Corporate Structure in Pakistan
In Pakistan, corporate structure is governed by the Companies Act of 2017, which outlines the rules and regulations for the formation and operation of companies in the country.
There are several types of corporate structures that can be formed in Pakistan. The law provides you with options to register different types of companies in Pakistan, keeping in view your objectives. You can choose to register:
- Company limited by shares
- Company limited by guarantee
- Unlimited company
- Trade Organization
- Not for profit association
Company Limited by Shares
A company limited by shares may be of three categories and you can choose the most suitable category based on a number of partners (promoters). One of the most attractive benefits of a company limited by shares is the concept of limited liability. Since the company is treated as a separate legal entity, the debts of the company remain on the company. If you have paid the full amount of shares of the company, your liability in case of winding up is ZERO.
Single Member Company (SMC)
If you have decided to go solo, you can register an SMC. You will be the sole promoter, shareholder, and director of the company. However, you may appoint another person to act as CEO of your company if you deem it necessary. While registering an SMC you will have to nominate one of your kins to act as trustee in case of death of legal incapacity. The name of the company will include at the end parenthesis and words “(SMC-Private) Limited”.
Private Limited Company
Going solo is not always the choice especially when you need more capital and skilled human resource to run your business. In such a case you can join hands with one or more persons to register a Private Limited Company. At least 2 persons will act as directors to run the company and one of them can be CEO or you can appoint a paid employee as CEO. However, the number can not go beyond 50 in which case you will have to register a public limited company. A private limited company is the best option from amongst various types of companies for small and family businesses with no public funds’ requirement. The name of the company will include at the end parenthesis and words “(Private) Limited”.
Public Limited Company
You may start your business as a company with small capital but there is no limit to expanding your business to a giant. If you have a big idea and need to invite the public to run or expand your business, a public limited company is most suitable from the beginning. To register a public limited company, you will need a minimum of three persons at the time of incorporation. However, to invite the public to subscribe to shares of your company, you will have to meet certain legal and regulatory requirements. The name of the company will include at the end words Limited”. A public limited company is the preferred choice from various types of companies if you think big and want public fund your company.
Company Limited by Guarantee
Unlike a company limited by shares, you can register a company limited by guarantee with or without share capital.
Unlike a limited liability company, there is no limit on members’ liability in an unlimited company. In case of winding up, the member shall be liable to pay all the debts of the company.
Not for profit Companies
If you are intending to undertake public welfare activities, for better recognition and credibility you can incorporate a Not for Profit Company. Under the law, you can incorporate a Not for Profit company as a public company only. You will have to under to contribute a specified sum to the company. You will also undertake to contribute to paying the debts of the company to a certain limit in case of winding up. The company can have a name without words “Limited” or “Guarantee Limited”.
Usman Rasheed & Co Chartered Accountants is a leading financial and corporate advisory firm in Pakistan, having offices in Islamabad, Quetta, Lahore, Karachi & Peshawar. The firm is providing Audit, Tax, Corporate, Financial, Legal & Secretarial Advisory services and other related assistance to local and foreign private, public and other organizations working in Pakistan