Practice Area
Business Restructuring
We plan and execute corporate reorganizations for Pakistani groups, family businesses, and inbound owners: mergers, schemes of arrangement, intra-group transfers, demergers, and workouts. Every step is tested against three files at once — corporate, tax, and stamp.
Most Pakistani businesses are not structured; they are accumulated. Companies get formed for a contract, a license, a family member, a tax idea from a decade ago, and the group that results is a map of its own history rather than a design. Restructuring is the discipline of turning that accumulation back into a design — one that a lender can secure against, an investor can diligence, a family can inherit, and a tax officer can be shown without apology.
The legal machinery is workable. The Companies Act 2017 provides the scheme-of-arrangement framework in sections 279 to 283, binding members and creditors once sanctioned, and added streamlined routes for qualifying amalgamations that avoid a full sanction process. The Income Tax Ordinance 2001 provides genuine reliefs — group taxation, group relief, and no-gain-no-loss treatment for qualifying intra-group and scheme transfers — that make tax-neutral reorganization achievable when the conditions are engineered in from the start. What the machinery does not forgive is improvisation. The reliefs are conditional, the stamp schedules are provincial and real, and the approvals must exist before the step, not after it.
Our method is the steps paper. Before any instrument is signed, the entire reorganization exists on paper as numbered steps, each with its legal basis, its approval, its filing, its tax and stamp treatment, and its dependencies. The client's board sees the whole road before the first move, the tax file is built contemporaneously rather than reconstructed under audit, and completion is a checklist rather than an adventure. It is unglamorous, and it is why our reorganizations close.
Restructuring is also where the firm's practices meet. Corporate provides the vehicles and approvals; tax advisory prices and protects each step; employment handles the people; and where the driver is distress rather than tidiness, our finance and dispute resolution lawyers manage lenders and, if needed, the court-supervised routes. One team runs the steps paper so nothing falls between chairs.
The framework described here — including the allocation of scheme jurisdiction between the SECP and the courts, the tax reliefs, and the merger-control thresholds — is stated as of mid-2026 and has moved before. We confirm the current position at the start of every mandate, because a reorganization built on last year's procedure is a delay wearing a plan's clothing.
When Businesses Need This
The moments this practice exists for.
- 01The group has grown into a tangle of companies formed for reasons nobody remembers, and consolidation is overdue.
- 02An investor or acquirer has made a clean structure a condition of the deal, and the diligence report reads like a to-do list.
- 03Two operating companies in the group do the same thing and should be one, but nobody has priced the merger's tax and stamp cost.
- 04A business line needs to be separated — hived down into its own company — ahead of a sale, a joint venture, or a licensing requirement.
- 05A family business is moving to the next generation and the ownership structure has to change without triggering avoidable tax or a family dispute.
- 06The balance sheet no longer works: lenders are circling, and the choice is between a negotiated restructuring and something worse.
- 07A foreign parent wants its Pakistani holdings reorganized under a single holding company for governance and repatriation reasons.
How It Works
The process, stage by stage.
1
Structure and steps paper
Every restructuring we run starts as a document: the current structure, the target structure, and the numbered steps between them, each with its legal instrument, approval, filing, and dependency identified. Reorganizations fail in the gaps between steps, so we write the gaps out of existence before anything is executed.
2
Tax and stamp modelling
With the client's tax advisers, we test each step against the Income Tax Ordinance 2001 — including the group provisions and the reliefs for intra-group and scheme-based transfers — and against provincial stamp duty on the instruments and orders involved. If a step costs more in tax and stamp than it saves in structure, we redesign it.
3
Approvals and documentation
We prepare the board and shareholder approvals, scheme documents, transfer instruments, and creditor communications. Where a court- or regulator-sanctioned scheme is the right vehicle, we draft the scheme and the supporting petitions; where board-approved routes suffice, we document them to the same standard, because the registrar and the tax authority will read both.
4
Regulatory clearances and sanction
Depending on the structure this stage covers the scheme sanction process, SECP filings, Competition Commission notification where thresholds are met, lender and creditor consents required by facility documents, and any sectoral approvals. We run these in parallel where the law allows and sequentially where it does not.
5
Implementation and closing the loop
The order or approvals are only the midpoint. Assets, licenses, employees, contracts, bank accounts, and registrations all have to actually move, and the post-completion filings have to land. We close a restructuring with a completion memorandum recording what moved, when, and under what instrument — the document every future auditor, buyer, and tax officer will ask for.
The Legal Framework
The law this work runs on.
- Companies Act, 2017 — compromises, arrangements and reconstructions
- Sections 279 to 283 provide the scheme machinery for compromises, arrangements, mergers, and demergers, binding members and creditors once sanctioned. The 2017 Act reallocated scheme jurisdiction, placing most sanctions with the Commission rather than the High Court as under the former Ordinance; the correct forum for a given structure is confirmed at the outset.
- Companies Act, 2017 — streamlined amalgamations
- The 2017 Act also introduced a short-form route for qualifying amalgamations, including of wholly-owned subsidiaries with their holding company, proceeding on board and member approvals rather than a full sanction process. The eligibility conditions are prescriptive, and we test them before recommending the route.
- Income Tax Ordinance, 2001
- The Ordinance carries the provisions a reorganization lives or dies by: group taxation under section 59AA, group relief under section 59B, and the no-gain-no-loss treatment for qualifying transfers between wholly-owned group companies and under sanctioned schemes in sections 97 and 97A. Each relief has conditions and required approvals, and none applies retroactively to a step already taken.
- Stamp Act, 1899 (provincial schedules)
- Stamp duty is provincial, charged on instruments — conveyances, transfers, and in some cases scheme orders — at rates set by each province's schedule. In Punjab, e-stamping applies. Asset-heavy restructurings are frequently redesigned around this statute, and pretending it away is the most expensive mistake on this page.
- Competition Act, 2010
- Mergers and acquisitions meeting the notification thresholds require Competition Commission of Pakistan clearance. Intra-group reorganizations often qualify for exemption or light-touch treatment, but the analysis has to be done and documented, not assumed.
- Corporate Rehabilitation Act, 2018
- For distressed companies, this statute provides a court-supervised rehabilitation process built around a plan and a moratorium, sitting alongside negotiated workouts under lenders' documents and the State Bank's prudential framework. As of mid-2026 the regime remains lightly used in practice, which itself informs strategy.
Statutory references are stated as of the page’s as-of date and flagged where verification is pending; the law moves, and the current position should be confirmed before relying on it.
Common Mistakes
The errors we see most — and their price.
- Executing the transfers first and asking about section 97 or scheme relief afterwards, when the conditions and approvals can no longer be satisfied.
- Designing an asset transfer without pricing provincial stamp duty, then discovering the duty exceeds the benefit of the entire reorganization.
- Leaving lenders out until late — most facility agreements make a reorganization an event of default unless consent is obtained first.
- Forgetting change-of-control and assignment clauses in key contracts and licenses, so the restructured entity loses the very business it was built to hold.
- Assuming employees transfer automatically with a business — Pakistani law has no general automatic-transfer rule, so consents, terminations, and dues have to be handled deliberately.
- Running a scheme timetable without the tax authority in mind, and finding the reliefs claimed are contested years later for want of contemporaneous documentation.
- Merging companies with unexamined histories, so the surviving entity inherits litigation, tax exposures, and contingent liabilities nobody diligenced.
- Treating the sanction order or final approval as completion, and leaving assets, registrations, and accounts unmigrated for months afterwards.
Representative Scenarios
The shape of the work.
Illustrative scenarios, not case reports — composites drawn to show how matters of this kind run.
- —A family manufacturing group with seven sibling-owned companies consolidated under a single holding company, sequenced so qualifying transfers took intra-group relief and the succession plan was documented alongside. Illustrative of family-group consolidation.Illustrative
- —A conglomerate hived a services division down into a new subsidiary ahead of a partial sale, with contracts, employees, and licenses moved on a single completion date. Illustrative of pre-sale separation.Illustrative
- —Two wholly-owned subsidiaries with overlapping operations were amalgamated into one, using the streamlined route rather than a full scheme, halving the timetable. Illustrative of route selection.Illustrative
- —A heavily indebted manufacturer negotiated a standstill and restructuring with its lender syndicate, restructuring debt and disposing of non-core assets without formal insolvency proceedings. Illustrative of consensual workout practice.Illustrative
Questions, Answered
What clients ask about business restructuring.
A scheme under sections 279 to 283 of the Companies Act 2017 is a statutory mechanism through which a compromise or arrangement — a merger, demerger, or debt restructuring — is approved by the required majorities of members or creditors and then sanctioned, after which it binds everyone including dissenters. You need one when the reorganization must bind people who have not individually agreed, or when the scheme's tax treatment is the point. Simpler structures often do not need it.
The Companies Act 2017 changed the allocation that existed under the 1984 Ordinance, placing most scheme sanctions with the Commission, and the boundary between Commission and Court matters has been adjusted since. As of mid-2026 we confirm the correct forum for each structure at the outset rather than assuming — the answer depends on the type of company and scheme involved, and getting it wrong costs months.
A board-approved intra-group transfer or short-form amalgamation can complete in a few months. A full sanctioned scheme typically runs longer — meetings, objections, sanction, and registration all take their place in the timetable — and anything requiring Competition Commission clearance or lender consent adds its own clock. The steps paper we produce at the start carries a dated timeline, and the discipline is keeping every step on it.
Often, yes — the Income Tax Ordinance 2001 provides no-gain-no-loss treatment for qualifying transfers between wholly-owned group companies under section 97 and for transfers under qualifying schemes under section 97A, alongside the group taxation and group relief regimes in sections 59AA and 59B. Every one of these is conditional: ownership thresholds, approvals, and continuity requirements. Tax neutrality is engineered in advance, not claimed in arrears.
Business losses carry forward for a limited period under the Ordinance, and whether they survive a reorganization depends on how the structure is built — the group relief and scheme provisions offer routes, each with conditions. If preserving losses is a driver of the restructuring, say so at the design stage, because a structure chosen for other reasons can extinguish them.
Purely intra-group reorganizations frequently fall outside the mischief of merger control or within exemptions, but the thresholds and exemption criteria under the Competition Act 2010 and its merger regulations have to be checked against the actual entities and numbers. We do the analysis, keep a note of it on file, and notify where the law requires — a missed mandatory notification is a bad way to save a filing fee.
Nothing automatic. Pakistani law does not have a general rule transferring employment with a business, so employees either consent to move to the new employer — usually on continuity-of-service terms — or their employment with the old entity is terminated with statutory dues. Gratuity, provident fund, and social security registrations all need deliberate handling. Done early and openly, this is administration; done late, it is a dispute.
Yes, but the toolkit changes. Distressed situations run on negotiated standstills and restructurings with lenders under the facility documents and the State Bank's prudential framework, with the Corporate Rehabilitation Act 2018 available as a court-supervised route and winding-up as the alternative nobody wants. The earlier the engagement, the more options exist — companies that call before default keep choices that companies calling after it have lost.
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Prepared by The First Counsel · As of 2026-07-12 · Pending professional review — statements flagged in the text are being verified
This publication is provided for general information only. It is not legal advice, and neither reading it nor corresponding with the firm about it creates a lawyer–client relationship. The position stated must be verified against current law before it is relied upon.