Growing your company in Pakistan can lead to profitable new business relationships, trade deals with other countries in the Middle East, and a broad talent pool. Although it’s an exciting time for your company, setting up a Pakistan subsidiary is not without challenges. Depending on the type of entity, the process can be lengthy and will require fees along the way.
G-P can simplify the process. As the Employer of Record, we manage all matters of employment compliance and can hire employees on your behalf, add them to an existing payroll, and ensure that they’re receiving the right compensation and benefits.
How to set up a Pakistan subsidiary
Before learning how to set up a Pakistan subsidiary, it is important to consider where your physical office will be in Pakistan. Much like different states have their own laws, separate regions may have different subsidiary laws as well as cultural factors that can impact your company’s operations.
To establish a subsidiary in Pakistan, you’ll need to choose the type of business form. Pakistan allows companies to incorporate as a limited liability company or private limited company (LLC), free zone company, limited liability partnership, public limited company (joint stock company), representative office, and branch of a foreign company. Most businesses choose the LLC. The incorporation process for an LLC includes the following steps:
- Obtaining an online user registration from the E-Services website of the Securities and Exchange Commission of Pakistan (SECP).
- Reserving your company name. This includes the payment of the corresponding fee.
- Submitting the memorandum of association, articles of association, identification documents of subscribers, directors and chief executive officer. The submission of incorporation documents includes the payment of the corresponding fee.
In case the shareholders and/or directors of the company are non-nationals, a security clearance shall be required by the Ministry of Interior and several original documents must be submitted to authorities, along with additional sets of incorporation documents.
Upon registration of the company, you’ll need to register with the tax authorities, open a bank account, pay the share capital, and register the shareholders’ ownership with the State Bank of Pakistan. Additionally, an auditor must be appointed, and a beneficial owner form must be filed to the SECP.
The incorporation process of a Pakistani subsidiary is usually lengthy since many documents need to be notarized, apostilled, and sent to Pakistan for physical submission. These factors affect the timeframe for the establishment of your company and can be extended to months.
Pakistan subsidiary laws
Before you set up your subsidiary, you need to understand all of Pakistan’s subsidiary laws. Pakistan subsidiary laws vary based on the type of entity that will be incorporated.
Typically, LLCs require 2 shareholders to incorporate and a minimum of 1 director and a chief executive officer. The director and chief executive officer can be non-residents, but they must register for a National Tax Number with the local tax authority, which may bring personal tax liability to them. Obtaining the services of local directors is recommended. Additionally, the Pakistani government requires every LLC to have a legal adviser who lives in the country.
Once your entity has been established, annual corporate governance involves preparing and submitting an annual report and holding a yearly shareholders meeting.
Benefits of setting up a Pakistan subsidiary
Setting up a subsidiary in Pakistan offers several benefits. An LLC operates independently from the parent company. This arrangement can protect the parent company from any losses or litigation. Plus, it allows the subsidiary to create its own structure that fits Pakistan’s culture and workplace practices.
Other important considerations
Before setting up a subsidiary in Pakistan, it is advisable to recognize the amount of time and resources it takes. It’s possible that someone from your company will need to learn every aspect of Pakistan subsidiary laws or invest significant amounts of money to hire professional counsel to assist with the set up and maintenance of the Pakistan subsidiary in compliance with local laws and regulations.
However, an Employer of Record like G-P can take the hassle out of setting up a subsidiary by hiring employees on your behalf so that you can start working in a few days instead of months. When you partner with G-P, we will manage compliance so that you can stay focused on growing your company in a new location.
Enter new markets with G-P — no new entities required.
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