How To Merge Two Registered Companies In Pakistan?

Hamza and Hamza
May 2
3 min read

Merging two registered companies in Pakistan is a legal process governed by the Companies Act, 2017 and overseen by the Securities and Exchange Commission of Pakistan (SECP). A merger involves the consolidation of two or more companies into one entity, often with the aim of achieving business synergies, expanding operations, reducing costs, or increasing market share. The procedure of Company Registration In Pakistan is formal, detailed, and requires approval from both company shareholders and regulatory bodies.

Here is a step-by-step guide on how to merge two companies in Pakistan:

1. Preliminary Agreement and Board Approval

The merger process begins with discussions between the management of both companies. If both sides agree in principle to merge, the respective Board of Directors of each company must approve a Scheme of Merger or Amalgamation. This scheme outlines the proposed terms, including the nature of the merger, share exchange ratio, treatment of assets and liabilities, and post-merger organizational structure.

A Memorandum of Understanding (MoU) or Letter of Intent (LoI) may also be signed to define the preliminary terms and ensure confidentiality.

2. Due Diligence

Before proceeding further, a thorough legal, financial, and operational due diligence is conducted by each party. This step is essential to identify any liabilities, ongoing litigation, tax issues, or contractual obligations. Professional services firms, such as legal consultants or chartered accountants, are usually engaged for Company Registration In Pakistan.

3. Drafting the Scheme of Amalgamation

The Scheme of Amalgamation is the core legal document in the merger process. It contains detailed provisions on:

Shareholding structure post-merger
Transfer of assets and liabilities
Valuation of companies
Tax implications
Treatment of employees
Name of the merged entity

The scheme must be signed by the authorized representatives of both companies and submitted to the SECP for initial review.

4. Application to SECP and Court Approval

Under Section 279 to 284 of the Companies Act, 2017, the companies must file a Joint Petition before the High Court or a designated Company Bench, seeking approval for the proposed merger. Alongside the court petition, an application is also submitted to the SECP.

The court may direct the companies to:

Convene Extraordinary General Meetings (EGMs) of shareholders and creditors
Issue public notices in newspapers inviting objections from stakeholders
Submit reports from auditors or valuers

After all objections are heard and if the scheme is found fair and reasonable, the court grants its approval.

5. Filing the Court Order and Effectiveness of the Merger

Once the court approves the merger, a certified copy of the court’s order must be filed with the SECP and the concerned Registrar of Companies. This filing legally completes the merger.

The merged entity is now treated as a single company, and the merging companies cease to exist as separate legal entities (unless structured as a holding-subsidiary merger). Assets, liabilities, contracts, licenses, and registrations are automatically transferred to the surviving entity by operation of law.

6. Post-Merger Compliance

After the merger is finalized, the newly merged company must update:

Bank accounts
Tax registrations with FBR and provincial revenue authorities
Licenses with regulatory bodies
Employee records and employment contracts
Company information on the SECP eServices Portal

Timely compliance is essential to avoid penalties or operational disruption.

Conclusion

Merging two registered companies in Pakistan is a structured legal process involving board and shareholder approval, due diligence, court petitions, and regulatory filings. Although it can be complex and time-consuming, a successful merger can bring significant benefits such as cost efficiencies, increased market access, and operational strength. Engaging legal and financial professionals like Hamza & Hamza Law Associates is strongly recommended to navigate the process smoothly and in full compliance with Pakistani corporate laws.