How to change the ownership of a registered business in Pakistan

Changing the ownership of a registered business in Pakistan is a formal process that depends on the legal structure of the business. Whether it’s a sole proprietorship, partnership firm, private limited company, or public company, each type requires different steps, documents, and approvals. A transfer of ownership might be the result of a sale, gift, inheritance, or internal restructuring.

This comprehensive guide explains how business ownership can be transferred in compliance with laws and regulations enforced by the Securities and Exchange Commission of Pakistan (SECP), Federal Board of Revenue (FBR), Registrar of Firms, and other authorities.

Reasons for Ownership Transfer

There are various scenarios in which a business owner might need to transfer ownership:

• Sale or acquisition of business

• Entry of a new investor or shareholder

• Retirement or death of an existing owner

• Corporate restructuring or merger

• Gifting business to a family member

• Legal settlement or succession planning

Whatever the reason, proper legal procedures must be followed to ensure a clean and enforceable transfer.

Types of Business Ownership Structures in Pakistan

Each structure has a different ownership framework:

• Sole Proprietorship – owned by a single individual

• Partnership Firm – jointly owned by two or more partners

• Private Limited Company (Pvt Ltd) – ownership through shares

• Single Member Company (SMC) – single shareholder and director

• Public Limited Company – ownership held by multiple shareholders via stock

• LLP (Limited Liability Partnership) – similar to partnership but with limited liability

Understanding the structure is essential before initiating a change in ownership.

Changing Ownership in a Sole Proprietorship

Sole proprietorships are tied to the identity of the owner, and ownership cannot technically be transferred like shares. However, the business can be:

• Sold along with its assets, name, and clientele

• Closed and re-registered under a new owner

Step-by-Step Process

1. Close Existing Business with FBR
   Submit a cessation request via IRIS to deactivate the NTN.

2. Draft a Sale Agreement
   Include asset transfer, goodwill, and client list.

3. Re-register with FBR in New Owner’s Name
   Apply for a new NTN and business activity code.

4. Update Trade License and Local Registrations
   Inform municipal authorities, Chamber of Commerce, or any trade body.

5. Open New Bank Account
   The new owner should open an account with proof of NTN and license.

Although the name and setup may continue, it is treated as a new legal entity.

Changing Ownership in a Partnership Firm

Ownership change in a partnership firm can occur in two main ways:

• Admission of a new partner

• Retirement, resignation, or death of an existing partner

Step-by-Step Process

1. Draft a New Partnership Deed
   Clearly mention the change in ownership structure and profit-sharing ratios.

2. Submit Amendment with Registrar of Firms
   File Form II for changes in constitution.

3. Provide Supporting Documents

• Updated CNICs

• Affidavits from partners

• Amended deed signed by all parties

4. Update FBR Records
   Submit updated deed and partner CNICs on IRIS for record correction.

5. Update PRA/SRB/Chamber if Applicable
   Inform provincial authorities of ownership change.

The ownership change is effective once the Registrar accepts the revised deed. This process usually takes 5 to 10 working days.

Changing Ownership in a Private Limited Company

Private Limited Companies are governed by shareholding, so ownership change is managed through transfer or allotment of shares.

Legal Basis

Under the Companies Act, 2017, ownership in a company is represented by shares. A transfer of shares from one individual to another constitutes a transfer of ownership.

Step-by-Step Process

1. Board Resolution
   Conduct a Board of Directors Meeting to:

• Approve share transfer proposal

• Acknowledge intent of buyer and seller

• Authorize preparation of transfer documents

2. Share Transfer Deed
   Both parties sign a Share Transfer Instrument (Form 29 or standard deed).

3. Payment of Share Transfer Stamp Duty
   As per provincial stamp laws (typically 1.5% of share value), paid through stamp paper.

4. Update Register of Members
   Company updates its statutory Register of Members and Share Certificates.

5. File Form 29 with SECP
   Upload changes in directorship and shareholding structure via SECP eServices.

6. Issue New Share Certificate
   A new certificate is issued in the buyer’s name.

7. Update FBR Record
   Reflect ownership change in FBR profile using IRIS and submit supporting documents.

The process is legally completed once SECP accepts Form 29. Estimated time: 5 to 15 working days.

Documents Required for Share Transfer

• CNIC copies of transferor and transferee

• Share Transfer Deed

• Board Resolution copy

• Updated Form 29

• Share certificate

• Payment proof of stamp duty

• Director affidavits (if applicable)

Tax Implications of Share Transfer

Share transfers can trigger capital gains tax or income tax liability:

• If shares are sold for a profit, Capital Gains Tax (CGT) may apply

• Stamp duty is mandatory

• FBR must be notified to avoid scrutiny during audits

It is advisable to consult a tax advisor for assessment.

Changing Ownership in a Single Member Company (SMC)

SMCs are private companies with only one shareholder. Changing ownership involves:

1. Execution of Share Transfer Deed
   The existing shareholder signs over 100% of shares.

2. Appointment of New Nominee Director
   Required under SMC rules to represent the shareholder.

3. File Form 29 with SECP
   Update shareholder and director details.

4. Update Register of Members
   New owner details are recorded.

The procedure is similar to share transfer in a private company, but all shares are transferred at once.

Changing Ownership in a Public Limited Company

For unlisted companies:

• Same process as private company share transfer

• Requires Form 3 and Form 29 filings with SECP

For listed companies:

• Shares are traded on stock exchange

• Transfer is managed through CDC (Central Depository Company)

• No board resolution is needed for individual stock sales

Large changes in control must be disclosed to PSX and SECP under takeover regulations.

Ownership Transfer Through Inheritance

If a business owner dies and succession occurs:

1. Apply for Succession Certificate from Court

2. Present it to SECP, Registrar of Firms, or FBR

3. Transfer shares or ownership interest to legal heirs

A valid will or succession certificate is mandatory.

This process may take longer due to legal formalities (1 to 3 months).

Updating FBR After Ownership Change

All types of ownership transfers should be reported to FBR via the IRIS portal:

1. Log in to business profile

2. Go to “Registration Form”

3. Edit Shareholding, Legal Representative, or Business Address

4. Upload new partnership deed, share transfer deed, or Form 29

5. Submit for approval

Without this step, the old owner may still be liable for future tax notices.

Bank and Regulatory Updates

After a change in ownership, inform:

• Bank (submit revised documents and board resolution)

• Chamber of Commerce

• PRA, SRB, or any provincial tax authority

• EOBI and Social Security (for employer records)

• Industry regulators (PEC, PSEB, SBP, etc.)

Failure to update could result in account freezes or non-compliance issues.

Role of Sterling.pk in Ownership Transfer

Changing ownership of a business requires precision and legal compliance. At Sterling.pk, we help:

• Draft share or partnership transfer agreements

• Organize board meetings and resolutions

• File SECP forms and FBR updates

• Calculate stamp duty and tax consequences

• Assist with succession and inheritance cases

• Liaise with banks and regulatory bodies

Our team ensures every step is properly executed and documented.

Common Mistakes to Avoid

• Not filing Form 29 with SECP

• Using incorrect stamp paper value

• Ignoring tax liabilities or gain reporting

• Failure to update FBR or bank records

• Overlooking nominee director change in SMC

• Missing succession certificate in inheritance

Conclusion

Transferring business ownership in Pakistan is a legally recognized and regulated process. Depending on the business type, the procedures range from re-registering sole proprietorships to executing formal share transfers in companies. Timely filings with SECP and FBR, payment of stamp duty, and updating all relevant authorities are crucial for smooth and risk-free ownership transition.

Whether you are selling your business, restructuring ownership, or planning succession, working with a professional consultancy like Sterling.pk ensures accuracy, compliance, and peace of mind.