Practice Area
Fundraising & Investment
We act for founders raising money and for the angels, funds and corporates providing it — term sheets, SAFEs, convertible notes, priced rounds and private equity investments. The distinctive work is making instruments designed for Delaware perform correctly inside Pakistani company law and the State Bank's foreign exchange regime.
Fundraising documents travel faster than the law they assume. The SAFE and the convertible note were designed for Delaware corporations, where shares can be created by board action and conversion can be close to automatic. A Pakistani private company is a different machine. Under the Companies Act 2017, new shares reach an investor only through the further-issue-of-capital provisions — pre-emptive rights of existing members, the approvals required for an issue to outsiders, sufficient authorised capital, an allotment, a register entry and a filing. None of that happens by itself. So the honest statement of our practice is this: SAFEs and convertibles work in Pakistan as contracts under the Contract Act 1872 — carefully drafted promises to deliver shares through Pakistani mechanics — and they fail when a foreign form is signed as if those mechanics did not exist.
Our adaptation work makes the promise performable. The instrument keeps its familiar economics — valuation cap, discount, conversion triggers, most-favoured terms — and gains a Pakistani spine: covenants to hold authorised capital headroom, to procure waivers and special resolutions in advance of the trigger, a defined timeline from trigger to allotment and filing, and remedies, framed with the Specific Relief Act 1877 in view, if the company does not perform. The friction points are real and we name them to clients at signing rather than at conversion: the pre-emptive rights of a forgotten early shareholder, the face-value floor and discount-issue conditions that can collide with a low conversion price, valuation requirements under SECP's further-issue regulations, and the gap in time between money arriving and shares existing — a gap the foreign exchange framework tolerates only if the paperwork anticipates it.
Foreign money adds the second regime. The Foreign Exchange Regulation Act 1947 and the State Bank's framework govern how a non-resident acquires shares in a Pakistani company and — the part investors care about most — how dividends and sale proceeds later leave. Investment remitted through banking channels and documented under the Foreign Exchange Manual is repatriable in the ordinary course; money that arrived informally may not be. We run this track in parallel with the corporate track on every cross-border round, working with the company's bank, because repatriation certainty is decided at closing, not at exit.
The same practice acts on priced rounds and private equity investments, where the centre of gravity shifts from the instrument to the shareholders' agreement: liquidation preferences, anti-dilution, board seats, reserved matters, founder vesting, information rights and exit. And it acts for investors — angels, venture funds, family offices and corporates — where the work is diligence, downside protection and documents that will still make sense at the moment they are needed, which is never a friendly moment. Rounds must also stay on the private side of the Securities Act 2015 line: a startup raise is a private placement, and how widely an offer is marketed is a legal question, not just a growth question.
Everything here is stated as of mid-2026. Company-law regulations, the State Bank's framework and market practice on adapted instruments all continue to move, and on each transaction we confirm the current position before documents are signed.
When Businesses Need This
The moments this practice exists for.
- 01A foreign accelerator or angel has sent you a standard-form SAFE to sign, and nobody has checked what it means for a Pakistani private company that cannot issue shares automatically.
- 02You have a term sheet for your first priced round and need to know which of its pages bind you, which economics are negotiable, and what the closing will actually require.
- 03Your convertible note is approaching maturity, no priced round has happened, and founder and investor now disagree about what the paper says should happen next.
- 04A foreign investor is ready to wire but wants certainty first that its money can later leave Pakistan — dividends, sale proceeds, or a redemption — through official channels.
- 05Your cap table is part paper, part promises: an advisor on a handshake, an ESOP announced but never documented, an early cheque never converted into shares.
- 06A private equity investor is taking a minority stake in your company and the shareholders' agreement — reserved matters, board seats, exit rights — is where the real negotiation lives.
- 07You are deciding between raising into the Pakistani company or flipping to a foreign holding company, and want the trade-offs stated honestly before the structure hardens.
How It Works
The process, stage by stage.
1
Structure call
Before any document, we settle the shape: SAFE, note or priced equity; local raise or holding-company raise; who the investors are and where their money sits. Each choice triggers different mechanics under the Companies Act 2017 and the foreign exchange regime, and changing structure mid-round is expensive.
2
Term sheet
We negotiate the economics and control terms while the document is still short — valuation or cap, discount, liquidation preference, board composition, reserved matters, founder vesting. We are precise about which clauses bind (usually exclusivity, confidentiality and costs) and which do not.
3
Documents
We draft or negotiate the instrument itself — the adapted SAFE, the note, or the subscription agreement — together with the shareholders' agreement and any amended articles. For adapted instruments, the drafting burden is the conversion mechanics: covenants that make a future share issue deliverable under Pakistani law, and remedies if it is not.
4
Approvals and filings
We run the corporate approvals the raise requires: board and shareholder resolutions, authorised capital headroom, compliance with the further-issue-of-capital provisions of the Companies Act 2017 including pre-emptive rights and any special resolution, and SECP filings. For foreign money, we coordinate the banking-channel remittance and the State Bank framework steps with the company's bank.
5
Closing and cap table
Money moves against shares, not against promises: allotment, the register of members updated, the return of allotment filed with SECP, share certificates issued, and for foreign investors the bank's documentation completed so the investment is repatriable. We deliver a closing set and a cap table that reconciles to the statutory registers.
6
Post-closing
We keep the company round-ready: information rights honoured, ESOP documented, consents and waivers collected as they arise, so the next raise's diligence takes days rather than months.
The Legal Framework
The law this work runs on.
- Contract Act, 1872
- SAFEs, convertible notes and term sheets are, in Pakistani law, contracts — enforceable promises governed by the 1872 Act. That is their strength and their limit: the instrument binds the company to act, but it does not itself create shares, so the drafting must make the promised acts performable and enforceable.
- Companies Act, 2017 — further issue of capital provisions
- Section 83 governs how a company issues new shares: existing members hold pre-emptive rights over further issues, and an issue to outsiders requires the prescribed approvals, including special resolution, alongside sufficient authorised capital. Every conversion mechanic in a Pakistani SAFE or note ultimately has to pass through this machinery.
- Companies (Further Issue of Shares) Regulations, 2020
- SECP regulations detailing the process for issues otherwise than as rights, including valuation and disclosure requirements for certain issues. Their precise application to a given private company raise should be confirmed on current text [SCOPE — TO BE VERIFIED BY REVIEWING LAWYER].
- Securities Act, 2015 and the Private Placement of Securities Rules, 2017
- These draw the boundary between a private placement and a public offer. A startup round stays private only if the offer is made within the permitted manner and limits; pitching securities too widely can cross into public-offer territory with consequences no seed round wants [CURRENT LIMITS — TO BE VERIFIED BY REVIEWING LAWYER].
- Foreign Exchange Regulation Act, 1947 and the SBP framework
- FERA 1947 and the State Bank's Foreign Exchange Manual (notably its chapter on securities) govern the issue and transfer of shares to non-residents and the repatriation of dividends and sale proceeds. Investment remitted through banking channels and documented under this framework is repatriable; money that arrives outside it may not be, and fixing that afterwards is hard.
- Specific Relief Act, 1877
- The backstop for adapted instruments: where a company refuses to perform its promise to allot shares, the investor's remedies run through specific relief and damages. Knowing what a court will and will not order in kind disciplines how the covenants are drafted.
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.
- Signing a US-form SAFE verbatim, importing Delaware mechanics — automatic conversion, treasury shares, post-money certificates — that a Pakistani private company cannot lawfully perform as written.
- Receiving foreign investment into a founder's personal account or outside banking channels, which undermines repatriation and creates foreign exchange exposure that surfaces at exit.
- Leaving no authorised capital headroom for conversion, so the round stalls on a shareholders' resolution and SECP filing while the investor's patience runs.
- Ignoring existing shareholders' pre-emptive rights under the further-issue provisions, then discovering at closing that a forgotten early shareholder holds a veto in fact.
- Treating the whole term sheet as non-binding and breaching the exclusivity, confidentiality or cost clauses that were drafted to bind.
- Promising equity to advisors and early employees orally, so every later round's diligence reopens the same undocumented claims.
- Marketing the raise so widely that the offer risks crossing from private placement toward a public offer under the Securities Act 2015.
- Structuring a friends-and-family raise as interest-bearing loans without checking the restrictions on companies raising money from the public and the deposit rules that can apply [POSITION — TO BE VERIFIED BY REVIEWING LAWYER].
Representative Scenarios
The shape of the work.
Illustrative scenarios, not case reports — composites drawn to show how matters of this kind run.
- —A startup accepted into a foreign accelerator signed the accelerator's standard SAFE at a new offshore holding company. We handled the Pakistan side of the flip — the share exchange, the foreign exchange approvals required for residents holding foreign securities, and the intercompany agreements — so the structure was clean before the money arrived.Illustrative
- —A seed round into a Pakistani private company was documented on a SAFE we adapted for local law: covenants to maintain authorised capital, procure waivers of pre-emptive rights and pass the special resolution, a defined allotment timeline, and specific-relief-backed remedies. At Series A the instrument converted as drafted, with the foreign investors' shares documented for repatriation.Illustrative
- —A convertible note matured with no qualifying round in sight. We renegotiated it into a priced equity conversion at an agreed valuation, papered the approvals, and cleaned three years of informal advisor-equity promises off the cap table in the same closing.Illustrative
- —A private equity fund took a minority stake in a family-owned manufacturer. The work was the shareholders' agreement: reserved matters, board composition, information rights, anti-dilution, and an exit clause the family could live with and the fund could enforce.Illustrative
Questions, Answered
What clients ask about fundraising & investment.
As contracts, yes — a SAFE is an enforceable agreement under the Contract Act 1872. What Pakistani law does not provide is the automatic, self-executing conversion the US form assumes: shares exist here only when the company completes an allotment under the Companies Act 2017, with pre-emptive rights addressed and approvals in place. So a Pakistani SAFE works when it is drafted as an enforceable pipeline to that allotment, not when a foreign form is signed unread.
We keep the economics — cap, discount, conversion triggers — and rebuild the mechanics: covenants to maintain authorised capital headroom, to obtain pre-emptive-right waivers and the special resolution for an issue to outsiders, a hard timeline to allot and file on trigger, and remedies if the company defaults. For foreign investors we add the banking-channel and SBP-framework steps so the eventual shares are repatriable.
In most sectors, yes — Pakistan's foreign investment regime is broadly open, with sectoral exceptions. The money should come through banking channels and the share issue should be documented under the State Bank's foreign exchange framework, because that documentation is what later supports repatriation of dividends and sale proceeds. As of mid-2026 this is framework and process work with the company's bank, not a discretionary approval in the ordinary case [SECTORAL EXCEPTIONS — TO BE VERIFIED PER TRANSACTION].
Through the same door it came in. Where the investment was remitted through banking channels and the shares were issued and documented under the SBP framework, dividends and sale proceeds are remittable through the bank under the Foreign Exchange Manual. Where the original investment was informal, repatriation becomes a remediation project — sometimes solvable, never quick.
Mostly no, partly yes. The economic terms are typically expressed as non-binding, but exclusivity, confidentiality, governing law and cost clauses are usually drafted to bind — and under the Contract Act 1872 they do. We also treat the non-binding terms as morally sticky: retrading a signed term sheet has a price in trust even where it has none in law.
A private placement does not need prior SECP approval, but the machinery around it is statutory: authorised capital, board and shareholder resolutions, compliance with the further-issue provisions of the Companies Act 2017, and a return of allotment filed with SECP after issuance. The raise must also stay within private placement limits under the Securities Act 2015 regime rather than drifting into a public offer.
The cap and discount set the conversion price by contract, and that works — subject to company-law floors. Shares generally cannot be issued below face value without meeting the Act's conditions for discounted issues, and certain issues attract valuation requirements under SECP regulations. We model the conversion math against those constraints when the instrument is signed, not when it converts.
Sometimes. A Delaware, ADGM or Singapore holdco gives foreign funds a familiar instrument set and can be a condition of investment. The costs are real: the flip itself needs care, Pakistani-resident founders holding foreign shares sit inside the FERA 1947 regime and need the State Bank position addressed, and the operating company still lives under Pakistani law. We treat the flip as a decision to be made on the facts of the round, not a default.
The spreadsheet is a summary; the law lives in the register of members and the filings at SECP. A share exists when it is allotted and registered — not when it is promised in an email or an offer letter. Diligence in every serious round reconciles the spreadsheet to the statutory record, and the gaps found there are the most common cause of delayed closings.
It complicates things. Interest turns the instrument decisively into debt: from a foreign lender that engages the State Bank's regime for private foreign currency borrowing, and from local investors it can implicate restrictions on raising deposits [POSITION — TO BE VERIFIED BY REVIEWING LAWYER]. Many Pakistani rounds avoid the issue with non-interest-bearing instruments or structures documented as advances against future share subscription.
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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.