When starting a new business in Pakistan, one of the first crucial decisions entrepreneurs must make is choosing the proper business structure. The Private Limited Company is one of Pakistan’s most popular and reliable business structures among the various available options. It is a business entity that offers multiple benefits to entrepreneurs, including limited liability, separate legal identity, and ease of raising capital. This blog post will delve into the details of a PLC in Pakistan and what makes it an attractive option for businesses.
Definition of Private Limited Company
A private limited company is a business structure in which a limited number of shareholders privately hold the company’s shares. In Pakistan, a private limited company is governed by the Companies Act of 2017 and is registered with the Securities and Exchange Commission of Pakistan (SECP). Unlike a public limited company, a private limited company cannot offer its shares to the general public through the stock exchange, and the number of shareholders cannot exceed 50.
Under the Companies Act of 2017, a private limited company must have a minimum of two directors and two shareholders. These directors and shareholders can be either individuals or corporate entities. The company’s liability is limited to the extent of its share capital, and the shareholders are not personally liable for its debts or liabilities.
Advantages of a Private Limited Company
1. Limited Liability:
One of the primary advantages of a PLC is that it offers limited liability protection to its shareholders. This means that the shareholder’s assets are not at risk in case of any financial losses or debts incurred by the company.
2. Separate Legal Entity:
A PLC is a separate legal entity, which means it has its own identity apart from its owners. This enables the company to enter into contracts, sue or be sued, and acquire assets and properties in its name.
3. Ease of Raising Capital:
Private limited companies have the advantage of being able to raise capital through the sale of shares to their shareholders. This makes it easier for the company to raise funds and expand its operations.
4. Attractiveness to Investors:
The PLC structure is more attractive to investors as it offers limited liability protection and a regulated corporate structure.
5. Tax Benefits:
In Pakistan, private limited companies enjoy tax benefits, including lower tax rates than other business structures.
Steps to Register a Private Limited Company in Pakistan
The process to register a private limited company in Pakistan involves the following steps:
1) Obtain Digital Signature Certificates (DSCs)
2) Obtain Director Identification Number (DIN)
3) Reserve company name
4) Prepare and file incorporation documents
5) Obtain a Certificate of Incorporation
6) Apply for a National Tax Number (NTN)
7) Register with the Employees’ Old-Age Benefits Institution (EOBI)
8) Register with the Employees’ Social Security Institution (ESSI)
9) Register with the Excise and Taxation Department for Sales Tax
10) Obtain a Sales Tax Registration Number (STRN)
11) Open a bank account
12) Get a company seal
The incorporation of a PLC in Pakistan is approximately three to four weeks. The registration process involves several legal and administrative procedures, and it is recommended to seek professional assistance from legal experts or company registration services to ensure a smooth and hassle-free registration process.
Requirements for a Private Limited Company
To register a private limited company in Pakistan, the following requirements must be met:
1) At least two directors and two shareholders
2) Minimum share capital of Rs. 100,000
3) A registered office address in Pakistan
4) Copies of CNICs of directors and shareholders
5) Consent forms from the company’s directors
6) A valid copy of the rent agreement or ownership documents for the registered office
7) Power of Attorney from foreign directors/shareholders
8) List of proposed directors and their shareholding
9) Company name reservation application form
10) Memorandum and Articles of Association (AoA)
11) Bank account opening certificate.
Conclusion
In conclusion, a private limited company is a famous business structure in Pakistan due to its numerous benefits, including limited liability protection and separate legal entity status. It offers an attractive option for investors and is relatively easy to incorporate compared to other business structures. However, it is essential to fulfil all the requirements and follow proper procedures to register a PLC in Pakistan. Seeking professional assistance can ensure a smooth and efficient registration process, allowing entrepreneurs to focus on growing their businesses.
FAQs
1) What is the minimum number of directors required for a private limited company in Pakistan?
Under the Companies Act of 2017, a private limited company is required to have a minimum of two directors.
2) Can foreigners invest in a private limited company in Pakistan?
Yes, foreigners can invest in a private limited company in Pakistan and hold up to 100% of the company’s shares.
3) Is a private limited company mandatory to have a registered office in Pakistan?
A registered office address in Pakistan is mandatory for incorporating a private limited company.
4) What are the tax benefits of registering a private limited company in Pakistan?
Private limited companies in Pakistan enjoy various tax benefits, including lower tax rates than other business structures.
5) Can a private limited company in Pakistan issue shares to the public?
No, a private limited company in Pakistan cannot offer its shares to the general public through the stock exchange. The number of shareholders in a private limited company cannot exceed 50.