one-window facility. It shares the collected company data directly with the FBR, which then issues the NTN automatically.

Pakistan Engineering Council (PEC) Registration for Constructors

For most businesses, registration with the FBR and obtaining an NTN completes the process. However, construction companies must also register with the Pakistan Engineering Council (PEC). PEC acts as the regulatory authority that maintains the registration of constructors and operators in Pakistan.

PEC Categories for Construction Companies

PEC divides constructors into eight categories: C-A, C-B, C-1, C-2, C-3, C-4, C-5, and C-6. The Enrollment Committees review and approve applications. Regional Enrollment Committees (REC) handle new registrations for C-6 and C-5 categories. The main Enrollment Committee deals with applications for C-4 and higher categories.

Required Documents for PEC New Registration

For new registration, you must provide the following documents:

• Copy of identity card of owner, shareholder, or partner.
  
  
• Fee payment voucher.
  
  
• Bank statement for the last year, accounting records, or audited financial statements.
  
  
• Documents of newly hired engineers, including appointment letter, detailed CV, valid PEC renewal card copy, supervisory certificate, and NTN.
  
  
• Documents of existing engineers, including a valid PEC renewal card, supervisory certificate, and NTN.
  
  
• Documents of the engineer who is also an owner, partner, or shareholder, including an undertaking, a detailed CV, a valid PEC renewal card copy, and an NTN.
  
  
• Undertakings from engineers.
  
  
• Affidavit from the CEO, Chairman, Managing Partner, or Director.
• Signed list of machinery and equipment owned by the company.
  
  
• Organisational chart showing the company’s chain of command.
  
  
• Ownership documents such as a notarised affidavit of sole proprietor, a partnership deed copy, a certificate of incorporation, articles of association, memorandum of association.
  
  
• Copy of the NTN certificate.

PEC Registration Fee Structure

The registration fee depends on the constructor’s category. For category C-6, the fee is Rs. 15,000. It increases gradually and can go up to Rs. 400,000 for the C-A category.

After you submit all required documents, the committee reviews the application. If approved, it issues a registration certificate and license. The certificate remains valid until December 31 of the issuing year and must be renewed every three years.

ABAD Membership for Builders & Developers in Pakistan

Although registration with ABAD is not compulsory, large developers and builders are encouraged to join. ABAD is a national-level representative body that brings together private sector builders and developers to organise and support construction activities across Pakistan.

Speak with SARDAR KHAN & CO today and get expert legal support for a smooth and hassle-free setup process.