Introduction
In Pakistan’s ever-evolving corporate regulatory environment, compliance requirements are critical for ensuring transparency, governance, and lawful operations. Among the many obligations imposed under the Companies Act, 2017, two significant elements that demand attention are Section 123A and Form-45. These provisions relate to the declaration and disclosure of beneficial ownership, a globally recognized standard that strengthens anti-money laundering (AML) and counter-terrorism financing (CFT) frameworks.
This article provides a complete breakdown of Section 123A and Form-45, their legal background, practical implications, submission processes, timelines, and penalties for non-compliance. Whether you are a company director, compliance officer, or business advisor, this guide will help you navigate this important requirement.
1. Legal Background
What is Section 123A?
Section 123A was inserted into the Companies Act, 2017 via an amendment to reinforce Pakistan’s compliance with FATF (Financial Action Task Force) recommendations. The section mandates every company (except single-member companies and listed companies) to maintain a register of ultimate beneficial owners (UBOs).
Objective:
To disclose individuals who indirectly hold or control at least 25% ownership or voting rights, either directly or through other arrangements (e.g., proxies, nominees, trusts, or holding companies).
2. Understanding Beneficial Ownership
Beneficial ownership refers to the natural person who ultimately owns or controls a company, even if the shares are held in the name of another individual or entity.
Examples:
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A person holding shares through a relative or offshore company
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Ownership via trust agreements
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Control through voting agreements or nominee directors
3. What is Form-45?
Form-45 is the statutory form used to declare or update beneficial ownership information with the Securities and Exchange Commission of Pakistan (SECP).
Key Functions of Form-45:
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Initial disclosure of beneficial owners
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Update in shareholding structures
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Change in control or ownership rights
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Confirmation of beneficial ownership for recordkeeping
Filing Method:
Form-45 is submitted online via SECP’s eServices portal, and the company must maintain this information in its internal UBO register.
4. Who Must Comply?
Obligated Entities:
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Private limited companies
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Public unlisted companies
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Foreign companies registered in Pakistan
Exempt Entities:
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Listed companies (already regulated under PSX and SECP transparency requirements)
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Single-member companies (ownership already disclosed)
5. When Must Form-45 Be Filed?
| Scenario | Timeline |
|---|---|
| Initial declaration of UBOs | Within 30 days of incorporation |
| Change in beneficial ownership | Within 15 days of the change |
| Annual declaration (if applicable) | With Form-A (Annual Return) |
6. Step-by-Step Filing Procedure for Form-45
Step 1: Log in to SECP eServices
Go to: https://eservices.secp.gov.pk
Step 2: Select Company’s Profile
Choose the relevant company and initiate a statutory filing.
Step 3: Fill Form-45
Provide:
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Name of beneficial owner
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CNIC/passport number
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Nature of ownership (direct/indirect)
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Percentage of ownership or control
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Means of control (shares, voting rights, other instruments)
Step 4: Upload Supporting Documents
Upload shareholder agreements, trust deeds, or any document supporting indirect control.
Step 5: Submit and Pay Fee
Submit electronically and pay a nominal filing fee via bank challan or online payment gateway.
7. Importance of Section 123A and Form-45 Compliance
a. Global Regulatory Alignment
Enables Pakistan to meet FATF obligations, ensuring global confidence in the financial and corporate system.
b. Transparency and Corporate Governance
Identifying actual owners discourages tax evasion, fraudulent schemes, and illegal ownership layering.
c. Preventing Money Laundering
Helps authorities trace financial crimes and disrupt illicit funding channels.
d. Enhanced Investor Trust
Stakeholders prefer investing in compliant and transparent businesses.
8. Common Mistakes in Filing Form-45
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Declaring only nominal shareholders (ignoring actual beneficial owners)
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Failing to update upon changes in shareholding or control
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Not maintaining internal register of UBOs
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Misunderstanding indirect control mechanisms (e.g., via board influence or trusts)
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Submitting incomplete or outdated documents
9. Penalties for Non-Compliance
Legal Provisions:
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Section 123A(4) of the Companies Act, 2017
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SECP’s directive S.R.O. 928(I)/2020
Penalties:
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Fine of up to PKR 1 million
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Daily fine for continuing default
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Additional penalties for false or misleading information
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SECP may initiate investigation or inspection proceedings
10. Record Maintenance Obligations
Every company must maintain:
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Register of Beneficial Owners at its registered office
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Copies of all submitted Form-45 filings
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Supporting documents (declarations, trust agreements, board resolutions)
These records must be accessible for SECP inspections or audits.
11. Confidentiality and Data Protection
While SECP maintains UBO data, it is not made public. Disclosure is only allowed:
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To regulatory authorities
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In legal proceedings
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As required under law
This balance protects privacy while allowing accountability.
12. Real-World Scenarios
Case 1: Indirect Shareholding via Offshore Company
A Pakistani company is owned by an offshore BVI-registered company. The SECP requires disclosure of the natural person behind the BVI entity via Form-45.
Case 2: Change in Ownership after M&A
Following a merger, control of the company changes hands. A new Form-45 must be submitted within 15 days.
13. Role of Compliance Consultants
Companies often struggle with:
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Interpreting beneficial ownership rules
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Structuring indirect holdings legally
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Preparing accurate Form-45 filings
At Sterling.pk, we help you:
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Identify UBOs under legal definitions
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Draft supporting documents
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Maintain UBO register
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File and update Form-45 on SECP portal
14. Tips for Seamless Compliance
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Conduct a beneficial ownership audit annually
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Integrate UBO tracking into corporate governance policies
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Train directors and secretarial staff on UBO regulations
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Update Form-45 immediately upon changes
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Retain backups of all filings and records
15. Alignment with International Best Practices
Section 123A and Form-45 reflect compliance with:
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FATF Recommendation 24: Transparency and beneficial ownership of legal persons
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OECD’s Base Erosion and Profit Shifting (BEPS) Actions
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UNODC anti-corruption frameworks
This alignment helps Pakistan avoid blacklisting and enhances international trade credibility.
16. FAQs
Q1: What is considered indirect ownership?
Ownership through another company, trust, nominee, or arrangement that allows control or benefit.
Q2: Are companies required to verify UBO documents?
Yes, companies must conduct reasonable due diligence and maintain valid documents.
Q3: Is Form-45 a one-time requirement?
No, it must be updated every time there’s a change in beneficial ownership.
Q4: Can SECP reject a Form-45 filing?
Yes, if information is incomplete, contradictory, or unsupported, SECP can reject or seek clarification.
Conclusion
Complying with Section 123A and Form-45 is not just a legal obligation—it’s a vital step toward corporate transparency and governance. As global financial scrutiny tightens, Pakistani companies must strengthen their internal controls and disclosure systems.
By proactively identifying and reporting beneficial ownership, companies position themselves as credible, responsible, and investment-ready. With the right guidance and systems, compliance becomes an enabler of growth rather than a burden.
Let Sterling.pk help you navigate this complex but essential compliance journey with ease.
