Company formation
Registering a Section 42 Non-Profit Company in Pakistan
A non-profit company in Pakistan cannot be registered at all until SECP grants a licence under section 42 of the Companies Act 2017. You reserve a name, apply for the licence with a non-refundable Rs 150,000 fee and at least three qualifying promoters, then incorporate as a public company within ninety days of the licence. The licence decides the corporate form only. Tax status is a separate approval.
We do this for clients:Non-Profit Registration in Pakistan
Where these figures come from
- Sources
- Sourced from section 42 of the Companies Act 2017, the Companies Regulations 2024 and SECP's Seventh Schedule fees.
- Last checked against the sources
- by BarrioVibe.
This is general guidance from the sources above, not advice on your situation. Procedures and official fees change, so confirm the current position before you file, or speak to us first.
Who needs a section 42 licence
Section 42(1) sets three conditions. An association meeting all three can only become a company through the licence.
- It is to be formed as a limited company for promoting commerce, art, science, religion, health, education, research, sports, protection of the environment, social welfare, charity or any other useful object
- It intends to apply its profits and other income in promoting those objects, and it prohibits the payment of dividends to its members
- Its objects and activities are not, and will not at any time be, against the laws, public order, security, sovereignty and national interests of Pakistan
- What it gets in return: registration as a public limited company without the word "Limited" or "(Guarantee) Limited" in its name, with all the privileges and obligations of a limited company under section 42(4)
What SECP charges
From the Seventh Schedule to the Companies Act 2017 as consolidated by SECP with effect from 10 November 2025. Item III covers a section 42 company without share capital; one with share capital pays the ordinary share capital scale in Item I.
| Item | Electronic | Physical |
|---|---|---|
| Name reservation | Rs 1,000 | Rs 2,000 |
| Application for the licence, non-refundable | Rs 150,000 | Rs 150,000 |
| Registration, section 42 company without share capital | Rs 27,500 | Rs 55,000 |
| Registration, section 42 company with share capital | Item I scale | Item I scale |
Who can be a promoter
Regulation 97(6) of the Companies Regulations 2024, inserted in April 2025, and the fit and proper test in regulation 101. These are the requirements that most often decide whether a section 42 company is possible at all.
- At least three promoters, of whom at least three must be graduates. SECP's guidebook adds that they need management experience as well
- Every promoter and director must be an active taxpayer. SECP's checklist asks for the promoters to be on FBR's Active Taxpayers List
- Relevant experience in the objects. Where there are several objects and the proposed chief executive lacks experience in them, there must be at least one promoter with adequate experience in each field
- Fit and proper under regulation 101: no link to money laundering or terrorist financing, not declared a tax defaulter, no conviction for fraud or breach of trust, no overdue payment showing in the credit bureau report, and no role in a company whose licence was revoked for irregularities, among other tests
- Every director must be a promoter or member, under regulation 100(1)(xxxiii)
- An international NGO is not eligible at all. Regulation 97(5) excludes it, and SECP's guidebook sends INGOs to the Ministry of Interior
The process, in the order SECP requires it
- 1
Define the objects
SECP wants each object to say what the company will achieve, how, and for whom. Regulation 97(2) lets you adopt the standard object clauses in Annexure U to the Regulations, adapted as needed, and SECP's guidebook reproduces them by sector.
- 2
Assemble the promoters
At least three who between them satisfy the graduate, experience, active taxpayer and fit and proper requirements above. This is the step that stops most applications before they start.
- 3
Reserve the name
Through eZfile, as for any company. The name should match the principal object, and the company will later have to carry the phrase "A company set up under section 42 of the Companies Act, 2017" alongside it on everything it issues.
- 4
Apply for the licence
Form App-3 with the supporting documents, filed by an authorised promoter or an authorised representative under regulation 97(1), and the Rs 150,000 challan. Foreign promoters, directors or chief executives need Ministry of Interior security clearance before the licence is granted.
- 5
SECP examines it
Under regulation 98 SECP may make enquiries and ask for more information, assesses every promoter, proposed director and proposed chief executive against the fit and proper criteria, and grants the licence subject to conditions. A refusal has to be made by order, after the applicant has been given a hearing.
- 6
Incorporate within ninety days
Regulation 99(1) requires the incorporation application within ninety days of the licence. SECP may extend by a maximum of another ninety days, and after that the licence is deemed cancelled and you start again with a fresh application and a fresh fee.
What the licence application contains
From SECP's current checklist and guidebook for a fresh applicant. An association already registered under another law files more, listed after this.
- Form App-3, signed by an authorised promoter or licensed intermediary
- Paid challan for the Rs 150,000 non-refundable fee, and confirmation that the name is available
- Copies of the CNIC, NICOP or passport of every promoter, proposed director, proposed chief executive and witness, with signatures verified
- CVs of the promoters, directors and chief executive, with the highest degree and evidence of experience, attested as SECP specifies
- A notarised letter of authority on stamp paper from all promoters in favour of one of them or an intermediary
- The draft memorandum and articles in the form of Table F of the First Schedule
- A list of intended donors with their particulars and intended amounts, and the promoters' affidavit on donors and the register of donors
- A board resolution where a promoter is a company, approval where a promoter is a state enterprise or public sector company, and an NOC where a promoter is a government servant
- An NOC from the Ministry of Interior or Economic Affairs where there will be foreign donations or foreign directors, and the latest audited accounts of any donor companies
Converting an existing trust or society
An existing trust or society may apply to become a section 42 company under regulation 97(7), but only where the law governing its dissolution or takeover allows it. It files the same application plus its last audited accounts and annual report, its registration certificate, a resolution of all members approving the change, a certified member list and constitution, and a statement of pending disputes.
The part that catches people is what happens next. Regulation 100(1)(xxx) requires the trust or society to be dissolved within ninety days of the company's incorporation, with evidence and an auditor's certificate filed within thirty days of the dissolution, or SECP begins revoking the licence. And SECP's guidebook says a society registered under the Societies Act converts only on its dissolution under that Act, with its assets passing to another society rather than to the new company. A society expecting to carry its property across into a section 42 company should read that twice.
The conditions a licence carries
Regulation 100(1) lists them, and section 42(2) makes them part of the memorandum and articles. The ones that change how the organisation actually runs:
- Every rupee of money, property, donations and income is applied solely to the objects, and nothing is paid to members or their close relatives by way of dividend, bonus or profit
- Remuneration only for a chief executive or directors who are not members and are in whole-time employment. Members and their close relatives may not be paid for services, and the bar runs for a year after a member leaves
- Prior SECP approval for any change to the object clause and for any change of chief executive, re-appointment excepted
- Accounts closed on 30 June every year
- Funds received through banking channels, with cash of up to Rs 20,000 allowed if it is banked within three working days
- No foreign donations without prior permission from the relevant authorities, and none from blacklisted or unregistered INGOs
- Separate registers of donors and donations, and of donees and beneficiaries, alongside the books of account
- No political activity or funding, and no functioning as a trade organisation
- A website carrying the information specified in Annexure V to the Regulations
How a licence is lost, and where the assets go
Section 42(5) lets SECP revoke a licence, after written notice and a hearing, on grounds that include breach of the licence conditions, failing to file financial statements or annual returns for the two immediately preceding financial years, membership falling below three, not carrying on business for a year, fraud or failure to keep proper accounts, and involvement in money laundering or terrorist financing. A company may also surrender its licence voluntarily under regulation 103.
Section 43 then takes over. The company stops all activity except recovering money owed to it, may not solicit or receive donations, and must transfer its remaining assets after debts to another section 42 company, preferably with similar objects, within ninety days. Nothing comes back to the members, which is the point of the structure and worth understanding before a founder puts personal money into it.
When a trust or society fits better
A section 42 company is not the only way to run a non-profit, and for tax purposes it is not privileged. Commissioner approval under section 2(36) of the Income Tax Ordinance is open to a non-profit formed and registered under any law, and trusts, waqfs and societies can obtain it with no SECP involvement. What the company form adds is incorporation, limited liability, SECP supervision and the credibility that comes with it.
The price is the regulation 97 and 100 regime above. If the founders cannot field three graduate promoters who are active taxpayers and pass the fit and proper test, if they cannot each commit Rs 200,000, or if the plan depends on members or their relatives being paid by the organisation, a section 42 company is either unavailable or the wrong shape. That is when a trust or a society is worth considering instead.
Questions
The questionspeople ask
How much does it cost to register a section 42 company in Pakistan?
Under the Seventh Schedule as consolidated from 10 November 2025, the licence application carries a non-refundable Rs 150,000 fee, and registration of a section 42 company without share capital costs Rs 27,500 electronically or Rs 55,000 on paper. Name reservation is Rs 1,000 electronically. One with share capital pays the ordinary share capital scale instead.
How many people do I need to form a section 42 company?
At least three promoters under regulation 97(6) of the Companies Regulations 2024, at least three of whom must be graduates, all of them active taxpayers, and all meeting the fit and proper criteria. Membership falling below three later is a ground for revoking the licence under section 42(5).
How long do we have to incorporate after the licence?
Ninety days under regulation 99(1). SECP may extend by a maximum of another ninety days on application, after which the licence is deemed cancelled and a fresh application, with a fresh fee, is needed.
Does a section 42 licence make us tax exempt?
No. The licence decides whether the organisation may exist as a non-profit company. Tax status needs separate Commissioner approval under section 2(36) of the Income Tax Ordinance, which is covered in our guide on tax status for a non-profit.
Can the directors of a section 42 company be paid?
Only a chief executive or directors who are not members and are in whole-time employment may be paid remuneration. All directors may receive actual expenses and a meeting fee set by the board, disclosed in the directors' report. Members and their close relatives may not be paid for services, and the bar continues for a year after a member leaves.
How much do the promoters have to contribute?
Each promoter undertakes a start-up donation of not less than Rs 200,000 under regulation 100(1)(v), and each member's liability is not less than Rs 200,000 under regulation 100(1)(iv). Both were raised from one hundred thousand in April 2025.
Can an existing trust or society become a section 42 company?
Yes, under regulation 97(7), where its governing law allows dissolution or takeover. The trust or society must then be dissolved within ninety days of incorporation. SECP's guidebook says a society's assets go to another society on dissolution rather than to the new company.
Does a section 42 licence have to be renewed?
We could not confirm that it does. The Act says the licence is for a period to be specified, but the Companies Regulations 2024 contain no renewal procedure and override contrary renewal conditions in older licences. Check the period stated in your own licence.
Also here
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Why a SECP licence gives you no tax relief at all, what the hundred per cent credit actually requires, and the surplus that gets taxed at ten per cent.
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The real fee schedule, the sixty-day trap on your reserved name, and the two filings due in the first forty-five days that nobody warns you about.
Annual compliance
The share money you have thirty days to actually pay, the form due within fifteen days of any change, and when an annual return is not required at all.
Setting up a non-profit company?
The Rs 150,000 fee is lost if the licence is refused, so the promoters and objects need to be right before anything is filed. We check both first, then run the licence and the incorporation.