The SECP Venture Capital Bill is now out for public consultation, and it could change how Pakistani startups raise money. The Securities and Exchange Commission of Pakistan (SECP) has shared the draft Venture Capital (VC) Bill with the Board of Investment (BOI) for public consultation. The move is one of the most direct steps the government has taken to build a proper home for risk capital inside Pakistan.
Why Pakistan Needs a Venture Capital Bill Right Now
The short answer: most startup investment in Pakistan today happens outside Pakistan. Many Pakistani startups and high-growth companies continue to rely on overseas investors or financing structures outside the domestic regulatory system. Founders set up holding companies in Delaware or Singapore, raise dollars offshore, and route equity through foreign entities, partly because there was no clear Pakistani law covering venture capital at all.
The draft has been prepared in line with a federal government initiative that tasked the SECP with developing a standalone legal framework for venture capital and addressing funding constraints faced by startups and innovative businesses. In other words, this bill was not SECP’s idea alone, it came from a direct government instruction to fix the gap.
Pakistan’s startup, technology and innovation sectors have significant growth potential but continue to face limited access to formal venture capital. Without a local VC framework, fund managers had no clear rules to follow, investors had no defined protections, and startups had no predictable path to domestic risk capital. The bill tries to fix all three problems at once.
What the SECP Venture Capital Bill Actually Proposes
The SECP said the draft legislation proposed a simple regulatory framework for venture capital funds and fund managers, along with an easier licensing and registration system for venture capital funds. Think of it as a dedicated rulebook that did not exist before, one written specifically for the high-risk, high-reward nature of startup investing.
Here are the key proposals inside the draft:
- Simplified licensing and registration for VC funds and their managers, so setting up a formal fund in Pakistan becomes less expensive and less complicated.
- Pass-through taxation. Income and gains will flow directly to investors without being taxed at the fund level first, reducing double taxation and making local funds more competitive and attractive to both domestic and foreign limited partners. This is how VC funds work in the US, Singapore, and most mature markets, Pakistan’s bill now tries to match that standard.
- Governance and reporting standards. It provides for light-touch licensing and registration requirements, simplified operational structures and defined governance and reporting standards.
- Tough penalties for unlicensed activity. The proposed punishment is significantly higher for businesses conducting venture capital activities without the required license or registration, up to Rs. 100 million and imprisonment of up to three years. This is a detail most coverage glossed over: the bill is not just about incentives, it also sets hard consequences for operating outside the rules.
- Formal access to risk capital for startups and tech companies, helping promote startup growth, attract new investment and create employment opportunities.
What SECP’s Chairman Said
SECP Chairperson Dr Kabir Ahmed Sidhu said the proposed legislation would help channel private capital towards emerging businesses in Pakistan. “The bill recognises the high-risk and innovation-driven nature of venture capital and seeks to reduce regulatory barriers while ensuring effective governance and investor protection,” he said.
That framing matters. Most financial regulation in Pakistan was built around banks, listed companies, and bond markets, not early-stage startups. The VC Bill is a rare case of a regulator writing rules that fit the asset class, not forcing the asset class to fit old rules.
What Happens Next After the Draft
Following the sharing of the draft with the BOI, the SECP and BOI will conduct consultations with key stakeholders, including startups, fund managers, legal and financial experts, the State Bank of Pakistan, Pakistan Stock Exchange and relevant industry associations.
Following the consultation process, the draft bill is expected to be refined before being sent to the federal government for the formal legislative process. That means there are still several steps before this becomes law. Founders and investors who want to shape the final text have a real window right now to engage with the BOI consultation process.
You can track SECP’s regulatory updates and official notices on the SECP official website, and find BOI’s consultation details through the Board of Investment Pakistan portal.
Why This Matters for Founders and Investors
If you are a Pakistani founder who has been advised to incorporate in Delaware to raise money, this bill is aimed squarely at your situation. The proposed legislation is significant because much of the investment involving Pakistani start-ups is currently structured offshore or outside the country’s formal regulatory framework. If enacted, the new law could make Pakistan a more practical jurisdiction for venture capital funds and investors while giving local start-ups greater access to domestic and international risk capital.
For domestic investors, pass-through taxation removes a significant cost. Today, a rupee of profit earned inside a VC fund can get taxed twice before it reaches an investor, once at the fund level and once in the investor’s hands. The bill would end that.
For foreign fund managers thinking about Pakistan, simpler licensing is the key signal. Setting up a regulated fund here currently requires navigating rules designed for mutual funds and listed-securities businesses, which do not translate well to VC. A standalone VC law removes that friction.
This also connects to broader moves in Pakistan’s startup finance space. The PVARA tokenisation sandbox, for example, is already letting Pakistani startups explore blockchain-based asset issuance, another sign that regulators are trying to build modern funding rails for the tech sector.
Frequently Asked Questions
What is the SECP Venture Capital Bill?
It is a draft law that SECP has sent to the Board of Investment for public consultation. It proposes a dedicated, simplified regulatory framework for venture capital funds and managers in Pakistan, including pass-through taxation and easier licensing, to help startups raise formal risk capital at home.
What is pass-through taxation and why does it matter for VC?
Pass-through taxation means a VC fund is not taxed on its income directly. Instead, profits and gains pass through to individual investors, who are then taxed in their own hands. This avoids double taxation and makes fund structures more efficient, which is the standard approach in most countries with active venture capital markets.
What are the penalties for running an unlicensed VC fund under the bill?
The proposed punishment for businesses conducting venture capital activities without the required license or registration includes fines of up to Rs. 100 million and imprisonment of up to three years.
When will the SECP Venture Capital Bill become law?
It is not law yet. The SECP and BOI will hold public consultations with stakeholders on the proposed Venture Capital Bill. Following the consultation process, the draft legislation will be forwarded to the government for consideration and legislation. The timeline for final passage through parliament has not been announced.
