During the process of business registration in Pakistan, one key decision is choosing the right legal structure for your company. Entrepreneurs and investors are unsure which company type suits their business goals best, especially when trying to meet legal and regulatory requirements under the Securities and Exchange Commission of Pakistan (SECP).
A single wrong decision can lead to legal issues, financial risks, or limitations in business growth. However, with the right information and guidance, it is easy to select the suitable company type.
In this article, we explain the role of SECP and the major company types that fall under this regulatory body. For the right guidance, you need to choose business setup experts at Company Enrolla. Our professional assistance helps you choose the business structure and register your business according to SECP rules.
What Is SECP & Its Role?
The Securities and Exchange Commission of Pakistan (SECP) was formed in 1999. It is the main regulatory body that is responsible for regulating and registering companies in Pakistan. SECP makes sure that businesses follow the law and work in a transparent environment.
The SECP was established to regulate companies, insurance firms, non-banking financial institutions, and capital markets. It helps build investor confidence and supports economic stability. Some of its main duties include registering different types of companies, giving licenses to non-profit organizations, and promoting good corporate governance.
SECP plays a key role in compelling businesses to follow the rules and laws that govern them. It works to make sure that all commercial activities in Pakistan are open, accountable, and fair. By doing this, SECP helps create a better business environment and attract investment from both local and foreign sources..
Company Types in Pakistan Recognized by SECP:
SECP allows entrepreneurs to register their companies under various legal structures based on business needs, ownership, liability preferences, and operational scale. The following are the major company types recognized by SECP:
1. Sole Proprietorship (SMC Pvt. Ltd.)
A Single Member Company (SMC Pvt. Ltd.) is a legal structure especially designed for individuals who want to run a business on their own while having limited liability. In this setup, one person acts as both the owner and director. It is a good option for freelancers, consultants, and small business owners who want to keep their personal assets safe from business risks.
Sole Proprietorship Company has only one owner, but it gives the same legal protection as a private company. One of its key benefits is that it is also flexible because it can be converted into a private company if more people join as shareholders. In case the owner of the company dies, the business can still run because a nominee director is already chosen during registration to take over for a while.
2. Private Limited Company (Pvt. Ltd.)
A Private Limited Company (Pvt. Ltd.) is one of the widely adopted and popular company structures in Pakistan. It is best for businesses with two or more owners, and that can be a maximum of fifty. One of the important benefits of this structure is that the owners (shareholders) are only responsible for the money they invest, keeping their personal assets safe.
This type of company also restricts the transfer of shares to maintain ownership control. Private limited companies are widely trusted by banks and investors, making it easier to raise funds for business growth. They also offer a strong corporate structure, tax benefits, and continuous existence, meaning the company keeps operating even if the shareholders change.
3. Public Limited Company
A Public Limited Company is a suitable company structure for firms that want to sell shares to the public in order to get money. There are two types of public limited companies such as listed corporations, which sell their shares on the stock exchange, and unlisted companies, which do not sell their shares on the stock exchange. This type of business structure has no limitation on the number of shareholders. Due to this unique feature, business owners having this legal structure can attract investment and grow their business quickly.
It is important to consider that starting a public limited company requires higher compliance standards and careful reporting to keep investors safe. This type is mostly used by large-scale businesses, manufacturing firms, and projects that need significant funding. This structure provides credibility and transparency to investors, as financial reports are publicly available and regulated under strict SECP guidelines.
4. Companies Limited by Guarantee
Companies Limited by Guarantee are mostly set up for non-profit purposes, and not to make money. They work to promote good causes like education, charity, religious objectives, or social work. Members in these companies do not hold shares. Instead, they guarantee to contribute a certain amount towards the company’s liabilities in case it winds up. Such companies can be formed with or without share capital.
These companies are usually made by groups like NGOs, clubs, societies, or trade associations. The main advantage is that members are not personally liable beyond their guaranteed amount, and the company gains a credible legal status to operate as a non-profit entity.
5. Unlimited Companies
In Pakistan’s corporate sector, companies with an unlimited legal structure are rarely found. In this structure, there is no limit on the liability of its members. This means that if the company’s assets are not sufficient to cover debts, members must pay the liability amount from their personal assets.
Unlimited companies can be private or public. They are usually formed when owners want complete control without regulatory restrictions on capital maintenance or profit distribution. There is a high financial risk for businesses involved in this structure. It is suitable for special cases where members have mutual trust and financial strength to cover liabilities collectively.
6. Section 42 Companies
Section 42 Companies are non-profit organizations that are registered under Section 42 of the Companies Act, 2017. These businesses must obtain a license from SECP and follow strict rules regarding their operations and finances. This company structure is also primarily used for non-profit organizations similar to Companies Limited by Guarantee; however, both are different in their licensing and operational requirements.
They are prohibited from distributing profits to members. Their objective must be charitable, educational, religious, or focused on public welfare. A Section 42 company must have a Board of Directors, regular audits, and keep the SECP updated about its activities. This structure is widely adopted by NGOs, foundations, and non-commercial institutions that operate for public benefit.
How Company Enrolla Can Help You?
It can be hard to determine what kind of legal structure is best for your business to start under SECP rules. Any mistake might lead to legal issues, unnecessary fines, or restrictions on your business growth. At Company Enrolla, our experts guide you at every step from understanding which company structure fits your goals to preparing and filing your documents accurately.
We make sure that your registration is done with full legal compliance so you can focus on your business plans without worrying about errors, rejections, or penalties. Whether you are starting as an SMC Pvt. Ltd., forming a private or public limited company, or registering a non-profit under Section 42, our experienced team at Company Enrolla handles everything efficiently.