COMPARATIVE STATEMENT OF PRIVATE LIMITED COMPANY AND A SIGLE MEMBER COMPANY IN PAKISTAN In Pakistan Companies could be form in many ways; for running a business registered under the federal statue, there are two popular ways to incorporate a company where liabilities are limited to its shares; one way is to form a Private Limited company; other way is to form Single Member Company and both are convertible into other kind (upward or downward as case may be) referring to Section 47 of the Companies Act, 2017 hereafter called as Act;

1. COMPARATIVE STATEMENT OF PRIVATE LIMITED COMPANY AND A SIGLE MEMBER COMPANY IN
PAKISTAN
In Pakistan Companies could be form in many ways; for running a business registered under the federal
statue, there are two popular ways to incorporate a company where liabilities are limited to its shares;
one way is to form a Private Limited company; other way is to form Single Member Company and both
are convertible into other kind (upward or downward as case may be) referring to Section 47 of the
Companies Act, 2017 hereafter called as Act;
Comparative Statement
Advantages/ Disadvantages
of a Private Limited
Company:
Reference of
section
Advantages/ Disadvantages of a
Single Member Company:
Reference of
section
Content of name: Given name
+ (Private) Limited
27 (A) (1) of
the Act
Content of name: Given name +
(SMC-Private) Limited
27 (A) (1) of
the Act
Company limited by shares:
liability of its members limited
by the memorandum to the
extent of amount
2 (20) of the
Act
Same 2 (20) of the
Act
Annual General Meeting:
Required every year within 120
days from the date of closure
of its accounts.
132 (1) of the
Act
Annual General Meeting: not
required
132 (4) of the
Act
Financial Statements
1. Board must lay before
the company in annual
general meeting
2. The financial
statements must be
223 (1) - (6) &
(8) of the Act
Financial Statements
All other sub sections are
inapplicable
Such as,
1. N/A
2. N/A
223 (5) & (9)
of the Act

2. laid within 120 days
following the close of
financial year of a
company:
3. not later than sixteen
months after the date
of incorporation of the
company and
subsequently once at
least in every calendar
year
4. Financial statements
except for 1st
year,
shall not exceed 12
months except where
special permission of
the registrar has been
obtained.
5. The financial
statement shall be
audited by the auditor
Provided that nothing
in this sub-section
shall apply to a private
company having the
paid up capital not
exceeding one million
rupees or such higher
amount of paid up
capital as may be
notified by the
Commission.
6. Every company shall
send Financial
Statement to the
members
8. Penalty
3. N/A
4. N/A
Except for: sub-section (5) the
financial statement shall be
audited where paid up capital not
exceeding one million
6. N/a
8. No penalty

3. (9) This section shall not apply to a
single member company except to
the extent as provided in sub-
section (5) as defined above.
Appointment of Auditor
1. First auditor or
auditors of a company
shall be appointed by
the board within
ninety days of the date
of incorporation shall
retire on the
conclusion of the first
annual general
meeting
2. subsequent auditor
shall retire on the
conclusion of the next
annual general
meeting.
3. Member or members
having not less than
ten percent
shareholding entitled
to propose any auditor
or auditors with
consent of auditor
seven days before the
date of the annual
general meeting
246 (1) and (2) Appointment of Auditor
1. First auditor or auditors of
a company shall be
appointed by the board
within ninety days of the
date of incorporation
2. subsequent auditor shall
resign or may remove or
shall serve for a period
stated in their consent
3. Member propose any
auditor at a event of
resignation or as per the
retirement written in the
consent;
There is no retirement in the SMC
as their will be no AGM,
therefore, auditor or auditors
shall resign or in their consent of
specific date or event shall be
stated
246 (1) and (2)

4. Control: Minimum of 2 board
of Directors appointed by the
member/shareholders for a
term of for three years
154 (1) (b) of
the Act
Control: A founder can be a
manager or can appoint
manager(s).
154 (1) (c) of
the Act
Ease of Raising Capital: Private
Limited Companies can raise
funds more easily through the
sale of shares to new investors.
83 of the Act Difficulty in Raising Capital: It may
be difficult for a single member
company to raise funds since there
are no other shareholders to
invest in the company.
Shareholding: minimum
number of members are 2
maximum 7
14 of the Act Shareholding: single member 14 of the Act
Greater Disclosure
Requirements: Private Limited
Companies are required to file
annual financial statements
and other documents with the
regulatory authorities, which
can lead to greater disclosure
requirements.
Lower Compliance Requirements:
A single member company has
lower legal and regulatory
compliance requirements
compared to a private limited
company.
In conclusion, both private limited companies and single member companies have their advantages and
disadvantages, and the choice between the two depends on the owner's specific needs and
circumstances. Private limited companies offer ease of raising capital, but require greater complexity and
disclosure requirements. Single member companies offer simplicity, lower compliance requirements, and
control and difficulty in raising capital.
Problem/obscurity in formation of single member company:
In Pakistan; the Companies Act, 2017, the Companies (General Provisions and Forms) Regulations, 2018
and the Companies (Incorporation) Regulations, 2017 are silent regarding legal person (company) as a
member of single member company, infect all of this emphasis the required of a nominee who shall be
relative of the sole member which implicitly indicate that member shall be a natural person referring to
section 14 (1) (c) pertaining to mode of forming a company and 79 (3) of the Act pertaining to transfer of
shares; reproducing the same hereunder:
14 (c) one person may form a single member company by complying with the requirements in
respect of registration of a private company and such other requirement as may be specified. The
subscriber to the memorandum shall nominate a person who in the event of death of the sole
member shall be responsible to-

5. (i) transfer the shares to the legal heirs of the deceased subject to succession to be determined
under the Islamic law of inheritance and in case of a non-Muslim members, as per their respective
law; and
(ii) manage the affairs of the company as a trustee, till such time the title of shares are transferred:
79 (3) The person to be nominated under this section shall not be a person other than the relatives
of the member, namely, a spouse, father, mother, brother, sister and son or daughter.
Moreover, in the Companies (Incorporation) Regulations, 2017 Inc. Form-II point No 2.9 Details of
Nominee is a mandatory part thereto.
However, in Pakistan a SMC could be formed with a legal person (Company) and there will be no
requirement of nominee in that case. A legal person (Company) as a sole member as there is no concrete
or proper statement which prohibits a company to hold shares in a single member company.
Suggested Changes:
In companies Act:
section 14 (1) (c) after the words the subscriber the expressions “in case of natural person” shall be
inserted.
Moreover in Inc. Form-II point No 2.9 Details of Nominee shall be optional with check mark
Details of Nominee (please tick, if application)
14 (c) one person may form a single member company by complying with the requirements in
respect of registration of a private company and such other requirement as may be specified. The
subscriber in case of natural person to the memorandum shall nominate a person who in the event
of death of the sole member shall be responsible to-
(i) transfer the shares to the legal heirs of the deceased subject to succession to be determined
under the Islamic law of inheritance and in case of a non-Muslim members, as per their respective
law; and
(ii) manage the affairs of the company as a trustee, till such time the title of shares are transferred:
79 (3) The person to be nominated by a natural person under this section shall not be a person
other than the relatives of the member, namely, a spouse, father, mother, brother, sister and son
or daughter.

6. Commentary by Syed Muhammad Humza Hussain having more than 7 years
of experience; dealing in top rated companies/Group of Pakistan amongst
them 7 are listed Companies, Currently Working as Assistant Manager Tax
and Corporate in Mazars Pakistan.
Experienced consultant with a demonstrated history of working in corporate
consultancy, Tax and administration. Skilled in handling all secretarial
matters of Companies. Finalist of Masters of Business Administration
(M.B.A.) in business administration and management in finance from Iqra
University;
Contact:
Mobile: +92 (0)335 2651436
sm_humza@outlook.com
My profile on LinkedIn
https://www.linkedin.com/in/humza/