How to register a holding company in Pakistan?

In the modern corporate landscape, holding companies play a central role in business expansion, asset protection, and strategic control. A holding company in Pakistan is formed to hold shares of subsidiary companies, manage investment portfolios, and oversee operational entities. While it does not usually engage in direct commercial activities, its legal and structural significance is immense.

Registering a holding company in Pakistan involves compliance with the Companies Act, 2017, rules of the Securities and Exchange Commission of Pakistan (SECP), and relevant taxation regulations. This comprehensive guide provides step-by-step instructions on how to register a holding company in Pakistan, including legal definitions, required documentation, tax implications, and post-incorporation responsibilities.

What is a Holding Company?

A holding company is a legal entity that owns shares in other companies (subsidiaries), giving it control and oversight without necessarily engaging in production or service delivery.

Key Features:

• Controls subsidiary companies via ownership of 50% or more shares

• May be registered as Private Limited or Public Limited company

• Its primary purpose is investment and control, not direct business activity

• Defined under Section 2(30) of the Companies Act, 2017

Benefits of a Holding Company

• Asset protection through limited liability structure

• Tax planning and consolidation of profits

• Centralized control and management

• Flexibility to diversify operations across different sectors

• Facilitates investment holding and fundraising

Legal Framework Governing Holding Companies

The registration and regulation of holding companies in Pakistan are governed by:

• Companies Act, 2017

• SECP Company Incorporation Regulations

• Income Tax Ordinance, 2001

• Group Companies Registration Guidelines

• Foreign Exchange Regulation Act (for foreign investors)

The process is administered entirely by the Securities and Exchange Commission of Pakistan (SECP).

Step-by-Step Guide to Register a Holding Company in Pakistan

Step 1: Name Reservation

Start by reserving a unique company name with SECP through the eServices portal.

Guidelines:

• Name must include (Private) Limited or (Public) Limited

• Avoid prohibited words (e.g., State, Bank, Trust)

• Avoid resemblance with existing company names

Process:

1. Login to https://eservices.secp.gov.pk

2. Submit “Name Reservation Application” (Form CNIC/NICOP)

3. Pay online fee (Rs. 200 – Rs. 500)

4. Approval is usually granted within 1–2 working days

Step 2: Preparation of Incorporation Documents

Prepare the necessary documents as per Form I and Form II requirements under SECP rules.

Required Documents:

• Memorandum of Association (MOA): Must specify holding company objectives (e.g., “to invest in shares of other companies”)

• Articles of Association (AOA): Includes internal governance, share structure, meetings, etc.

• CNIC/NICOP/Passport copies of directors

• Form 1: Declaration of compliance

• Form 21: Registered office address

• Form 29: Particulars of directors and officers

• Authority letter if using an intermediary

• Bank challan of incorporation fee

MOA should clearly state:
“The company shall act as a holding company in accordance with Section 2(30) of the Companies Act, 2017.”

Step 3: Filing for Incorporation on SECP eServices

1. Log into SECP’s eServices portal

2. Choose “Incorporation of Company”

3. Fill all online forms (I, 21, 29)

4. Upload scanned MOA, AOA, CNICs, passport photos

5. Pay incorporation fee online via 1LINK or credit card

Step 4: Certificate of Incorporation

If all documents are in order, SECP will issue:

• Digital Certificate of Incorporation

• Company Incorporation Number

• Digital copies of stamped MOA and AOA

Incorporation is usually completed within 3–5 working days.

Step 5: Opening of Company Bank Account

Use incorporation documents to open a corporate bank account in any scheduled bank. Required documents include:

• Certificate of incorporation

• CNICs of directors

• Resolution authorizing signatories

• NTN and letterhead

The bank account must be in the company’s registered name.

Step 6: NTN Registration with FBR

Log on to the FBR IRIS Portal (https://iris.fbr.gov.pk) to obtain your National Tax Number (NTN):

• Fill the Registration Form

• Upload company documents and director details

• Select “Investment / Holding Company” as business activity

• NTN is issued within 1–2 days

Step 7: STRN (If Required)

Although holding companies are not involved in taxable supplies, if the company charges any service fees (e.g., to subsidiaries), Sales Tax Registration Number (STRN) may be required with the Federal Board of Revenue.

This is done through the same IRIS portal.

Special Considerations for Group Holdings

If your holding company owns or controls multiple subsidiaries, you must:

• Disclose relationships in annual returns and audit reports

• Maintain consolidated financial statements

• Register the group structure with SECP for transparency

For public companies or listed entities, approval from SECP may be required for holding >30% stake in other companies.

Legal Obligations After Registration

Once registered, a holding company must meet regular compliance requirements:

1. SECP Filings

• Form A (Annual Return) once every year

• Form 29 for changes in directorship

• Form 45 for beneficial ownership declaration

• Filing of audited accounts (mandatory)

2. Tax Compliance

• Annual income tax return (even if inactive)

• Quarterly advance tax (if applicable)

• Withholding tax statements (if employee salaries paid)

3. Audit and Financial Statements

• Annual audit by a Chartered Accountant

• Consolidated reports if owning >50% of any subsidiary

4. Corporate Governance

• Maintain board meeting minutes

• Keep statutory registers

• Ensure timely filing of any special resolutions or amendments

Holding Company vs Subsidiary: Key Differences

Foreign Ownership in Holding Companies

Pakistan allows 100% foreign ownership in holding companies subject to:

• Submission of foreign shareholder’s passport

• Approval by Board of Investment (BOI) if required

• Bank certificate showing foreign capital inflow

• Filing with State Bank of Pakistan for remittances

Foreign investors must comply with anti-money laundering (AML) and ultimate beneficial owner (UBO) disclosure norms.

Taxation of Holding Companies in Pakistan

1. Income Tax

• Holding companies are taxed at 29% corporate tax rate

• Minimum tax of 1.25% of turnover applies (if revenue-generating)

• Passive income (dividends) may be subject to withholding tax

2. Dividend Income

• Dividend received from subsidiaries is exempt under Clause 103C of Part I of Second Schedule (if both are part of a 100% group structure)

• Must be declared through proper board resolution

3. Group Relief (Section 59B)

• A holding company can adjust losses of subsidiaries under group relief if:

  • Holding is >55% in private and >50% in listed subsidiaries

  • Both file consolidated returns

4. Capital Gains Tax

• Any gains from sale of shares are subject to CGT, unless exempted under tax treaties or holding period

Risks and Challenges

• Misuse of holding structure for tax evasion may attract audit

• Non-disclosure of beneficial ownership can lead to fines

• Improper maintenance of subsidiary records may cause SECP scrutiny

• Cross-border remittances must follow SBP regulations strictly

Role of Professional Advisors

Setting up and maintaining a holding company requires expert legal and tax knowledge. Professional consultants help with:

• Drafting specialized MOA for holding activities

• Ensuring SECP and FBR compliance

• Structuring group relief for tax optimization

• Advising on foreign remittances and investment flows

At Sterling.pk, we help entrepreneurs, corporate investors, and family offices establish and manage compliant and efficient holding company structures in Pakistan.

Summary Checklist: Registering a Holding Company

Conclusion

Registering a holding company in Pakistan is a strategic move for businesses looking to expand through subsidiaries, diversify investments, or centralize control. While the process is similar to incorporating a regular company, certain legal, tax, and structural considerations are unique to holding entities.

By following proper legal procedures and maintaining ongoing compliance with SECP and FBR, holding companies can unlock significant tax and operational advantages. Whether you are an individual investor, multinational, or business group, Sterling.pk can help you establish and manage your holding company efficiently and lawfully.