Regulation 100 — Conditions applicable to section 42 companies

(1) In particular and without prejudice to
the generality of the powers of the Commission 37[or included in the license] under section 42 of the
Act and regulation 98 of these regulations, a license may be granted subject to the following
conditions and such other conditions as may be impose subsequently, namely—
(i) the conditions imposed under these regulations or any other additional conditions
imposed by the Commission shall be deemed to be included in the memorandum of
association of the company;
(ii) the company shall utilize all its money, property, donations or income or any part
thereof solely for promoting its objects:
(iii) It shall be registered as a public limited company 38[…..];
(iv) the limit of liability for each of its members shall not be less than 39[two] hundred
thousand rupees or such other amount as may be notified by the Commission;
(v) each promoter shall undertake to donate a reasonable amount but not less than two
hundred thousand rupees as start-up donation or such other amount as may be required
by the Commission:
Provided that this condition shall not be applicable in case of a promoter
representing or nominated by an entity or by Government or an institution or authority
or other statutory body of the Federal or Provincial Government(s) and in such case,
the start-up donation shall be contributed by the said entity, Government, institution,
authority or statutory body as the case may be;
(vi) The directors and the chief executive officer shall be entitled for the reimbursement or
payment of actual expenses incurred by them for attending meetings and they may also
receive fee for attending meetings of the board or a committee of board, as determined
by the board:
Provided that the directors’ report as attached to the financial statements of
Association shall disclose the payment of meeting fee and reimbursement of actual

36 Omitted proviso vide SRO No. 1221(I)/2024 dated 6th August 2024. The omitted proviso was read as under:
“Provided that before a license is so revoked, the Commission shall give an opportunity of being heard to the
association against the revocation”.
37 Inserted vide S.R.O. 601(I)/2025 dated 11th April, 2025.
38 Omitted “having at least three promoters” vide S.R.O. 601(I)/2025 dated 11th April, 2025.
39 Substituted “one” with “two” vide S.R.O. 601(I)/2025 dated 11th April, 2025.

expenses incurred by each director including chief executive for attending meeting of
board and committees of board:
Provided further that the board, in the case of public sector company, shall
also comply with all applicable laws, instructions and policies of the relevant line
ministry, if any, while approving amount of meeting fee for attending meetings of
board and committee of the board;
(vii) payment of remuneration and other benefits shall be allowed only to the chief
executive officer and directors who are non -members and are in the whole -time
employment of the company:
Provided that this condition shall not be applicable on the chief executive
officer and directors who are members and are in the whole-time employment of non-
bank microfinance company licensed under the Non -Banking Finance Companies
(Establishment and Regulation) Rules, 2003;
(viii) payment of remuneration or other benefits by the company or its subsidiary entity for
services or otherwise to members of the company or to their close relatives whether
holding an office in the company or its subsidiary or not, shall be prohibited:
Provided that the prohibition shall continue to apply for a period of one year
after a member quits from the membership of the company;
(ix) the company may alter the provisions of its memorandum and articles of association
subject to compliance of relevant provisions of the Act40[:]
41[Provided that any amendment addition or deletion in the object clause of its
Memorandum of Association, shall only be made with the prior approval of the
Commission.]
(x) patronage of any government or authority or renowned personalities and organizations
whether local or foreign, express or implied, shall not be claimed unless such person
has signified its consent thereto in writing;
(xi) the company shall not engage in any activities to function as a trade organization;
(xii) the company shall:
(a) not exploit or offend the religious susceptibilities of the people; and

40 Substituted full stop with a colon vide S.R.O. 601(I)/2025 dated 11th April, 2025.
41 Inserted proviso vide S.R.O. 601(I)/2025 dated 11th April, 2025.

(b) ensure that Islamic donations, including but not limited to zakat, sadaqah or in
any other form, shall not be received, invested, or utilized by it in any way that is
contrary to the Shariah principles:
Provided that it shall be the responsibility of the company to arrange a Shariah
opinion in the form of a Fatwa from a Shariah Advisor registered with the Commission for
collection and utilization of such Islamic donations, which shall be duly annexed with the audited
financial statements of the company.
(xiii) the company shall not, directly or indirectly, participate in any political campaign for
elective public office or other political activities akin to those of a political party or
contribute any funds or resources to any political party or any individual or body for
any such purpose;
(xiv) the company shall not admit any new member unless he meets the fit and proper
criteria as contained in these regulations:
Provided that this condition shall not be applicable on members representing
or nominated by Government or an institution or authority or other statutory body of
the Federal or Provincial Government(s);
(xv) the company shall appoint directors and chief executive offic er who meet the fit and
proper criteria as specified under these regulations:
Provided that in case of appointment/re -appointment/election/re-election of
directors and chief executive officer, the company:
(a) shall obtain an affidavit from the incoming director or the Chief
Executive officer confirming that he/she meets the fit and proper
criteria in terms of these regulations; and
(b) while notifying such appointment/re -appointment/election/re-
election of directors and Chief Executive officer on specifi ed form,
shall file an affidavit on stamp paper with the registrar duly signed
by the chief executive officer or authorized director, attested by an
Oath Commissioner and witnessed, affirming that the fit and proper
criteria as mentioned in these regulatio ns has been assessed by the
company and that the appointed/re -appointed/elected/re-elected
chief executive officer or directors meet the criteria as mentioned in
these regulations;

(a) 42[Provided further that subsequent to the grant of license, grant of license, 43[no
change in Chief Executive Officer can take place unless prior permission from
the Commission has been granted upon application.
Explanation: - Change does not include re-appointment.]
Provided further that this condition shall not b e applicable on nominees of
Government or an institution or authority or other statutory body of the Federal or
Provincial Government(s):
Provided also that this requirement shall not be applicable on the chief
executive officer and directors of a non -bank microfinance company licensed under
the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 as
such persons shall be required to comply with the fit and proper criteria specified in
Non-Banking Finance Companies and Notified Entities Regulations, 2008;
(xvi) the Company may make investment, whatsoever, in any of its associated companies
or associated undertakings subject to compliance of the requirements of section 199 of
the Act and the regulations made thereunder. The board shall also frame and follow a
broad policy specifying mechanism for such investments and shall carry out due
diligence before making such investment and shall also disclose interest of directors
of the company, if any;
(xvii) the company shall state with its name, the phrase “A company set up under section 42
of the Companies Act, 2017 ”, in all its letterheads, documents, signboards, and all
other modes of communication;
(xviii) the income and any profits of the company, shall be applied solely towards the
promotion of objects of the company and no portion thereof shall be distributed, paid
or transferred directly or indirectly by way of dividend, bonus or otherwise by way of
profit to the members of the company or their close relatives;
(xix) the company shall close its accounts on 30th of June each year;
(xx) notwithstanding anything stated in any object clause, the company shall obtain such
other licenses, permissions, or approvals of the relevant public authorities as may be
required under any relevant statutory regulations and laws for the time being in force,
to carry out any specific object;
(xxi) the company shall not appeal, solicit, receive or accept donations from foreign sources
except with the prior permission, clearance or approval from the relevant au thorities

42 Inserted second proviso vide S.R.O. 1221(I)/2024 dated 6th August, 2024.
43 Substituted vide S.R.O. 601(I)/2025 dated 11th April, 2025. The original clause was read as under:
“Provided further that subsequent to the grant of license, no change in the directorship or object clause of memorandum
can take place unless prior approval from the Commission has been granted upon application.”;

as may be required under any law or specified by the Government44[:]
45[Provided that the company shall not receive funding/foreign funding from
black listed International NGOs (INGOs) or INGOs having operations in Pakistan and
not registered as INGOs in Pakistan.];
(xxii) the company shall receive all funds, grants, contributions and donations (except
funds, grants, contributions and donations received in kind) through proper banking
channels:
Provided that amounts equivalent to or less than twenty thousand rupees can
be received in cash for which proper entries in the books and records of donor shall be
maintained by the company and such amount shall be deposited not later than 3
working days of the receipt, in the bank account of the company;
(xxiii) the company shall ensure that the donations received and the charitable assets are
utilized exclusively for charitable purposes and are not utilized or diverted to the
benefit of the entities and individuals designated under the United Nations Security
Council’s (UNSC) sanctions list as maintained and periodically updated on UNSC’s
website;
(xxiv) the company shall ensure that a system of sound internal control is established, which
is effectively implemented and maintained a t all levels within the company to ensure
safeguarding of its charitable assets. Such a system of sound internal control is
characterized, inter-alia, by,
(a) the issuance and implementation of policies, procedures, delegation of
decision-making powers, record management systems, financial management
systems and tools, etc.;
(b) having appropriate controls in place to ensure that donors, beneficiaries,
promoters, members, directors, stakeholders, employees, volunteers or other
people associated with the company or its associated company are not listed
as a designated individual or entity which is subject to targeted financial
sanctions;
(xxv) the company shall separately maintain the following registers in addition to the books
of account as required under the Act—
(a) register of donors and donations including information about donor’s names,
addresses, type of donation received i.e in cash or in kind, amount/value of
donation received, date of receipt of donation, mode of payment, particulars

44 Substituted semi colon with a colon vide S.R.O. 601(I)/2025 dated 11th April, 2025.
45 Inserted proviso vide S.R.O. 601(I)/2025 dated 11th April, 2025

of payment instrument and the purpose of donation;
(b) register of donees and beneficiaries of the funds disbursed including
information about their names, addresses, type of disbursement i.e in cash or
in kind, amount/value of disbursement, date of disbursement and the purpose
and other details of disbursement;
(xxvi) the company shall ensure compliance with the conditions prescribed in relations to
anti-money laundering and counter financing of terrorism under the applicable laws;
and
(xxvii) the company shall compl y with any other condition(s) as may be imposed by the
Commission at the time of grant of license or imposed from time to time subsequent
to grant of license.
46[(xxviii) Section 42 Companies classified under Regulation 100(xxxii) as large companies
shall submit evidence of registration with the Pakistan Centre for Philanthropy (PCP)
or the respective charity commission to the Commission within six months of their
registration with SECP. For existing large companies, within six months of the
promulgation of these Regulations.
Provided that the above requirement shall not apply on Companies holding
valid license issued by SECP for other licensed activities.
(xxix) the company shall maintain its website with the information specified in Annexure V
of these Regulations;
(xxx) Where an existing entity is converted into a section 42 company, the trust or society
must be dissolved within ninety (90) days of the company’s incorporation. Evidence
of the dissolution must be submitted to the Commission, along with an auditor’s
certificate confirming the completion of the takeover process, within thirty (30) days
of the dissolution. Failure to submit the required documentation within this timeframe
will result in the initiation of the license revocation process, which may lead to the
strike-off of the company’s name;
Provided that in case the dissolution process of existing entity is not available
under the current framework, the proposed company must submit a revocation letter
from its registering authority to retain the same name.
(xxxi) the CEO of large sized section 42 companies must be full time employee;
(xxxii) for section 42 companies classified as medium the auditor should be QCR rated; and
companies classified as large auditor should be registered with audit oversight board
(AOB);

46 Inserted new clauses (xxviii) to (xxxiv) vide S.R.O. 601(I)/2025 dated 11th April, 2025.

Explanation: - For the purpose of this clause the classification of section
42 Companies shall be;
1 Small sized Companies: - Annual revenue upto rupees fifty million.
2 Medium sized Companies: - Companies with annual revenue greater than
rupees fifty million but not exceeding two hundred million.
3 Large sized Companies: - Annual revenue greater than two hundred million.

All licensed Section 42 companies are required to file their annual audited accounts
within six months of the promulgation of this amendment. Failure to file such accounts
will result in the classification of non-compliant companies as large-sized Companies.

(xxxiii) All directors must be promoter/member;

(xxxiv) Medium and large -sized Section 42 companies shall have at least one female
director on the Board, effective from the next election of directors following the
promulgation of these Regulations. Small sized section 42 companies be
encouraged to have a female director on the board.]

(2) All the conditions provided in the license granted under section 42 of the Act,
including renewal of license, which are in contradiction to these regulations shall have no effect
henceforth.