What is a Section 42 company in Pakistan?

A Section 42 company is a company in Pakistan that has been licensed by the Securities and Exchange Commission of Pakistan (SECP) to operate for charitable or other not-for-profit purposes, under Section 42 of the Companies Act, 2017. Asraa Hope Foundation is registered this way. This article explains what that means for donors.

What does Section 42 of the Companies Act, 2017 say?

Section 42 lets the SECP grant a licence to an association that is formed to promote charity, education, health, social welfare, religion, science, art, sport or a similar useful purpose, on the condition that it applies all its income to those purposes and pays no dividends to its members.

What rules does a Section 42 company follow?

• All income and property must be used only for the objects in its memorandum.
• No profit or dividend can be paid to members or directors.
• It must keep proper accounts, have them audited and file them with the SECP each year.
• It must follow the conditions of its licence and SECP regulations for not-for-profit associations.

How is it different from a trust or a society?

Charities in Pakistan can also be set up as trusts, registered under provincial trust laws, or as societies under the Societies Registration Act, 1860. A Section 42 company is a separate legal entity with a board of directors, governed by company law and supervised by a federal regulator, the SECP. Its filings are on public record in the same way as any other company’s.

Why did Asraa choose this structure?

We wanted donors in Pakistan and abroad to see a structure they recognise: a registered company with directors, audited accounts and a regulator. The same records also support our applications to register in the United Kingdom and the United States.

Are donations to a Section 42 company tax-deductible?

Not automatically. In Pakistan, donors can claim a tax credit for gifts to non-profit organisations approved by the Federal Board of Revenue under section 2(36) of the Income Tax Ordinance, 2001. That approval is separate from the SECP licence. Our current status is listed on our About page.

How can you check a Section 42 company?

You can search a company’s name on the SECP’s online company search to see its registration number, date of incorporation and status. You can also ask the organisation for its licence and latest audited accounts. A genuine charity will share them.