Beruflich Dokumente
Kultur Dokumente
Branching out
in Pakistan (FDI) M. Awais MCOWF16-005
M. Zeeshan MCOWF16-007
International Finance Adeel Ahmad MCOWF16-020
This brief overview explains, in very general terms, the investment policy of the Government of Pakistan
and it is only meant to be a guidance note for those foreign investors who are interested to invest in
Pakistan. Therefore, these brief notes must only be taken as an initial assistance and should not be
misunderstood as a substitute for thorough and professional legal advice.
Service Sector
Infrastructure Sector, and
Social Sector
Tourism
Housing and Construction
Information Technology
The Investment Policy of Pakistan may vary vis-à-vis these different sectors.
Arms and Ammunitions, High Explosives, Radioactive Substances, Security Printing, Currency and Mint,
Alcoholic beverages or liquors.
Investors are not required to obtain No Objection Certificate (NOC) from the Provincial Governments for
locating the project anywhere in the country except in the areas that are notified as negative areas.
Investment Policy of Pakistan for Non-Manufacturing Sector
Foreign investors are allowed to hold 100% equity of non-manufacturing projects on repatriation basis
subject to the terms and conditions indicated against each sub-category stated herein below:
Foreign Direct Investment in a Service Sector is allowed in any activity subject to obtaining permission,
NOC or license from the concerned agency/agencies and fulfilling the requirements of the respective
sectoral policy.
Foreign investors may hold 100% equity allowed on return basis and the minimum amount of foreign
equity investment in the project shall be 0.15 million dollars.
Foreign Direct Investment in an infrastructure sector is allowed for infrastructure projects which may
include development of an Industrial Zone(s).
Foreign investors may hold 100% equity allowed on repatriation basis and the minimum amount of foreign
equity investment in the project shall be 0.30 million dollars.
Foreign Direct Investment in the social sector is allowed in the following fields:
Education, Technical/Vocational Training, Human Resource Development (HRD), Hospitals, Medical and
Diagnostic Services.
Foreign investors may hold 100% equity allowed on repatriation basis and the minimum amount of foreign
equity investment in the project shall be 0.30 million dollars.
Investment in Tourism Sector in Pakistan Tourism sector is treated as an industry by virtue of Ministry of
Industries and Production Circular No. 1-129/99-INV-IV dated 2nd August, 1999.
In lieu of SRO No. 455(I)/2004 dated 12.06.2004 any plant, machinery or equipment, which is not
manufactured locally, and is used for tourism, hotels or tourism related projects is importable at custom
duty of 5% and zero rated sales tax.
Housing and Construction sector is also treated as an industry by virtue of Finance Division Notification
No.10 (10)/IF-II/98 dated 7-4-1999 and 4-6-1999.
In lieu of SRO No. 455(I)/2004 dated 12.06.2004 any plant, machinery or equipment, which is not
manufactured locally, and is used for housing and construction related projects is importable at custom
duty of 5% and zero rated sales tax.
Local, as well as foreign, companies involved in real estate projects will not market these projects unless
the title of the property has been transferred in the name of a company incorporated in Pakistan and
"Commencement of Business" certificate has been issued by the Securities & Exchange Commission of
Pakistan (SECP).
Computer Software and Information Technology is also treated as an industry by virtue of Government
notification No. 3 (2)/97-INV-IV dated 05/03/1997.
In lieu of SRO 457(I)/2004 dated 12.06.2004 any plant, machinery or equipment of IT, which is not
manufactured locally and as certified through CBR by the facilitation Committee of BOI from time to time
is importable at custom duty of 5% and zero rated sales tax.
In addition, the following incentives are also available to foreign direct investors:
Exchange Control
Full repatriation of capital, capital gains, dividends and profits, is allowed. Facility for contracting foreign
private loans (which does not involve any Guarantee by the Government of Pakistan) is available to all
those foreign investors, who make investment in sectors open to foreign investment, for financing the
cost of imported plant and machinery required for setting up the project. However, loan agreements
should be registered/cleared by the State Bank of Pakistan.
Foreign controlled manufacturing concerns will be allowed unlimited domestic borrowing according to
their requirements for working capital.
There is no restriction on payment of royalty or technical fees for the manufacturing sector. However,
such agreements shall be registered with the State Bank of Pakistan. The payments of royalties and
technical service fees to foreign companies will be taxed at 15%. However, reduced rates under treaties
with different countries remain applicable.
Initial Investment should not exceed US$ 100,000 (PKR 124.32 * 100,000 = 12,432,000 ) irrespective of
number of outlets under one franchise.
A maximum of 5% of net sales (excluding 15% Sales Tax) in food sector may be allowed as franchise fee
only for those items, which are core items of the franchise and are the specialties of the trade name.
Payment of such fees shall be allowed on monthly basis. No item will be eligible for payment of
royalty/franchise fee twice.
Percentage/amount of fees, etc., for other non-manufacturing projects is also a maximum of 5% of net
sales (excluding 15% Sales Tax).
Initial period for which such fees may be allowed to projects in non-manufacturing sectors should not
exceed 5 years. Subsequent extension in time period may be considered provided these projects also
make investment in allied upstream projects.
Agreements conforming to the above guidelines shall be sent by the sponsors to the State Bank of Pakistan
for its information. However, any relaxation or deviation from the guidelines will require prior approval
of the Cabinet Committee on Investment (CCOI).
We have and are currently dealing with various investment projects in Pakistan including, but not limited
to, the following:
MNS Global Inc. is US based company and they decide to open a subsidiary in Pakistan because of low
operating costs and cheap workforce. Following is the company’s information and how they will register
with SECP. All the prudential regulations are given below.
Company Profile
MNS Global Inc. was founded with the express purpose of providing consultancy & specialized services in
the Business process outsourcing activities that includes Human Resource outsourcing, Accounts
Outsourcing, IT and Software development, Contact center outsourcing and deployment of structural and
civil engineering services. Our CEO started with a handpicked team, and oversaw the firm grown to a
strength of over 200+ personnel. We pride ourselves in a positive and vibrant attitude expressed by our
employees in and out of our corporate environment. The Company specializes in providing civil and
Structural engineering services mainly to Government and private sector clients and as such, economy of
Design is our forefront of our work ethic and environment. Large numbers of projects ranging in
commercial, retail, industrial and special structures have successfully completed, on time and within
budget. Our clients and contractors are a glowing reference to our result based approach for executed
projects. We specialize in managing business processes for businesses in United States, United Kingdom
and across the world. We provide solutions that integrate process expertise, BPO, KPO, IT and analytical
Capabilities in diverse fields.
Mission Statement
“To develop an excellent business environment in terms of quality and effectiveness of employees,
business tools and technology. To achieve excellence in all the areas of business specially in terms of
quality, reliability and customer care for all the products and services rendered by the company”
Vision Statement
“Enabling MNS Global Inc. into a pioneer and leader of professional consultancy and outsourcing and
into a respected global business services provider. Maintaining the holistic and ethical business practices
leading to a Win-Win for the clients, employees, partners and business associates”
Information and Prudential Regulations for a Foreign Company to Register In
Pakistan
A Wholly Owned Subsidiary Company is an entity of which 100% shares are held by another company.
When foreign company makes 100% FDI (Foreign Direct Investment) in Pakistan, the Pakistani company
becomes the Wholly Owned Subsidiary of that Foreign Company.
A Wholly Owned Subsidiary of Foreign Company can be defined as an entity whose entire share capital
is held by the foreign corporate bodies. A Wholly Owned Subsidiary Company can be formed as a
private, limited, limited liability company. Considering the various exemptions available to a private
company limited by shares under the Pakistan’s Companies Ordinance 1984, it is recommended that a
Wholly Owned Subsidiary Company be established as a private company.
Pakistan’s investment and corporate laws permit wholly-owned subsidiaries with 100% foreign equity in
all sectors of the economy including manufacturing, trading and service sectors with full repatriation
rights as to capital and dividends remittable through a commercial bank without the frequent need to
access the State Bank of Pakistan (Central Bank).
Foreign investors have also been provided added legal protection against nationalization, expropriation
and currency inconvertibility and for such contingencies the foreign investor would be entitled to fair
compensation at the prevailing market value.
A private company is required to have a minimum of 2 members and 2 directors. It may commence its
business immediately after its incorporation. A private company, through its Articles of Association
(AoA) restricts the right to transfer its shares, limits the number of its members to fifty (50) and
prohibits any invitation to the public to subscribe for its shares.
Single-Member Company:
Single Member Company as is evident from the name is the type of the company with only one member
who is the sole director of the Company as well. All the shares are vested with single member; however,
it is mandatory for the single member to nominate an individual as nominee director, to act as director
in case of his death, and an alternate nominee director who will act as nominee director in case of non-
availability of nominee director. A corporate entity cannot become its member or director.
E Commerce Project in Business Administration
A public unlisted company must have at least 3 members and 3 directors. It does not become entitled to
commence its business unless it obtains ‘Certificate of Commencement of Business’ from the Registrar
of Companies, Securities and Exchange Commission of Pakistan. There is no restriction on the maximum
number of members and transfer of shares. A public company has option to list its securities/shares at
Pakistan Stock Exchange. It must then have at least 7 members and 7 directors. Its minimum paid up
capital should be Rs. 200 million and it is also required to make a public offer/issue of its shares which
must be subscribed by at least 500 applicants. The post issue paid up capital is required to be at
minimum Rs.500 million.
Pakistan (SECP). The process of incorporation starts from reservation of company’s name and ends with
the issuance of Certificate of Incorporation. The SECP usually does not require more than 1 week for
incorporation, from the filing of the required documents and submission of prescribed fee.
Step 1: Obtain permission from Board of Investment:
A foreign company is first required to obtain a permission letter from the BOI, Government of
Pakistan with a specific validity period for opening and maintaining of place of business in Pakistan. Copy
of such permission letter is required to be furnished with the documents meant for registration.
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Step 3: Documentation:
After seeking company name availability, next step is documentation. A foreign company is required
to file the following documents, within thirty days of establishing a place of business in Pakistan
(Sections 450 to 458 of the Companies Ordinance 1984), to the registrar concerned:
Form 38: Certified copy of the charter, statute or Memorandum and Articles of the company.
The certification is to be given by:
(a) the public officer in the country where the company is incorporated in whose
custody the original is committed; or
(b) a notary public of the country where the company is incorporated; or
(c) an affidavit of a responsible officer of the company in the country where the
company is incorporated.
In first two situations, at (a) and (b), certification is required to be authenticated
by a Pakistan diplomatic consular or consulate officer, while in third situation at
(c) above, affidavit shall be signed before a Pakistan diplomatic consular or
consulate officer. [Rule 22 of Companies (General Provisions and Forms) Rules,
1985]
Form 40: Particulars of directors, Chief Executive and Secretary, if any, of the company.
Form 42: Particulars of person(s) resident in Pakistan authorized to accept service on behalf of
the foreign company along with the certified copy of the appointment order, authority letter of
board of directors’ resolution and consent of the principle officer.
Form 43: Address of principal place(s) of business in Pakistan of the foreign company (Section
451).
Immediately upon registration with SECP, the entity becomes eligible for entering into contracts or
arrangements with resident or non-resident entities or individuals. The right to invest is an inherent
right of a limited liability company within or outside Pakistan.
Commencement of Business:
Exit Mechanism:
Exit mechanisms available for foreign investors are i.e. transferring / selling of shares or winding-up /
liquidation of the company. These are however subject to statutory requirements under the Companies
Ordinance, 1984 and taxation laws. The eligibility to repatriate proceeds under FERA is established upon
of completion of the requirements of the relevant mechanism.
• To maintain registers of Pakistani members and debenture-holders, directors and officers at its
principal place of business and keeping it open to inspection.
• To state the country of origin in every prospectus inviting subscriptions for its shares or debentures in
Pakistan.
• To exhibit the name of the company and the country of its incorporation on the outside of every place
of business in Pakistan, in letters easily legible in English or Urdu characters and also if the place of
Business is beyond the local limits of the ordinary original civil jurisdiction of a High Court, in the
characters of one of the vernacular language used in that place.
• To mention the company's name and country of incorporation in English or Urdu characters on all
letter paper, bill heads, notices, advertisements, documents and other official publications of the
company.
• To state the fact that the liability of the members of the company is limited in legible English or Urdu
characters in every prospectus inviting subscription for its shares, all letter papers, bill heads, notices,
Advertisements, and other official publications of the company.
Under the Section 463 of the Ordinance, the provisions of Section 121 to 136 as applicable to other
companies, relating to the registration of mortgage and charges are also applicable to a foreign company.
A foreign company at the time of creation of a mortgage or charge on their property in Pakistan, is
required to file particulars of the mortgage or charge, together with a copy of the instrument
Creating or evidencing thereof, with the concerned registrar. The documents must be filed within 21 days
after the creation of the mortgage/charge, as required under Section 121 of the Ordinance.
Section 121 of the Ordinance enlists the mortgages and charges to be registered. If a foreign company has
already created a charge on a property in Pakistan, otherwise registerable under the Ordinance, it is
required to file the documents within thirty days of the establishment of a place of business in Pakistan.
All details about registration of mortgage and charge are available in the SECP’s Guide of “Company
Mortgages and Charges”.
The provisions of Section 230 of the Ordinance, relating to the maintenance of books of account by
companies, apply to the foreign companies to the extent of requiring them to keep at their principal place
of business in Pakistan the books of account with respect to money received and expended, sales and
purchases made, and assets and liabilities of its business in Pakistan.
Under the provisions of Section 453 of the Ordinance, A foreign company is required to file with the
registrar concerned the following accounts/ documents every year within 45 days of filing of the accounts
to the public authority of the country of origin, or within six months of the date upto which the relevant
accounts are made up, whichever is earlier:
(a) Form 45 - containing places of business of the company in Pakistan, along- with Annual audited
accounts in respect of its operations within Pakistan.
(b) Global audited accounts.
(c) List of Pakistani members and debenture holders.