TaxCalc.pk FY 2026-27

Increase Capital On SECP: Form 7 Legal Guide

Increase authorized and paid-up share capital on SECP eZfile. Complete 2026 legal guide covering Form 7, Special Resolution, stamp duty, and Form 3 allotment.

By Syed Asad Hussain Zaidi · 8 September 2026

As private limited companies, startups, and commercial enterprises in Pakistan grow, their initial corporate capital structure inevitably requires expansion. Whether expanding operations to qualify for institutional commercial bank loans, onboarding angel investors and venture capital syndicates, fulfilling government tender bidding pre-qualifications, or capitalizing accumulated retained earnings through bonus shares, increasing corporate capital is a fundamental milestone in corporate evolution.

Under the Companies Act, 2017, altering a company's share capital requires strict adherence to statutory corporate governance. Company directors and corporate secretaries must navigate the critical distinction between Authorized (Nominal) Capital and Paid-Up (Issued) Capital, pass compliant Special Resolutions, pay mandatory provincial stamp duties, and execute digital statutory filings via Form 7 and Form 3 on the SECP eZfile platform.

This practitioner's guide outlines the complete legal, procedural, and tax framework for increasing corporate share capital in Pakistan in 2026.

1. Statutory Foundations: Authorized vs. Paid-Up Capital

Before executing corporate resolutions, founders and directors must understand the distinct legal mechanics of share capital under the Companies Act, 2017:

[!IMPORTANT]

The Golden Rule of Corporate Capital:

A company's Paid-Up Capital can never exceed its Authorized Capital. If a company has an authorized capital of PKR 1,000,000 and seeks to issue PKR 2,000,000 in new shares to an investor, it must first legally increase its authorized capital to at least PKR 2,000,000 via Form 7 before allotting the new shares via Form 3.

2. Alteration of Authorized Capital: The Form 7 Legal Procedure

Under Section 85 of the Companies Act, 2017, a company limited by shares may alter its share capital to increase its nominal share capital by such amount as it deems expedient, provided such authority is granted in its Articles of Association (AOA).

Phase 1: Convening the Board of Directors Meeting

The Board of Directors holds a formal meeting to approve the proposed increase in authorized capital.
The Board authorizes the issuance of a formal notice convening an Extraordinary General Meeting (EGM) of the shareholders.
The notice must specify the exact proposed increase (e.g., from PKR 1,000,000 divided into 100,000 shares of PKR 10 each to PKR 10,000,000 divided into 1,000,000 shares of PKR 10 each) and include a draft text of the proposed Special Resolution.

Phase 2: Passing the Special Resolution at the EGM

Under Section 2(66) of the Act, a Special Resolution requires:

Not less than twenty-one (21) days' notice to all voting members (or shorter notice if agreed to unanimously by all members holding voting rights).
Approval by a majority of not less than three-fourths (75%) of members present and voting in person or by proxy.

Phase 3: Filing Form 26 on eZfile

Under Section 150, a certified copy of every Special Resolution must be filed with the Registrar of Companies via Form 26 within fifteen (15) days from the date of passing.

Phase 4: Calculating SECP Filing Fees & Provincial Stamp Duty

When increasing authorized capital, two distinct governmental fees apply:

SECP Statutory Filing Fee: Calculated on the incremental authorized capital in accordance with the Seventh Schedule to the Companies Act, 2017.
Provincial Stamp Duty on MOA Alteration: Payable to the relevant provincial treasury under the Stamp Act, 1899:

- Punjab (PRA / BOR Punjab): Stamp duty levied on the increase in capital.

- Sindh (Board of Revenue Sindh): 0.25% to 0.5% depending on prevailing Finance Act rates. - Federal Capital (ICT Islamabad): Fixed schedule applicable to Islamabad CRO registrations.

Phase 5: Filing Form 7 (Notice of Increase in Capital)

Under Section 85(2), the company must file Form 7 within fifteen (15) days of the resolution. The electronic submission on eZfile requires:

Certified true copy of the passed Special Resolution.
Amended copy of the Memorandum of Association reflecting the expanded Capital Clause (Clause V).
Copy of the Treasury Challan proving payment of provincial stamp duty.
Original PSID receipt proving payment of SECP registration fees via 1Bill.

3. Increasing Paid-Up Capital: Right Shares vs. Direct Allotment

Once the authorized capital ceiling has been expanded, the company can issue and allot new shares to increase its paid-up equity. In a private company, the issuance of new shares is governed strictly by Section 83 of the Companies Act, 2017.

| Capital Mechanism | Statutory Section | Legal Procedure & Shareholder Protection | | :--- | :--- | :--- | | Right Issue (Pro-Rata) | Section 83(1) of Companies Act 2017 | Mandatory pre-emptive right: new shares must first be offered to existing shareholders pro-rata to avoid involuntary dilution. | | Third-Party Allotment | Section 83(1)(b) of Companies Act 2017 | Permitted only pursuant to a Special Resolution authorizing non-pre-emptive allotment to incoming strategic or VC investors. | | Bonus Shares (Capitalization) | Section 85 & Articles of Association | Capitalizing accumulated retained earnings or reserves to issue free, pro-rata bonus shares to existing shareholders. |

The Pre-Emptive Right of Existing Shareholders (Section 83)

Under Section 83(1), where the directors decide to issue new shares, such shares must be offered to existing shareholders strictly in proportion to their existing holdings ("Right Issue"):

The offer must specify the number of shares offered, the issue price (par value or premium), and a time limit of not less than fifteen (15) days and not more than thirty (30) days.
A shareholder may accept the offer, decline it, or renounce the offer in favor of another person (if permitted by Articles).
If any shares remain unsubscribed after the expiry of the offer period, the directors may dispose of them in such manner as they deem most beneficial to the company.

Filing Form 3 (Return of Allotment) on eZfile

Within thirty (30) days of share allotment, the company must submit Form 3 to the Registrar containing:

Detailed listing of allottees (Names, CNICs/Passports, residential addresses, shares allotted).
Number of shares allotted for cash consideration vs. consideration other than cash.
Bank Encashment Certificate proving deposit of share subscription funds into the corporate bank account.
Auditor's Certificate confirming receipt of share consideration.

4. SECP Official Fee Schedule for Capital Increase (2026)

Filing fees are calculated based on the incremental authorized capital tier under the Companies (General Provisions and Forms) Regulations, 2018:

Note: In addition to SECP fees, provincial stamp duty on the amended Memorandum must be paid at the district treasury / National Bank of Pakistan branch.

5. Tax & FBR Implications of Capital Expansion

Expanding corporate share capital intersects directly with federal income tax laws under the Income Tax Ordinance, 2001:

1. Verification of Inward Funds under Section 111

Under Section 111 of ITO 2001, the FBR possesses statutory authority to investigate the nature and source of any sum credited in the books of accounts of a company:

If a director or incoming shareholder subscribes to shares in cash without a verifiable banking channel, the FBR Commissioner will treat the entire share capital as unexplained taxable income of the company, levying 29% corporate income tax plus default surcharges.
Mandatory Banking Rule: Every rupee of share capital must flow through traceable banking channels (cross-cheque, banking wire transfer, or pay order) from the subscriber's disclosed personal bank account.

2. Taxability of Bonus Shares (Section 236Z / Section 37)

When a company capitalizes reserves and issues bonus shares to shareholders:

The bonus shares are treated as income of the shareholder in the year of receipt under Section 236Z.
The company must collect withholding tax at the rate of 10% (for filers) on the value of bonus shares (determined on the basis of face value for unlisted companies) before issuing share certificates.

6. Critical Procedural Pitfalls & Compliance Traps

Corporate directors frequently encounter costly regulatory delays or incur personal penalties by overlooking core procedural rules:

7. Operational Checklist: Executing a Flawless Capital Increase

Before submitting your capital expansion on SECP eZfile, ensure compliance with every operational milestone:

[ ] Current Articles of Association reviewed to verify express power to alter capital under Section 85.
[ ] Board of Directors meeting held; notice of EGM issued with 21 days' statutory notice.
[ ] Special Resolution drafted, passed by 75% majority, and signed by CEO/Director.
[ ] Form 26 filed on eZfile within 15 days of passing the Special Resolution.
[ ] Provincial stamp duty calculated, paid at district treasury, and stamped onto MOA.
[ ] Form 7 filed on eZfile within 15 days with stamped MOA and fee challan.
[ ] CRO Approval and certified amended Memorandum secured.
[ ] Share subscription offer issued to existing members under Section 83.
[ ] Subscription funds received into corporate bank account; encashment verified.
[ ] Form 3 (Return of Allotment) filed within 30 days of board allotment resolution.
[ ] Share certificates updated, sealed, and issued to shareholders.
[ ] Register of Members and Form 19 (UBO) updated to reflect new share percentages.

Conclusion & Legal Advisory

Expanding authorized and paid-up share capital establishes the legal and financial foundation for business scaling, international investment, and commercial bank credit facilities. However, because capital alteration alters voting dynamics, shareholder equity proportions, and tax liabilities, precise execution under the Companies Act, 2017 and Income Tax Ordinance, 2001 is essential.

For structuring corporate capital expansions, drafting custom Special Resolutions, executing Form 7 / Form 3 filings on SECP eZfile, or navigating investor share subscription agreements, contact Syed Asad Hussain Zaidi | Advocate High Court at info@taxcalc.pk or consult our Corporate Law & SECP Practice.

Legal & Statutory Notice: The information provided in this publication is for general educational, academic, and statutory informational purposes only under the relevant laws of Pakistan (including the Income Tax Ordinance, 2001, the Companies Act, 2017, and the Trade Marks Ordinance, 2001). This content does not constitute formal legal, financial, or tax advice. For specific assessments, consult a licensed Advocate or qualified tax professional.

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FBR Finance Act 2026 · Tax Year 2027

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Official Salaried Tax Slabs (FY 2026-27 / Tax Year 2027)

Under the First Schedule, Part I, Division I of the Income Tax Ordinance, 2001 (as amended by Finance Act 2026):

Taxable Income Slab (Annual)	Statutory Rate & Fixed Tax
Up to Rs. 600,000	0% (Exempt)
Rs. 600,001 to Rs. 1,200,000	1% of the amount exceeding Rs. 600,000
Rs. 1,200,001 to Rs. 2,200,000	Rs. 6,000 + 11% of the amount exceeding Rs. 1,200,000
Rs. 2,200,001 to Rs. 3,200,000	Rs. 116,000 + 20% of the amount exceeding Rs. 2,200,000
Rs. 3,200,001 to Rs. 4,100,000	Rs. 316,000 + 25% of the amount exceeding Rs. 3,200,000
Rs. 4,100,001 to Rs. 5,600,000	Rs. 541,000 + 29% of the amount exceeding Rs. 4,100,000
Rs. 5,600,001 to Rs. 7,000,000	Rs. 976,000 + 32% of the amount exceeding Rs. 5,600,000
Exceeding Rs. 7,000,000	Rs. 1,424,000 + 35% of the amount exceeding Rs. 7,000,000

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