How to Transfer Company Shares to a Foreigner Legally
Transferring company shares to a foreign national or overseas investor in Pakistan requires following specific legal procedures set by the Securities and Exchange Commission of Pakistan (SECP), Board of Investment (BOI), and State Bank of Pakistan (SBP). The process ensures that the transfer is transparent, compliant with investment laws, and properly recorded in the company’s ownership structure.
Understanding Foreign Shareholding in Pakistan
Foreigners can legally own shares in Pakistani companies, subject to compliance with government and central bank regulations. Pakistan’s investment policy allows 100% foreign ownership in most sectors (except a few restricted industries such as arms, explosives, and currency).
However, before transferring shares to a foreign investor, both the seller and buyer must follow regulatory procedures to ensure proper documentation and approval.
Key Authorities Involved in Foreign Share Transfers
When transferring shares to a foreign national or company, three main regulatory bodies are involved:
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SECP (Securities and Exchange Commission of Pakistan): Oversees company ownership and records the change in shareholding.
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BOI (Board of Investment): Issues foreign investment approval letters for capital inflow.
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SBP (State Bank of Pakistan): Monitors and verifies foreign currency inflows through official banking channels.
Step-by-Step Process for Transferring Shares to a Foreigner in Pakistan
| Step | Action | Details |
|---|---|---|
| 1 | Review Company’s Articles of Association | Check if the Articles of Association allow foreign shareholders. Amend them if necessary via a special resolution. |
| 2 | Obtain Board of Investment (BOI) Approval | Submit details of the foreign investor, investment amount, and business activity to BOI. BOI will issue an approval letter confirming permission for foreign ownership. |
| 3 | Document the Share Transfer | Prepare a Share Transfer Deed stating the number of shares, transfer value, and details of both parties. Attach original share certificates for endorsement. |
| 4 | Receive Payment via Authorized Banking Channel | The foreign investor must remit the investment amount in foreign currency (USD, EUR, GBP, etc.) through a State Bank-recognized bank. This ensures traceability of funds. |
| 5 | Obtain State Bank’s Inflow Certificate | The receiving bank issues an Inward Remittance Certificate confirming that funds were received from abroad for investment purposes. |
| 6 | Update SECP Record (Form 29 Filing) | File Form 29 through SECP’s eServices portal to record the change in shareholding and directorship (if applicable). |
| 7 | Issue New Share Certificates | Cancel the old certificates and issue new ones in the name of the foreign shareholder, signed by two company directors. |
| 8 | Update Company’s Statutory Registers | Update the Register of Members and Share Transfer Register to reflect the new shareholder’s details. |
Documents Required for Foreign Share Transfer
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CNIC or Passport copy of the foreign investor
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BOI approval letter
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Bank Inward Remittance Certificate
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Share Transfer Deed
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Original Share Certificates
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Board Resolution approving the transfer
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Updated Form 29 (SECP filing)
Legal and Financial Compliance
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Valuation of Shares:
SECP requires that shares transferred to a foreigner reflect fair market value, especially when involving capital gains. You may obtain a valuation certificate from a Chartered Accountant to ensure compliance. -
Tax Implications:
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If the seller gains from the transfer, Capital Gains Tax (CGT) may apply.
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For non-resident buyers, withholding tax on dividends or future profits may apply, based on Double Taxation Treaties (DTT) between Pakistan and their country.
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Reporting to SBP:
The company must report the foreign investment transaction to the Exchange Policy Department of SBP through its authorized dealer bank within the prescribed period.
Foreign Shareholding in Different Types of Companies
| Company Type | Foreign Ownership Allowed | Additional Requirement |
|---|---|---|
| Private Limited Company | Up to 100% | BOI & SBP approvals mandatory |
| Public Limited Company (Unlisted) | Up to 100% | Disclosure of share transfer in annual return |
| Listed Company | As per stock exchange & SECP rules | Reporting through Central Depository Company (CDC) |
Common Mistakes to Avoid
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Receiving funds through personal remittance instead of authorized banking channels
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Forgetting to file Form 29 within the required timeframe (30 days)
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Failing to obtain BOI or SBP approval for foreign capital inflows
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Ignoring company’s Articles of Association restrictions on foreign ownership
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Not maintaining share transfer records for audit and compliance purposes
Post-Transfer Obligations
After completing the share transfer, ensure the following compliance actions are taken:
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Update Form A (Annual Return) with SECP reflecting new shareholders.
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File Updated UBO (Ultimate Beneficial Owner) Declaration if the foreign shareholder holds 10% or more shares.
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Maintain documentation for SBP and FBR audits.
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Report the change to FBR if it impacts tax status or business classification.
Advantages of Allowing Foreign Shareholding
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Access to global capital and investment
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Increased credibility for international partnerships
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Enhanced business valuation and growth opportunities
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Opportunity for technology transfer and global expertise
Conclusion
Transferring company shares to a foreigner in Pakistan is a legal and straightforward process if handled correctly. The key is compliance — ensuring approvals from BOI, SECP, and SBP, and maintaining transparent financial transactions through proper banking channels. Following these steps helps you expand your company’s ownership structure while staying fully compliant with Pakistani corporate and investment laws.
