Incorporating a Specialized or Licensed Company (Section 42)
Some entities need a licence before — or as part of — incorporation. The clearest example under the Companies Act is a Section 42 company: an association formed for charitable or not-for-profit objects, licensed to drop "limited" from its name and barred from paying dividends to members. (Other licensed sectors — NBFCs, insurers, and similar — are regulated under separate laws not yet covered section-by-section on this site.) This guide covers the Section 42 licensing and incorporation route.
Steps
- Confirm your proposed association's objects are charitable or not-for-profit in nature — e.g. promoting commerce, art, science, religion, sport, or welfare — with no dividend to be paid to members; this is the threshold test for Section 42 licensing.
- Reserve a name for the proposed association under Regulation 3, subject to the incorporation procedure for associations under Regulation 99.
- Apply for a licence under Section 42 using App-3, attaching the draft Memorandum and Articles of Association, a statement of the promoters' professional experience, and the standardized object clauses required for Section 42 companies under Regulation 100.
- SECP examines the application under Regulation 97 and, if satisfied, grants the licence under Regulation 98, issuing the Licence Under Section 42 of the Act (Annexure-G).
- Complete incorporation of the association under Regulation 99 once the licence is granted — this issues your Certificate of Incorporation (Annexure-C) alongside the Section 42 licence.
- Keep the ongoing Regulation 100 conditions in mind: restrictions on altering the objects clause, and the requirement to publish specified information on the company's website (Annexure-V).
- Complete third-party registration, including FBR NTN registration for any applicable tax-exemption status.
Sections involved
Forms you'll need
App-1
App-1 — Application for Reservation of Name for New Incorporation or Change of Name
App-3
App-3 — Application for Grant of Licence Under Section 42 of the Act
Annexure-C
Annexure-C — Certificate of Incorporation
Annexure-G
Annexure-G — Licence Under Section 42 of the Act
Annexure-U
Annexure-U — Standardization of Object Clauses and Education Requirement
Annexure-V
Annexure-V — Information to be Placed by a Section 42 Company on Its Website
How to file a form
New to SECP's eZfile / LEAP portal? See the step-by-step filing guide →
See Important Definitions
Key terms from Section 2 (Definitions) of the Companies Act, 2017 (and, where noted, the LLP Act, 2017) that matter for this task.