How to dissolve a company in Pakistan

Dissolving a company in Pakistan, also known as winding up or liquidation, is a formal legal process of closing a business entity and removing its name from the register maintained by the Securities and Exchange Commission of Pakistan (SECP). Whether due to business inactivity, financial distress, shareholder decision, or regulatory non-compliance, company dissolution must follow a structured legal process under the Companies Act, 2017. This guide provides a detailed 2025 step-by-step explanation of how to dissolve a private limited company or single-member company in Pakistan, including voluntary and compulsory methods, documentation, timelines, tax clearances, and compliance with SECP regulations.

Types of Company Dissolution in Pakistan

1. Voluntary Winding Up by Members
   Initiated by shareholders when the company is solvent and agrees to close operations voluntarily.

2. Voluntary Winding Up by Creditors
   Initiated when the company is unable to pay debts, and creditors are involved in the process.

3. Compulsory Winding Up by the Court
   Ordered by a High Court due to insolvency, misconduct, public interest, or SECP’s petition.

4. Strike Off by SECP (Defunct Company)
   SECP may remove a company from the register if it has ceased to operate or has not filed statutory returns.

This article focuses primarily on Voluntary Winding Up, the most common method used by business owners in Pakistan.

Step-by-Step Process for Voluntary Winding Up

Step 1: Board of Directors’ Resolution
The process begins with a Board Meeting, where the directors pass a resolution proposing that the company be wound up voluntarily. The resolution should also approve:

• Preparation of audited accounts

• Declaration of solvency (if applicable)

• Calling of an extraordinary general meeting (EGM)

This resolution must be recorded in the Board Minutes.

Step 2: Declaration of Solvency (for Members’ Voluntary Winding Up)
If the company is solvent, the directors must sign a Declaration of Solvency under Section 426 of the Companies Act, 2017, stating:

• The company has no debts or can pay all debts within 12 months

• The company’s liabilities do not exceed its assets

This declaration must be verified by an affidavit and supported by a statement of assets and liabilities (audited).

Step 3: Notice for Extraordinary General Meeting (EGM)
An EGM must be convened with at least 21 days’ notice to shareholders. The agenda includes:

• Passing of a special resolution for winding up

• Appointment of a liquidator

• Approval of liquidator’s remuneration

• Authorizing the liquidator to distribute assets, if any

The notice must include the proposed special resolution and a copy of the declaration of solvency.

Step 4: Passing of Special Resolution
During the EGM, shareholders must pass a special resolution (requiring 75% of votes) to officially resolve to wind up the company voluntarily and appoint a liquidator.

The resolution must be filed with SECP within 15 days using Form 26.

Step 5: Appointment and Duties of the Liquidator
The appointed liquidator takes over the company’s affairs and performs the following duties:

• Collects and realizes company assets

• Settles liabilities and pays creditors

• Distributes remaining assets among shareholders

• Maintains records of liquidation

• Submits final report and accounts to SECP

Only a chartered accountant or a person authorized under SECP rules can act as a liquidator.

Step 6: Public Notice in Newspapers
A notice of winding up and liquidator’s appointment must be published in:

• One Urdu and one English national newspaper

• Within 10 days of resolution

This notifies creditors and the public of the company’s dissolution process.

Step 7: Filing with SECP
The following documents must be filed with SECP using the eServices portal:

• Form 26 – Special resolution of winding up

• Form 27 – Notice of appointment of liquidator

• Declaration of Solvency

• Audited statement of affairs

• Public notice clippings

Fees are payable online, and SECP issues acknowledgments after verifying the filings.

Step 8: Tax Clearance and Compliance

Before final dissolution, the company must obtain:

• Tax Clearance Certificate from FBR

• Clearance from Sales Tax department (FBR or PRA/SRB)

• NOC from EOBI and Social Security (if employees were registered)

• NOC from any licensing body, if applicable (e.g., DRAP, SBP, PTA)

Without tax clearance, SECP will not accept the final winding-up documents.

Step 9: Final Accounts and Liquidator’s Report
After paying debts and distributing assets, the liquidator prepares:

• Final account of receipts and payments

• Report showing how winding up was conducted

• List of asset distribution among shareholders

A general meeting is then convened to present the final report.

Step 10: Filing of Form 28 and Final Dissolution
Within 7 days of the final general meeting, the liquidator files:

• Form 28 – Report of final winding up

• Copy of final accounts

• Minutes of the final meeting

• Affidavit of completion

Upon satisfaction, SECP strikes off the company from the register and issues a Certificate of Dissolution.

Strike Off by SECP (Defunct Companies)
If a company is non-operational, inactive, or non-compliant, SECP may initiate strike-off proceedings under Section 426(3). Grounds include:

• Failure to file returns for 2+ years

• No business activity

• Registered address not functional

In such cases, SECP issues a show-cause notice. If no response is received, the company is struck off and published in the official gazette.

Companies can also voluntarily request strike-off through Form STK-1 (if there are no liabilities or assets).

Tax Implications and Responsibilities

FBR Finalization

• File final income tax return

• Declare asset disposal and capital gains

• Apply for tax clearance certificate

Sales Tax

• De-register STRN (sales tax registration number)

• Submit final sales tax return

Employee Settlements

• Pay outstanding salaries and dues

• Clear EOBI and social security payments

• Issue final Form 16 and tax certificates

Bank and Commercial Obligations

• Close company bank accounts

• Settle utility and lease agreements

• Notify Chamber of Commerce, vendors, and customers

Important Timelines

Cost of Winding Up a Company

Conclusion
Dissolving a company in Pakistan requires careful planning, legal documentation, and compliance with SECP and FBR regulations. Whether through a voluntary winding-up resolution or SECP-initiated strike-off, the process ensures that company liabilities are settled, records are closed, and the entity is officially removed from the registry. Companies that no longer conduct business should consider formal dissolution to avoid penalties, tax notices, and compliance burdens. With the SECP eServices system, much of the process can now be completed online, but professional guidance is recommended to ensure smooth and compliant closure.