How Foreign Investors Get Money Into — and Out of — Pakistani Startups

Pakistan's policy stance on foreign investment is open: non-residents may, in most sectors, own all of a Pakistani company. What trips investors is not permission but plumbing. The governing statute is the Foreign Exchange Regulation Act, 1947 — a currency-control law, not an investment law — and it is administered by the State Bank of Pakistan through its Foreign Exchange Manual and the commercial banks it licenses as authorised dealers. The regime does not ask whether your investment is welcome. It asks whether the money moved through the right pipe, whether the shares were issued against it in time, and whether the paper trail exists. Get those three things right and money later flows out with surprising ease. Get any of them wrong and the error surfaces years later, at exit, when it is hardest to fix. This briefing describes the mechanics as of July 2026; the Manual's chapter-level detail moves often enough that the bracketed items below are genuine checks, not boilerplate. For structuring work on cross-border rounds, see our foreign investment practice.

One statute, one manual, one gatekeeper

The architecture is worth thirty seconds because it explains everything downstream. The Foreign Exchange Regulation Act, 1947 restricts dealings in foreign exchange and — critically for equity deals — the issue and transfer of securities where a non-resident is involved, except as permitted by the State Bank. The State Bank grants those permissions in bulk through the Foreign Exchange Manual, which delegates day-to-day handling to authorised dealers: the investor and the company rarely face the State Bank directly, but their bank acts under its rulebook and reports into it. The chapter of the Manual dealing with securities sets the conditions on which shares may be issued to non-residents on a repatriable basis [CHAPTER REFERENCE AND CURRENT CONDITIONS — TO BE VERIFIED BY REVIEWING LAWYER]. "Repatriable" is the word that matters: it is the status that later lets dividends and sale proceeds leave, and it is earned at entry or not at all.

The inbound flow, step by step

Step	Who acts	What happens	Legal hook
1. Remittance	Investor	Foreign currency is wired from abroad into the company's Pakistani bank account, through an authorised dealer, with the purpose stated as subscription for shares	Foreign Exchange Regulation Act, 1947; banking channel requirement
2. Encashment evidence	Authorised dealer	The bank converts the funds and issues the certificate evidencing the inward remittance and its purpose — the document the whole later record hangs on	Foreign Exchange Manual [CERTIFICATE FORM — TO BE VERIFIED BY REVIEWING LAWYER]
3. Corporate approvals	Company	Pre-emption under section 83 of the Companies Act, 2017 is addressed — existing members waive or the required shareholder authority is obtained — and authorised capital headroom is confirmed	Companies Act, 2017
4. Allotment	Board	Shares are allotted to the non-resident investor against the remittance, within the period the framework expects between receipt of funds and issue of shares [CURRENT TIME LIMIT — TO BE VERIFIED BY REVIEWING LAWYER]	Companies Act, 2017; Foreign Exchange Manual
5. SECP filing	Company	Return of allotment filed; register of members updated; certificates issued within statutory windows	Companies Act, 2017
6. Reporting to the State Bank	Authorised dealer, on the company's documents	The issue of shares to the non-resident is reported on the prescribed form — the PSC — with the remittance evidence attached [FORM DESIGNATION, ATTACHMENTS AND FILING WINDOW — TO BE VERIFIED BY REVIEWING LAWYER]	Foreign Exchange Manual
7. Repatriable status	—	The shares stand registered on a repatriable basis; the entry file is archived, because it will be produced at every dividend and at exit	Foreign Exchange Regulation Act, 1947 framework

Two features of this table deserve emphasis. First, steps 3 to 6 are a chain: a missing pre-emption waiver stalls the allotment, a stalled allotment blows the reporting window, and a blown window is a conversation with the State Bank rather than a routine filing. Deals should therefore complete the corporate approvals before the wire, not after. Second, the discipline is evidentiary. Nothing in the flow is intellectually hard; all of it must be provable, in writing, a decade later.

Where entries go wrong

The failure patterns are few and repetitive. Money sent to a founder's personal account "to save time," converted informally, and only later contributed to the company — no encashment certificate names the company, so the shares cannot be shown to have been issued against a qualifying remittance. Money routed through an exchange house or crypto rail rather than the banking channel — outside the framework entirely, and exposure under the Foreign Exchange Regulation Act, 1947 attaches to the residents involved. Shares issued long after the remittance, or never reported through the authorised dealer — the investment exists as a matter of company law but lacks the exchange-control record that makes it repatriable. Convertible instruments deserve special mention: a SAFE or note remits money now against shares later, which strains a framework built around prompt issue-against-remittance, and should be routed with the bank's concurrence on the current rules before signing [TREATMENT OF CONVERTIBLE ENTRIES — TO BE VERIFIED BY REVIEWING LAWYER]. None of these defects announces itself at the time. All of them announce themselves at exit.

Dividends out

For a properly entered investment, dividend remittance is the easy case. The company declares the dividend under the Companies Act, 2017, withholds tax under the Income Tax Ordinance, 2001 at the rate applicable to the non-resident shareholder — checked against any relevant double taxation treaty [RATES AND TREATY MECHANICS — TO BE VERIFIED BY REVIEWING LAWYER] — and the authorised dealer remits the net amount against the standard document set: the dividend resolution, the tax evidence, and proof that the shares are held on a repatriable basis [CURRENT DOCUMENT LIST — TO BE VERIFIED BY REVIEWING LAWYER]. No prior State Bank approval is ordinarily needed where the entry record is clean; the bank is verifying, not deciding. That last clause is the recurring theme: the dividend leaves easily because the entry was done properly, and for no other reason.

Sale proceeds out

Exit is where the regime shows its teeth. When a non-resident sells shares in a Pakistani company, the sale proceeds may be remitted through the authorised dealer where the shares were held on a repatriable basis — and the bank will trace the chain all the way back to the original encashment certificate and the PSC reporting before it wires anything. Pricing is also policed: the framework constrains the valuation at which a non-resident may buy from or sell to a resident, typically by reference to a supportable value such as a chartered accountant's certification of break-up or fair value, to prevent disguised capital flight [CURRENT VALUATION REQUIREMENTS FOR TRANSFERS INVOLVING NON-RESIDENTS — TO BE VERIFIED BY REVIEWING LAWYER]. Capital gains tax under the Income Tax Ordinance, 2001 sits alongside, with treaty questions for the seller. A buyer's lawyers on any secondary deal will diligence the seller's entry file as hard as the seller's title, because a defect in either blocks the same wire.

What this means for you

If you are the investor: wire only through the banking channel, only to the company's own account, with the purpose stated; make your closing conditional on the corporate approvals being already in place; and collect the entry file — encashment certificate, allotment return, PSC reporting — as a closing deliverable, not a loose end. If you are the company: sequence approvals before money, complete the allotment and the reporting inside the windows, and archive the file as if your next round depends on it, because it does. If any past entry is defective, address it now, with advice, rather than at exit under deal pressure. The regime rewards exactly one thing — discipline at entry — and it pays that reward years later, at the moment the money needs to leave.