STEPS BY STEP GUIDE ON INCORPORATION OF PRIVATE LIMITED COMPANY IN PAKISTAN
PRIVATE LIMITED COMPANY:
A Private Limited Company is a legal person in the eyes of law. Therefore in case of any legal issue, the case or legal proceedings can only be initiated against the company and not the owners. A Private Limited Company cannot issue shares to the public, restriction on the transferability of shares, and the number of members cannot exceed fifty.
THE INCORPORATION PROCESS
Step 1: Creating User Profile over e-services:
Every person both Pakistani national and Foreign National who intends to register/incorporate a company with SECP in Pakistan has to create his/her profile over the e-services portal. Data required for the creation of a profile for Pakistani nationals is a scanned copy of CNIC and for foreign nationals is an Embassy Attested Scan copy of the Passport and Picture.
Step 2: Company Name Registration:
Check the availability of your proposed name here on SECP’s Company Name Search.
After the creation of the profile, the only process available for you would be Company Name Reservation. At least 3 names are required to be proposed and proposed names should represent the principal business activity of the company.
Step 3: Submission of Company Incorporation Application:
After reservation of name, an application for incorporation may be submitted with SECP giving details of Registered Office of the Company. Amount of authorized capital, Amount of Paid-up Capital, Name of shareholders, and Name of CEO and Directors.
This concludes the Company Incorporation Process as upon acceptance of the application, a certificate of incorporation can be received from Company Registration Office.
Requirement for Shareholders and Directors regarding the type of Company:
- A private limited company needs at least 2 shareholders, two directors, and a CEO appointment.
- Single Member Company needs one shareholder, one director, CEO Appointment, and nomination on behalf of the shareholder.
Documents Required for Application for Incorporation:
- Approval of Name Registration.
- Memorandum and Articles of Association, formats for each business sector are available on the SECP website.
- Scan CNICs of shareholders, directors, and CEO.
- Where a shareholder is a non-natural person, the requirements are extensive as for foreign company statutory documents duly attested from Embassy are required alongside BOD resolution.
Advantages of Private Limited Company
Separate legal entity:
A Private Limited Company is a separate legal identity in the court of law, meaning the assets and liabilities of the business are not the same as the assets and liabilities of the Directors. Both are counted as different. A Private Limited Company separates Management and Ownership and thus, managers are responsible for the company’s success and also answerable for the company’s loss.
Limited liability:
If the company undergoes financial distress because for whatsoever reason, the personal assets of members will not be used to pay the debts of the Company as the liability of the person is limited.
Free and Easy transfer of shares:
Shares of a company limited by shares are transferable by a shareholder to any other person. The transfer is easy as compared to the transfer of an interest in a business run as a proprietary concern or a partnership.
Tax-efficient:
Private Limited Companies are tax efficient as they can claim corporation tax relief on their profits. This can be a significant saving for businesses and increase profits. In addition, private limited companies can pay dividends to their shareholders, which are also taxed at a lower rate. In addition, there are several other advantages available to companies, such as capital allowances and plant and machinery tax credits.
Easier to raise capital:
Raising capital for a business can be challenging, and private limited companies are becoming increasingly popular as they attract investors into the business more due to their credibility. This can be done by issuing new shares. In addition, it is often easier. Additionally, it is often easier to approach high-net-worth individuals for funding when operating under a private limited company.
Easier to Maintain:
Today there are several plethoras of accounting software that have incorporated features into their systems, making maintaining finances extremely easy with an integrated system available to view updated financial statements.
Flexible Management Structure:
Private Limited Companies are famous for sole traders or small businessmen that do not have the resources to set up a public limited company. This can be advantageous for companies that want to keep control of their operations within a small group of people.
With private limited companies, the owners are given complete control over managing the business. This can be achieved easily through online systems such as free agents. This allows shareholders to manage the company via an incorporated board of directors and appoint a committee where necessary.
Professional Image:
A private limited company gives a professional image to a business which can be important when attracting new customers or investors. It also shows that the industry is established and has longevity.
This is because private limited companies are more credible and established than sole traders or partnerships. In addition, private limited companies often have their website and letterhead, giving customers and suppliers, a sense of trust in the business.
Protection from Creditors:
One of the benefits of a private limited company is that it enjoys protection from creditors. This is because the company is a separate legal entity from its shareholders and directors.
If the company goes into debt or bankruptcy, creditors cannot seek direct payment from the personal assets of the business owners. This can be essential protection for the shareholders and directors as it limits their liability.
This means that if the company goes bankrupt, the owners are not personally liable for any money owed by the company. This can be a significant advantage for businesses struggling as it gives them some breathing room and time to reorganize their finances without worrying about repercussions.
Overall, private limited companies offer several key benefits which can be extremely useful for businesses of all sizes. By incorporating and adhering to relevant formalities, companies can enjoy limited liability, tax advantages, and more significant business credibility. In addition, private limited companies are much easier to raise capital from shareholders and third-party investors. Therefore, incorporating a private limited company is so popular with over 90,000 incorporated in Pakistan.
To know more about how to incorporate a private limited company, contact us at +92-343-1058325 or visit us at https://bizcognitis.com/