Section 42 Not-for-Profit Incorporation

Incorporating a licensed Section 42 association

Incorporation is the second statutory stage of establishing a Section 42 company. The Securities and Exchange Commission of Pakistan first grants a licence to the proposed not-for-profit association under section 42 of the Companies Act, 2017 and regulations 97–98 of the Companies Regulations, 2024. The licensed association must then apply to the registrar for incorporation as a public limited company under regulation 99 and the ordinary incorporation provisions, using the approved charitable objects and constitutional documents.

A Section 42 company is not an ordinary private limited company and cannot be formed by simply selecting a charitable description in the incorporation portal. The company is incorporated without the normal “Limited” suffix but retains the legal obligations of a public limited company together with the special restrictions imposed by section 42, regulation 100 and its licence. The Section 42 licence does not automatically confer FBR tax exemption, provincial charity registration, foreign-funding approval or permission to conduct a separately regulated activity.

This guide concerns the post-licence incorporation process. For the antecedent licensing application, promoter scrutiny and App-3, see the separate Section 42 licence guide. The SECP company registration page contains the incorporation forms and eZfile instructions.

Who can file the incorporation application?

The applicant must hold a valid Section 42 licence covering the proposed objects and promoters. Regulation 99 requires the incorporation application to be made within 90 days of licence issuance. On application, the Commission may extend the period by no more than another 90 days, after which the licence is deemed cancelled under the amended text. The 90-day period is not an assurance that SECP will issue a certificate within 90 days; it is a deadline for filing the incorporation application.

The licensed association must be formed as a public limited company, with at least three promoters or members and the applicable minimum board. SECP's incorporation Form-1 indicates a minimum of three directors for a public limited company. The underlying Section 42 rules additionally require at least three promoters, at least three graduates among them, active-taxpayer status and fit-and-proper eligibility. If the licensed promoter, chief executive, objects or proposed directors change, check whether a fresh SECP approval, amendment or clarification is required before incorporation rather than substituting different persons or objects without explanation.

The constitution must prohibit dividend distribution and direct profits and assets to the licensed objects. Regulation 100 sets each member's minimum liability at PKR 200,000 and generally requires each promoter to undertake at least PKR 200,000 as a start-up donation, subject to the prescribed exception for promoters nominated by entities or government bodies. These are not paid-up share capital requirements and should not be treated as the ordinary authorised capital of a company limited by shares.

International NGOs are ineligible for the ordinary Section 42 registration route. An existing domestic society or trust may pursue the permitted conversion route, but the licence and incorporation do not automatically dissolve the old body or transfer property and liabilities. Its own statute, title documents and creditors' rights must be examined. The applicable registered-office jurisdiction determines the SECP registrar; additional provincial charity and sector rules depend on where activities are undertaken.

Documents and information for incorporation

Use the licensed association's final approved file as the source of truth. Regulation 8 of the Companies Regulations, 2024 provides the incorporation procedure and prescribed Form-1. Prepare the following according to the actual applicant and filing mode:

• Section 42 licence and name: SECP licence, conditions, approved objects, valid name availability and any relevant extension or clarification. Reconcile the approved name and promoter particulars with the incorporation application.
• Constitution: the memorandum and articles in the form required for the licensed Section 42 company, consistent with section 42(3), the approved objects, member-liability undertaking and the restrictions on distribution. Do not replace the licensed constitution with the default articles for an ordinary company limited by shares.
• Persons and governance: identity documents for subscribers, directors and the proposed chief executive; board and officer particulars for Form-1; registered-office or correspondence particulars; and the necessary authority to file. Regulation 8 prescribes additional evidence for a corporate subscriber and for foreign individuals or entities.
• Physical filings: where physical submission is used, comply with the witness, signature, authority-letter, notarisation and paid-challan requirements applicable under regulation 8 and related provisions. Electronic filing follows the portal's signature and authentication workflow.
• Conditional cases: corporate or foreign subscribers, an existing trust or society, a public-sector sponsor, foreign donations, or an activity requiring another licence may require certified additional documents and competent-authority NOCs. The prior Section 42 licence does not eliminate these separate legal conditions.

The Section 42 licensing fee and the incorporation fee are distinct. The former is specified in the SECP Section 42 checklist; the latter is determined under the Companies Act Seventh Schedule and the actual filing route. The SECP Seventh Schedule updated to 20 April 2026 is the proper fee reference. Do not quote a universal incorporation charge without checking the applicable category and current official calculator.

Step-by-step Section 42 incorporation after licensing

1. 01
   Verify the licence and calendar the statutory deadline

   Record the licence issuance date, licence number, approved objects, conditions and promoter details. Regulation 99 requires an incorporation application within 90 days. If a justified extension is needed, apply to the Commission before the deadline and retain the written decision. Do not assume that an unsubmitted or expired licence remains valid because the name is reserved or the draft incorporation application exists.

2. 02
   Reconcile the approved constitution and company category

   Confirm the entity will be a public limited company under section 42, with the required minimum promoters and directors. Compare the licensed memorandum and articles against the incorporation documents. Check the non-distribution provisions, member liability, name, objects, first board and chief executive. A change to the licensed objects is not an informal edit and may require prior SECP approval.

3. 03
   Check name reservation and the registered office

   Regulation 3 ordinarily gives 60 days' name reservation. Confirm the name remains available and is consistent with the licence; a lapsed reservation may require fresh action even if the licence remains valid. Identify the registered office or permitted correspondence address and the relevant Company Registration Office jurisdiction. A registered office must be supportable by actual records, not merely a convenient postal label.

4. 04
   Prepare Form-1 and supporting identity evidence

   Complete the prescribed incorporation particulars for the subscribers, directors and chief executive. Attach the licensed memorandum and articles, Section 42 licence, valid identity evidence and authority documents. For foreign persons, bodies corporate or physical submissions, follow the specific certification, witness and filing requirements in regulations 8, 11, 14 and 19 rather than assuming a single checklist covers every applicant.

5. 05
   Submit through the applicable SECP route

   Use SECP's current company registration instructions and the eZfile FAQ to register or access the filing account, complete the incorporation application, authenticate electronic signatures and upload documents. The ordinary combined name-and-incorporation facility is not available where the company is being formed to engage in an activity requiring prior licensing; preserve the separate Section 42 licence route. The portal may display different steps for electronic and physical filings.

6. 06
   Pay the incorporation fee and answer registrar observations

   Calculate the fee under the current Seventh Schedule and the actual company category. Retain the challan or electronic payment confirmation. Under regulation 15 the registrar examines the documents and may require clarification. Correct inconsistencies in promoter identities, the licence, registered office, objects or the constitutional documents before resubmission. No fixed approval time is guaranteed.

7. 07
   Obtain the incorporation certificate and establish records

   When the registrar is satisfied, the association becomes a company on registration. Retain the certificate, filed constitution, licence, payment evidence and electronic filing receipts. Establish statutory registers, director and member records, banking controls, financial reporting arrangements and the company seal or authorised signature processes where relevant. A certificate alone does not validate unrelated activities or exempt the company from licensing conditions.

8. 08
   Complete conversion or activity-specific follow-through

   Where an existing society or trust is converted, regulation 100 ordinarily requires dissolution within 90 days after incorporation and submission of dissolution evidence plus an auditor's takeover certificate within 30 days of dissolution, subject to the prescribed exception. Arrange tax registration and any necessary provincial charity, sector, fundraising or foreign-donation permissions before operations. Maintain the licence's conditions and avoid payments or distributions prohibited by section 42.

Enacted and proposed instruments: the 11 April 2025 amendments to the Companies Regulations materially changed Section 42 governance and promoter conditions. The 1 June 2026 S.R.O.915(I)/2026 is expressly a draft proposal on security clearance, not enacted merely by publication. S.R.O.1974(I)/2026, dated 26 October 2026, amended the definition of “registrar concerned”; it does not dispense with the Section 42 licensing stage. Confirm later notifications before a foreign-linked filing.

Post-incorporation duties and the limits of the certificate

The company must apply its income and assets solely to its licensed objects and cannot distribute dividends or indirect profits to members or close relatives. Regulation 100 imposes restrictions on member remuneration and on changes to objects and chief executive. It also requires the company to display the phrase indicating that it was set up under section 42 on communications. Board composition, fit-and-proper assessments and officer-change filings remain continuing obligations.

Maintain audited accounts and company returns, a 30 June year-end, donor and beneficiary registers, AML/CFT controls, sanctions screening and records of grants. Donations generally pass through banking channels subject to a narrow cash exception with recordkeeping and deposit requirements. Foreign donations require any applicable prior approvals; Section 42 incorporation does not create an exemption from those restrictions.

Regulation 100 classifies companies by annual revenue and applies additional requirements to medium and large entities, including the female-director rule from the next applicable election, auditor-quality standards and large-company CEO and charity-registration evidence. A converted trust or society must document its dissolution or the specified alternative and the audited takeover. Failure to satisfy the conditions can lead to licence revocation and other consequences under section 42, section 43 and regulation 102.

Tax registration, charitable tax treatment, provincial charity registration and sector permits should be addressed as distinct legal workstreams. Where a foundation will operate across provinces, the location and type of activity can change the competent authority. Do not state that SECP incorporation alone authorises fundraising, school operations, healthcare services or financial intermediation.

Official incorporation and Section 42 legal sources

• Companies Regulations, 2024 — SECP consolidated text through July 2025 (regulations 3, 8, 9–19, 97–106; App-3; Annexures U/V).
• SECP registration of company, stepwise online incorporation procedure and Companies Regulations 2024 and eZfile FAQs.
• SECP Seventh Schedule updated to 20 April 2026 and Section 42 licensing guidebook.
• Section 42 licensing checklist and S.R.O.601(I)/2025 enacted amendment.
• S.R.O.915(I)/2026 draft security-clearance amendment and S.R.O.1974(I)/2026 enacted registrar amendment.

Additional provincial, tax and sector-specific requirements depend on the proposed activity and registered office. No fee, outcome or processing period is guaranteed without current case-specific verification.

How Chambers can assist

Chambers can review the legal route, identify regulatory constraints, prepare or review the supporting corporate and legal documents, manage the prescribed submission and correspond with the competent authority where instructed. The scope of the engagement will be determined by the applicant’s particular circumstances.

For an initial enquiry, identify the proposed activity, applicant entity and current stage, and provide the available documents indicated above. Please avoid sending confidential or identity-sensitive records through an unencrypted first contact.