Can a foreign company sue in Pakistan?

4 August 2014

Under Section 456 of the Companies Ordinance, 1984 (the “Ordinance”), a foreign company may contract, deal or transact (with other companies) in Pakistan but unless the foreign company meets the requirements laid out under the laws of Pakistan, in the event of any conflict, dispute, or issue, the foreign company is not entitled to bring any suit, claim any set-off, make any counter-claim or institute any legal proceedings. Section 456 is as follows:

456. Company’s failure to comply with this part not to affect its liability under contracts, etc.-Any failure by a foreign company to comply with any of the requirements of section 451 or section 452 shall not affect the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in respect thereof; but the company shall not be entitled to bring any suit, claim any set-off, make any counter-claim or institute any legal proceeding in respect of any such contract, dealing or transaction, until it has complied with the provisions of section 451 and section 452. (emphasis added)

Sections 450 to 460 of the Ordinance, inter alia, deal with the requirements that foreign companies must meet in order to effectively defend themselves or initiate proceedings in Pakistan.

Section 450 provides as follows:

450. Application of this Part to foreign companies.- This Part shall apply to all foreign companies, that is to say, companies incorporated or formed outside Pakistan which, after the commencement of this Ordinance, establish a place of business within Pakistan or which have, before the commencement of this Ordinance, established a place of business in Pakistan and continue to have an established place of business within Pakistan at the commencement of this Ordinance.

A “place of business” includes a branch, management, share transfer or registration office, factory, mine or fixed place of business but does not include an agency unless the agent exercises a general authority to negotiate and conclude contract or maintains stock of merchandise on behalf of the company.

Section 451 provides for the documents to be delivered to the registrar by foreign companies. These documents include:

(a) a certified copy of the memorandum and articles of the company (Form 38);

(b) full address of the registered or principal office of the company (Form 39);

(c) a list of the directors, chief executive and secretaries (if any) (Form 40);

(d) a return showing the full name and surname, father’s name, nationality, designation and full address in Pakistan of the principal officer of the company in Pakistan by whatever name called;

(e) the full name and surname, father’s name, nationality, designation and full address of some one (1) or more persons resident in Pakistan authorised to accept on behalf of the company service of process and any notice or other document required to be served on the company together with his consent to do so (Form 42);

(f) the full address of that office of the company in Pakistan which is deemed to be the principal place of business in Pakistan (Form 43); and

(g) particulars of principal officer of the company in Pakistan (Form 41).

Section 451 is read in line with with Rule 22 of the Companies (General Provisions and Forms) Rules, 1985.

Moreover, a foreign company is required to obtain a permission letter from the Board of Investment with a specific validity period for opening and maintaining of its branch/liaison office in Pakistan. Copy of such permission letter is required to be furnished with the documents meant for registration.

Section 454 of the Ordinance provides the statutory obligations that the foreign company is required to comply with. These include, among others, maintaining registers of Pakistani members, directors and officers at its principal place of business and keeping it open to inspection, stating the country of origin in every prospectus, exhibition of the name of the company.

Disclaimer: This post is intended as an introduction and for information only and should be read with the relevant legislation. This post does not provide or intend to provide an alternate to legal advice by a competent counsel. For any further queries or assistance, please contact Myra Khan at lawyereadia@gmail.com.

_____________________

Myra Khan is a Barrister-at-Law from the Honourable Society of Lincoln’s Inn and Vice Chairperson Women Rights Committee of the Lahore High Court Bar Association. She is currently practicing law in Lahore, Pakistan.

Any queries may be directed to lawyereadia@gmail.com

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