Pakistan

Operating a Business in Pakistan

Setting up a company | Working conditions | Cost of labor | Social partners

Setting up a company

Legal business entities

Different types of companies	Number of partners/ shareholders	Maximum and/or minimum capital	Liabilities	Registration fees
Sole Proprietorship	One	No minimum capital	Unlimited liability	Registration of the firm is not essential. However, the owner may be required to obtain a license specific to the line of business from the local administration.
Partnership	Minimum number is 2, while as the maximum number can be 10 in case of banking business and 20 in all other types of business.	No minimum capital	Liability of the partners is unlimited	Its registration is also not essential. However, if the firm is not registered, it will be deprived of certain legal benefits.
Private Limited	Minimum number is 2, while as the maximum number is 50.	Minimum paid up capital of PKR 100,000	Limited liability to the amount contributed.	PKR 2,500 if the nominal capital-share does not exceed PKR 100,000, then PKR 500 upto share-capital of PKR 500,000; followed by PKR 250 for every additional share capital of PKR 100,000. Note: The total registration fee should not exceed 10 million rupees.
Public Limited	Minimum number is 3, while as there is no limit on the maximum number of members/shareholders.	Minimum paid up capital of PKR 100,000	The liability of a member is limited to the face value of the shares he owns	PKR 2,500 if the nominal capital-share does not exceed PKR 100,000, then PKR 500 upto share-capital of PKR 500,000; followed by PKR 250 for every additional share capital of PKR 100,000. Note: The total registration fee should not exceed 10 million rupees.

Business setup procedures

A prior approval of the concerned ministry is required before incorporation of a company in the country: The sector-wise list is given below:

Banking: Ministry of Finance and State Bank of Pakistan
Insurance: Ministry of Commerce
Investment Finance: Ministry of Finance and State Bank of Pakistan
Venture Capital: Securities and Exchange Commission of Pakistan
Asset management: Securities and Exchange Commission of Pakistan
For any of the following industries (arms and ammunition; security printing, currency and mint; high explosives; radio active substances): Ministry of Industries and Board of Investment

The foreign company (incorporated outside Pakistan) is required to deliver following documents to the concerned Company Registration Office (located at Karachi, Lahore and Islamabad) Registrar with 30 days of the establishment of its place of business in Pakistan:

* A certified copy of the Memorandum of Association and Articles of Association in the English language, duly authenticated by a Pakistani diplomatic consular and accompanies by the prescribed form (38)

* Address of the registered or principal office in a country of origin (Form 39)

* A list of Director, Chief Executive and Secretary of the company (Form 40)

* Particulars of the principal officer of the company in Pakistan (Form 41)

* Particulars of person(s) resident in Pakistan authorized to accept service on behalf of the foreign company (Form 42)

* Address of principal place of business in Pakistan of the foreign company (Form 43)

* Paid challan for the filing fee of each document deposited in the designated corporate branches of Habib Bank Limited

The competent organization

Company Registration Office

Board of Investment (BOI)

Security and Exchange Commission of Pakistan (SECP)

Working conditions

Legal weekly duration: 48 hours, 54 hours for seasonal factories.
This applies only to factories/offices employing ten or more workers.
Retirement age: 60 years
Working contracts: Employment contract (also called Appointment letter) is regulated by Industrial and Commercial Employment Ordinance of 1968 Every employer in an industrial or commercial establishment (with more than 20 workers) is required to issue a formal appointment letter at the time of employment of each worker. The appointment letter should necessarily mention the main terms and conditions of employment, namely nature and tenure of appointment, pay allowances and other benefits.

There are specific rules for termination of an employee. Terminating an employee is not always so easy.

Cost of labor

Minimum wage: The federal law defines minimum wages for unskilled workers only, which is currently PRs 2,500 per month. The government keeps on revising it from time to time.
Average wage: It was PKR 3,000 per month for unskilled workers (2004 figure).
Social contributions: Social security contributions paid by employers:
Governed by Employees social security ordinance of 1965.

Employer’s contribution: PKR 210 for an employee drawing upto PKR 5,000 per month. The workers once covered under this scheme remain secured even if their wages exceed Rs. 5,000/- per month.

Social security contributions paid by employees:
Governed by Employees social security ordinance of 1965.
Employee’s contribution: PKR 20 per month.

Social partners

Bargaining power: The labor relations in Pakistan are controlled by the Industrial Relations Ordinance of 2002 gives industrial workers the right to form trade unions and bargain. However the union organizers are generally subjected to a variety of restrictions that hinder their activities and effectiveness.

Moreover the country’s petroleum sector is subject to the Essential Services Maintenance Act. The Act bans strikes, limits workers’ rights to change employment, and affords little recourse to a fired worker, but allows collective bargaining. However, this Act is not applied very frequently.
The government of Pakistan has ratified 34 ILO conventions relating to human rights, workers' rights and working conditions.
Unions: http://www.pwf.org.pk/">Pakistan Workers Federation
http://aptuc.org/">All Pakistan Trade Union Congress
All Pakistan Trade Union Federation
Unionization rate: 10% in industrial labor force.
5% in total labor force.
Labor regulation bodies: http://www.molm.gov.pk/">Ministry of Labour and Manpower
http://www.ilo.org.pk">The representation of the International Labor Organization in Pakistan