Before commencing with company registration/incorporation in Pakistan it is important to recognize what a company in fact stands for? A company can be defined as an “artificial person”, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.
The English word company has its origins in the Late Latin word companio or “companion”, and the Old French military term compaignie (first recorded in 1150), meaning a “body of soldiers”.By 1303, the word referred to trade guilds. Usage of company to mean “business association” was first recorded in 1553 and the abbreviation “co.” dates from 1769.
WHAT ARE THE TYPES OF COMPANIES?
There are various types of company that can be formed/registered/incorporated in Pakistan under the companies Ordinance, 1984, but the most common forms of company (generally formed by registration) are:
1) A COMPANY INCORPORATED AS LIMITED BY GUARANTEE
Commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes into insolvent liquidation, but otherwise they have no economic rights in relation to the company. This type of company is common in England.
2) A COMPANY INCORPORATED AS LIMITED BY SHARES
The most common form of company used for business ventures. Specifically, a limited company is a “company in which the liability of each shareholder is limited to the amount individually invested” with corporations being “the most common example of a limited company. This type of company is the most common in Pakistan to be registered.
3) A COMPANY INCORPORATED AS LIMITED BY GUARANTEE WITH A SHARE CAPITAL.
A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return. This type of company may no longer be formed in the UK, although provisions still exist in law for them to exist.
4) A LIMITED-LIABILITY COMPANY.
A company—statutorily authorized that is characterized by limited liability, management by members or managers, and limitations on ownership transfer
5) AN UNLIMITED COMPANY WITH OR WITHOUT A SHARE CAPITAL.
A hybrid entity, a company where the liability of members or shareholders for the debts (if any) of the company are not limited.
Less commonly seen types of companies are:
6) COMPANIES REGISTERED FORMED BY LETTERS PATENT.
Most corporations by letters patent are corporations sole and not companies as the term is commonly understood today.
7) COMPANIES REGISTERED AS CHARTER CORPORATIONS.
Before the passing of modern companies legislation, these were the only types of companies. Now they are relatively rare, except r very old companies that still survive (of which there are still many, particularly many British banks), or modern societies that fulfil a quasi regulatory function (for example, the Bank of England is a corporation formed by a modern charter).
*Note that “Ltd after the company’s name signifies limited company, and PLC (public limited company) indicates that its shares are widely held.”
In legal parlance, the owners of a company are normally referred to as the “members”. In a company limited or unlimited by shares (formed/ registered/ incorporated with a share capital), this will be the shareholders.
In a company limited by guarantee, this will be the guarantors. Some offshore jurisdictions have created special forms of offshore company in a bid to attract business for their jurisdictions. Examples include “segregated portfolio companies” and restricted purpose companies.
There are however, many, many sub-categories of types of company that can be formed in various jurisdictions in the world.
PUBLIC COMPANIES AND PRIVATE COMPANIES
Companies are also sometimes distinguished for legal and regulatory purposes between public companies and private companies. Public companies are companies whose shares can be publicly traded, often (although not always) on a regulated stock exchange. Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders.
COMPANY TAXATION IN PAKISTAN
Pakistan’s taxation system for comapny’s is based upon two basis i.e. Direct Taxation and Indirect Taxation. Effective rate of tax may differ for company’s depending upon their size, allowances and exemption to particular company/industry, location, exports and so forth.As a general guide companies are taxed as follows on their net income directly:
Corporate Tax Rates for Companies — Tax Year 2014(running from 1st of July, 2013 to 30th of June, 2014)
Public Companies 29%
Private Ltd. Companies 29%
Banking Companies 29+10%
Small company 20% up to 29%
Indirect Taxation includes deduction at source which may be payment on supplies, services, imports, exports, dividends and so forth. Rates of deduction may vary from a meager 1% up to as high as 30%.
There is a fine line between Tax Planning and Tax Evasion, and there are always ways to stay on the legal side, not cross the line and simultaneously reduce your tax bill. We believe in Sound thinking which results in better and effective tax planning and the top notch advice usually pays for itself.
COMPANY INCORPORATION /REGISTRATION OFFICES IN PAKISTAN
Company Registration (formation/incorporation) in Pakistan is administered under a single umbrella of Securities Exchange Commission of Pakistan, which acts as the prime regulatory authority for the companies in most cases.
Securities Exchange Commission of Pakistan works for company registration (formation/incorporation), periodic monitoring, compliance issues of corporate laws and legislation, before and after company registration for companies of all sizes in Pakistan.
Company Registration Offices are established and in lahore, karachi , islamabad , peshawar and 4 other cities in Pakistan. Functions of these Company Registration Offices include providing services and guidance, while also ensuring that the companies, their directors, legal representatives, employees and other related parties comply with the statutory requirements as provided under the Companies Ordinance, 1984 (Pakistan).
The record of companies maintained by the Company Registration Offices is public record/data covered under Freedom to Information Ordinance, 2002 of Pakistan, therefore, the investors, shareholders, creditors and general public, may inspect the record of any company(whether it be private company or a Public company) whenever they need and they may also obtain certified copy of any specific document forthwith on payment of an amount of fee.
PUBLIC COMPANY FORMATION/REGISTRATION
Any three or more persons associated for any lawful purpose may, by subscribing their names to the Memorandum of Association and complying with the requirements of the Companies Ordinance of Pakistan can form a public company
PRIVATE LIMITED COMPANY FORMATION/REGISTRATION
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 and if it is formed by more than one member, it is termed as a private company.
TYPES OF COMPANIES IN PAKISTAN AND PRIOR APPROVAL BEFORE COMPANY FORMATION/REGISTRATION IN PAKISTAN
Prior approval of the Ministries/Departments etc. may be needed due to law/legislation before commencing on formation/incorporation of a company in pakistan which include the following:
(a) A Banking Company has to seek permission and complete the legal requirements of the State Bank of Pakistan and Ministry of Finance in Pakistan before commencing with company incorporation/registration.
(b) A Non-Banking Finance company (NBFC) has to seek permission and complete the legal requirements of the State Bank of Pakistan and Ministry of Finance in Pakistan before commencing with company incorporation/registration with Securities and Exchange Commission of Pakistan
(c) A Security Service Company, has to appoint people from the Army of prominent rank and seek permission and complete the legal requirements of the Ministry of Interior before commencing with company incorporation/registration with Securities and Exchange Commission of Pakistan.
(d) A Corporate Brokerage House has to seek approval of the concerned stock exchange before commencement of Business.
(e) A Money Exchange Company as required for a Banking Company requires the prior approval of the State Bank of Pakistan to proceed with company registration.
(f) An Association not for profit u/section 42, such association may need to apply directly to SECP for a License.
(g) A trade organization u/s 42 would require a License from the Ministry of Commerce before it can work as a trade organization.
STEPS / PROCESS OF COMPANY REGISTRATION/INCORPORATION IN PAKISTAN
The Steps to formation/incorporation of a company in Pakistan are as follows;
- Seek Approval from the concerned ministry if special permission before incorporation/formation of a company in Pakistan is required
- Seek approval for the availability of the proposed name.
- File a range of documents to the Registrar which varies from company to company depending on whether it is a single member company, private limited company, public listed company, public unlisted company, banking company, small company, foreign company and so forth.
- Apply for the attested copies of the documents filed
- Receive Certificate of Incorporation or Certificate of Commencement of Business
- Proceed with other registrations if required which may include local chamber of commerce, State Bank of Pakistan, Income Tax registrations, Sales Tax registration and so forth.
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The best possible way to do business is and has been a Registered/ Incorporated Company, whether it be a company limited by guarantee or Limited by shares(Private company or a Public Listed/unlisted company) in Pakistan. Numerous Benefits may be obtained by Company Registration / Incorporation in Pakistan and M&M is here to help.