The Startup Legal Hub
The Fundraising Checklist
The legal sequence of a startup funding round in Pakistan, from readiness through term sheet, documents, approvals, and the filings and banking steps that make the money real — in order, with the statutes named.
A funding round in Pakistan is a sequence, and most of what goes wrong is really a sequencing error: shares allotted before the money cleared the banking channel, resolutions passed after the deadline they were meant to precede, articles amended at leisure while the shareholders' agreement they contradict sits signed. This checklist article walks the sequence end to end, as the law and practice stand in July 2026, with the recurring failure points marked. Filing windows and regulatory details move; confirm the current position on the bracketed items before relying on them.
It is written for the priced equity round, because that is where the full machinery engages. SAFEs and convertible notes compress the paperwork at signing but only defer the same corporate steps to conversion — and they are covered in their own briefing in this hub.
Six months out: make the company financeable
Everything in the round moves faster if the company enters it clean. The pre-raise quarter has four jobs. Reconcile the cap table to its source documents and the SECP record, because the investor subscribes against the register, not the spreadsheet. Bring the filings current — annual returns, financial statements, director and allotment filings — since curing them mid-diligence converts a routine fix into a condition precedent. Close the IP chain of title with the founder deeds and contractor assignments diligence always requests. And confirm the option pool: term sheets price fully diluted including the pool, and if the shareholder authority for it does not exist, creating it becomes an unplanned shareholders' meeting on the critical path.
This is also when the data room is built and checked against the public registers. That exercise has its own briefing in this hub; the short version is that the room is the factual basis of your warranties, and it should be reconciled before an investor ever sees it.
The term sheet
The term sheet is mostly non-binding, but it fixes the economics you will live with, so negotiate it as if it were the deal — because commercially it is. The points that repay attention in a Pakistani round: whether the valuation is pre- or post-money and where the pool top-up sits (before or after the money changes the founders' dilution materially); the liquidation preference multiple and whether it participates; anti-dilution mechanics; board composition and the reserved matters list; founder vesting and lock-up expectations; and the binding tails, usually exclusivity, confidentiality, and costs.
One structural decision belongs at this stage, not later: whether the investment lands in the Pakistani company or in a foreign holding company above it. A flip engages the exchange-control regime for the founders' own shareholdings and needs State Bank routing done properly [CURRENT SBP TREATMENT OF RESIDENT SHAREHOLDINGS IN FOREIGN HOLDING STRUCTURES — TO BE VERIFIED BY REVIEWING LAWYER]; deciding it after documents are drafted wastes a drafting cycle at best.
The document set
A Pakistani priced round is a package of documents that must agree with each other. The subscription agreement carries the investment mechanics: amount, tranches if any, conditions precedent, warranties, and the disclosure letter that qualifies them. The shareholders' agreement carries the ongoing bargain: board rights, reserved matters, information rights, transfer restrictions, pre-emption on transfers, tag-along and drag-along, and founder covenants. The amended articles of association translate as much of that bargain as possible into the company's constitution, adopted by special resolution — essential in Pakistan, because the articles bind the company and its members while a shareholders' agreement binds only its signatories, and a conflict between the two is an invitation to litigate. Preference share terms, where the investor takes a preferred class, are created through the articles and the terms of issue, and imported preferences need deliberate redrafting to work under the Companies Act, 2017 [PERMISSIBLE CLASSES AND RIGHTS FOR PRIVATE COMPANIES — TO BE VERIFIED BY REVIEWING LAWYER].
Stamp the executed documents under the provincial stamp regime at signing. The duty is modest; the admissibility fight over an unstamped shareholders' agreement is not.
Approvals, money, and filings — in strict order
The closing sequence has an order that should not be improvised. First, corporate authority: board approval of the transaction, and the members' approval that permits issuing the new shares otherwise than to existing shareholders under section 83 of the Companies Act, 2017, through the route prescribed for private companies [PROCEDURE UNDER THE COMPANIES (FURTHER ISSUE OF SHARES) REGULATIONS, 2020 — TO BE VERIFIED BY REVIEWING LAWYER]. Second, conditions precedent confirmed satisfied in writing. Third, the money: subscription funds into the company's account — and for a non-resident investor, as an inward foreign-currency remittance through the banking channel, converted and confirmed by the authorised dealer before any share is allotted. That confirmation is not bureaucracy; under the Foreign Exchange Regulation Act, 1947 framework it is the root of the investor's ability to repatriate dividends and exit proceeds, and the guarantee regime of the Foreign Private Investment (Promotion and Protection) Act, 1976 presumes investment that came in properly.
Fourth, the issue: allotment resolved, register of members written up, share certificates issued within the statutory period [PERIOD — TO BE VERIFIED BY REVIEWING LAWYER]. Fifth, the filings: the return of allotment and any articles amendment and director changes filed with the SECP within their windows, and the issue of shares to the non-resident reported to the State Bank through the authorised dealer as the FE Manual prescribes [CURRENT REPORTING PROCEDURE — TO BE VERIFIED BY REVIEWING LAWYER].
Two regulatory branches to check rather than assume. Where a foreign investor takes shares or a board seat, Ministry of Interior security clearance is engaged, and its timeline should be built into the timetable from day one. And where the round conveys control of the company, test the transaction against the merger-control thresholds under section 11 of the Competition Act, 2010; most minority venture rounds fall outside them, but the question is asked once, in writing, not assumed.
After closing
The round is not finished at the wire transfer. The post-closing period has its own list: board appointments made and filed, the investor's information rights wired into the company's reporting rhythm, insurance the shareholders' agreement promised put in place, bank mandates updated, and the full executed set archived in the data room. Then read the shareholders' agreement once more — this time as an operating manual. The reserved matters you negotiated are now the law of your boardroom, and the fastest way to a bad investor relationship is to breach a consent right in month two because nobody briefed the team on what now needs approval.
Run the round this way — clean going in, sequenced in the middle, filed and reported at the end — and the next round starts from the archive instead of the repair shop.
The Checklist
The fundraising round checklist
Every legal step of a Pakistani equity round, from six months out to ninety days after closing.
- Reconcile the cap table against SECP filings, allotment resolutions, and share certificates six months before the raise.
- File any overdue SECP returns and financial statements before investor conversations begin.
- Close the IP gaps — founder deeds, contractor assignments, registrations in the company's name — before diligence opens.
- Confirm the option pool has shareholder authority for a defined number of shares, and top it up if the round assumes more.
- Build and reconcile the data room against the public registers before granting access.
- Choose the instrument — SAFE, convertible note, or priced round — with advice on its Pakistani mechanics, not by template.
- Sign a term sheet that states valuation basis, pool treatment, liquidation preference, board composition, and exclusivity in numbers.
- Verify any foreign investor's remittance route and, where directors or shareholders are foreign, start the security-clearance process early.
- Check whether the investment confers control that meets Competition Act, 2010 notification thresholds, and file for clearance if it does.
- Negotiate the subscription agreement, shareholders' agreement, and amended articles as one package, and make the articles match the agreement.
- Prepare the disclosure letter against the data room, indexed document by document.
- Pass the board and general-meeting resolutions authorising the issue outside section 83 pre-emption, by the prescribed route.
- Receive the subscription money into the company's bank account — for foreign investors, as a foreign-currency remittance through the banking channel.
- Obtain the bank's confirmation of the remittance and its conversion before allotting shares to a non-resident.
- Allot the shares, update the register of members, and issue share certificates within the statutory period.
- File the return of allotment and every other event-driven filing with the SECP within its statutory window.
- Report the issue of shares to the non-resident to the State Bank through the authorised dealer as the FE Manual requires.
- Stamp the transaction documents under the applicable provincial stamp law at execution.
- Deliver the post-closing items list — board appointments, information rights setup, insurance, bank signatories — within the agreed period.
- Archive the full signing and closing set in the data room for the next round's diligence.
Questions, Answered
What clients ask most.
From term sheet to money in the bank, a clean domestic round commonly runs eight to twelve weeks: diligence and documents take most of it, and the corporate approvals and filings the rest. Foreign investors add time for remittance logistics and, where a foreign shareholder or director joins the register, the Ministry of Interior security clearance, whose timeline is outside anyone's control. The biggest schedule variable is the company's own readiness.
At minimum: the resolutions and regulatory steps authorising the further issue outside section 83 pre-emption, the return of allotment after shares are issued, any special resolution amending the articles, and event-driven filings for new directors. Each has its own statutory window [CURRENT FORMS AND PERIODS — TO BE VERIFIED BY REVIEWING LAWYER]. Missed windows are curable with additional fees, but a pattern of late filings is itself a diligence finding.
Three things. The money must arrive as a foreign-currency remittance through the banking channel and be converted and confirmed by the authorised dealer, because that record is what makes dividends and exit proceeds repatriable under the Foreign Exchange Regulation Act, 1947 and the FE Manual. The share issue to the non-resident must be reported to the State Bank through the bank. And foreign shareholders and directors trigger security clearance from the Ministry of Interior [CURRENT PRACTICE AND TIMELINES — TO BE VERIFIED BY REVIEWING LAWYER].
As a starting point for commercial terms, yes; as operative Pakistani documents, no. The imported forms assume mechanics local law does not supply on those terms — automatic conversion, company repurchases, self-executing preferences — and ignore the ones it demands: section 83 authority, SECP filings, stamping, and exchange-control steps. The usual approach is to keep the familiar economic terms and rebuild the machinery for the Companies Act, 2017, or to place the instrument at a foreign holding company where it is native.
In rough order: gaps found in diligence that must be cured as conditions precedent, such as unfiled returns or unassigned IP; security clearance for foreign participants; articles that were never conformed to the shareholders' agreement, discovered at signing; remittance and bank-compliance delays on the investor's transfer; and pool top-ups that need shareholder meetings nobody scheduled. Every one is avoidable with a timetable built at term-sheet stage.
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.