Private company (other than single member company)
Definition: Private company [Section 2(49)] “private company” means a company which, by its articles:
(a) restricts the right to transfer its shares;
(b) limits the number of its members to fifty not including persons who are in the employment of the company;
(c) prohibits any invitation to the public to subscribe for the shares or debentures of the company:
Provided that, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member. Private companies are usually small and medium sized family owned businesses.
Private company is a firm held under private ownership. Private companies may issue stock and have shareholders, but their shares do not trade on public exchanges and are not issued through an initial public offering (IPO). As a result, private firms do not need to meet the Securities and Exchange Commission’s (SECP) strict filing requirements for public companies.
Private company is required to have minimum 2 members and 2 directors
Formation of Private Limited Company
1.It is important to suggest a unique company name that would keep you apart from the others in the industry.You must follow the restrictions and guidelines. For example, make sure that your company’s name does not include any prohibited name.
2 You need to submit the documents to the Securities and Exchange Commission of Pakistan (SECP) for incorporation.
3.After submitting the documents, the SECP evaluates them. A digital signature is granted by the National Institutional Facilitation Technologies (NIFT) and can be acquired through the SECP and its validity is also checked.
4: Deposit of Shares:After the registration, shareholders must deposit their corresponding amount of shares to the company’s bank account.
5: Registration of Income, Sales, and Professional Taxes.In conclusion, the last step of company registration in Pakistan is the registration with the Federal Board of Revenue (FBR) and issuance of a national tax number (NTN). A sales tax registration number may be registered if applicable.
1.Copy of National Identity Card or passport ,in case of foreigner ,of each subscriber and witness to the memorandum and article of association
2.Four printed copies of Memorandum and Articles of association are duly signed by each subscriber
3.Form 1 is required for the formation of company
4.A copy of original paid challan is required in authorized branches of HBL or Bank Draft/Pay Order drawn in favour of SECP
5.The authorization of sponsors to remove the defect in the memorandum and article of association as may be indicated by the registrar and collect the certificate of incorporation
Advantages of Private Limited Company
1.There is no requirement of minimum capital for Private Limited Company
2.There is a separate legal entity for private Limited company.It can own property and also incur debts and there is no personal liability.
3.There is a free and easy transfer of shares.
4.There is a limited liability in case of Private Limited company
5.It builds the credibility of the company.
6.In the company form of organization it is possible for a company to make a valid contract with any of its members. It is also possible for a person to be in control of a company and at the same time be in its employment.Thus, a person can at the same time be a shareholder, creditor, director and also an employee of the company.
7.A company enjoys better sources for the borrowing of funds. It can issue debentures, secured as well as unsecured and can also accept deposits from the public, etc. Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns
8.You may be protected from higher income tax yourself
9. Setting up as a private limited company means you can choose other people to take control when you’re not there.