Families who have done well, and businesses that want to give structurally rather than occasionally, arrive at the same question: what is the right vehicle, and what does it commit us to?
The answer depends on purpose, on who controls it, and — more than people expect — on whether the organisation intends to receive foreign funding.
The structures
Trust. Assets are settled by a settlor on trustees, to be held for defined purposes or beneficiaries. Registration is with the relevant authority under the applicable provincial or federal law. Suitable for endowed charitable purposes and for family arrangements.
Waqf. A dedication of property for religious or charitable purposes under Islamic law, characteristically perpetual and irrevocable. Waqf property is subject to its own regulatory regime, and the perpetuity is the point — it is not a structure to enter casually.
Society. A membership organisation registered under societies legislation, governed by members through a managing committee. Suitable for associations, professional bodies and community organisations.
Section 42 company. A company limited by guarantee, licensed by the SECP as a not-for-profit. The most corporate of the options: the most governance, the most transparency, and generally the most credible to institutional donors and international funders.
Which one to choose
A family endowment, funding education or healthcare in perpetuity from settled assets — a trust or waqf.
A membership body where members elect the leadership — a society.
An organisation seeking institutional or foreign funding, or one that will grow and employ staff — a Section 42 company. Donors increasingly expect that level of governance, and the difference in credibility is real.
A vehicle to hold family assets — be careful. Trusts are sometimes proposed as a way to route property away from heirs. A trust created to defeat the fixed shares of heirs is open to challenge, and the one-third limit on bequests cannot be circumvented by relabelling. See who inherits what in Pakistan.
Registration, in outline
The steps vary by structure and province, but broadly:
- Choose the structure, and check the name is available
- Draft the constitutional document — trust deed, memorandum and articles, or society rules — setting out objects, governance and the procedure on dissolution
- Identify trustees, directors or office bearers, with their identity documents
- Register with the relevant authority — the sub-registrar for a trust deed, the registrar of societies, or the SECP for a Section 42 company (which requires a licence before incorporation)
- Obtain a national tax number and open a bank account
- Apply for tax exemption and approval where the organisation will rely on it
The objects clause deserves real attention. It defines what the organisation may lawfully do, and amending it later is considerably harder than drafting it properly now.
Tax exemption and donor deductibility
Not-for-profit status does not automatically mean tax exemption. Exemption requires approval, which depends on the objects, the governance and continued compliance — including filing.
Separately, whether donors can claim a deduction for their contributions depends on the organisation holding the relevant approval. For any organisation intending to fundraise seriously, obtaining and maintaining that approval is a practical necessity rather than a nicety.
Both require ongoing compliance. Approvals lapse when filings stop.
Foreign funding
This is the point that most often changes the plan.
Organisations receiving foreign contributions are subject to a distinct and demanding regulatory regime — registration or agreement requirements, reporting, and restrictions on activities and areas of operation. Approvals take time and are not automatic.
If foreign funding is part of the plan, establish the requirements before choosing a structure and before accepting the first contribution. Receiving foreign funds outside the framework creates a serious problem that is difficult to unwind.
Governance and compliance
Whichever structure is chosen:
- Hold and minute meetings of trustees, the committee or the board
- Keep proper books, and have them audited where required
- File annual returns and accounts with the relevant authority
- File tax returns even where exempt — exemption is not an excuse not to file
- Keep the register of trustees or members current, and notify changes
- Maintain donor records, and AML-appropriate diligence on significant donations
Dormant charitable organisations that stopped filing are extremely common, and reviving one is more work than maintaining it would have been.
The disputes we see
Control. Founders who assume the organisation is theirs, and a board or membership that disagrees. The constitutional document decides it, which is why it is worth drafting carefully.
Succession of trustees. Trust deeds that do not provide for replacing trustees on death or incapacity, leaving the trust unable to act.
Property. Charitable and waqf property occupied, encroached upon, or dealt with by someone without authority — a very common problem where property was dedicated generations ago and the records were never maintained.
Family assets in charitable clothing. Structures used to hold what is really family wealth, which attract challenge from heirs and scrutiny from the revenue.
How the firm can help
We advise on the appropriate structure, draft trust deeds, memoranda and articles and society rules, handle registration including SECP licensing for Section 42 companies, and advise on tax exemption and donor approval.
We also act in the disputes that arise — control and trusteeship, and the recovery of trust and waqf property that has been occupied or wrongly transferred, drawing on the firm's property and civil litigation practice.
If you are establishing a charitable or family structure, contact the firm before the deed is executed. These documents are intended to last a long time, and they are difficult to change afterwards.