1. TUFAIL H. EBRAHIM, J. - Through this petition under Section 97 of the Companies Ordinance, 1984, the petitioner as sought sanction for the reduction in the issued share capital and has made following prayers:-
(a) an order under Section 101 of the Companies Ordinance confirming the reduction in the share capital of the petitioner to be effected in the manner resolved by the Ordinary and Special Resolution set out in the paragraph 10 of this petition;
(b) an order under Section 98 of the Companies Ordinance, 1984 directing that notwithstanding the reduction aforesaid in the issued and paid up share capital of the petitioner, the use of the words "and reduced" in relation to the name of the petitioner shall be dispensed with;
(c) an order under Section 102 of the Companies Ordinance, 1984 confirming the Minute as set forth in paragraph 14 pf this petition and directing that the notice of the registration of such Minutes shall be published in at least one issue each of the daily newspaper in the English language and a daily newspaper in the Urdu language having circulation in the Province of Sindh.
2. Briefly the facts are that the petitioner is a registered public limited (unlisted) company within the meaning of the Companies Ordinance, 1984. The Company was duly registered on 25.7.1951 at Karachi, under the Indian Companies Act, 1913 vide Registration No. SIND 913 of 1951-52. The main business of the Company is manufacturing and marketing pharmaceutical, personal care and household products, insecticides arid pest control products and other objects set forth in the memorandum of association of the petitioner. The barrie of the petitioner had been changed from Reckitt & Colman of Pakistan Limited in pursuance of Section 40 of the Companies Ordinance, 1984 on 7.9.2000. The petitioner was delisted in the year 2005 and thereafter the paid up capital of the Company was reduced by 50% in the year 2006 in pursuance of order of this Court. * The learned counsel of the petitioner submits that (a) authorized share capital of the petitioner is Rs. 500,000,000/- divided into 50,000,000 ordinary shares of ' Rs. 10/-; (b) the present paid up capital of the Company is Rs. 147,013,890/- divided into 14,7013,890 shares of Rs. 10/- each; and (c)
3. Under Article 37 of the Articles of Association the petitioner is entitled to reduce its. Share capital- in the manner, as may be permitted under the Companies Ordinance, 1984.
4. Lt is submitted by the learned counsel of the petitioner that (a) the directors of petitioner initiated task for reduction of paid up share capital of the petitioner as the paid up share capital in the hands of the petitioner, was in excess to its need and in the meeting of the Board of Directors dated 2.3.2009, it was resolved that the paid up share capital to be reduced by 2/3rd and excess amount be returned to the shareholders of the petitioner; and (b) the schemes for the reduction of the share capital would not, in any manner, effect the ownership, voting rights of the shareholders nor it will in any way, be detrimental to the rights of any shareholders.
5. The learned counsel of the petitioner has also invited attention of this Court to the Annual General Meeting of the petitioner held on 8.4.2009, which has also been annexed with the petition as Annexure "D". He has submitted that according to scheme as unanimously approved in the Annual General Meeting of the petitioner, the paid up capital of the petitioner is to be reduced by 2/3rd and in that way 2/3rd paid up capital is to be returned to the shareholders of the petitioner, lt has also been resolved that prior to the said reduction in the paid up share capital, the total paid up shares is to be sub-divided into 147,013,890 issued ordinary shares of Re. 1/- each. The learned counsel has also submitted that in accordance with Section 96 of the Companies Ordinance, the shareholders of the petitioner have approved reduction of share capital through ordinary and special resolution which have been reproduced in Para 10 of the petition.
6. The learned counsel for the petitioner has submitted that all necessary requirement of law have been fulfilled and consent from the shareholders has been obtained in Annual General Meeting of the petitioner. The petitioner has also obtained approval/consent from 98.96% of the creditors (mostly being trade creditors) and none of them has objected to the proposed reduction and Independent Assurance Report dated 29.4.2009 on consent of creditors, to the proposed reduction in issued share capital has been obtained from M/s. Ford Rhodes Sidat Hyder & Co., Chartered Accountants. The learned counsel candidly admitted that such formal approvals/consent were not obtained from all the secured creditors as no amount was overdue; however, the required consent/approvals were obtained from them after filing of this petition and specifically in response to the comments filed on behalf of Additional Registrar of Companies, Karachi, S.E.C.P. In response to the Court notice issued to them. The said consent/approvals have been filed alongwith the affidavit in rejoinder in response to the comments filed on behalf of S.E.C.P.
7. The learned counsel has stated that- the financial position of the petitioner, even after proposed reduction of the share, capital, would remain very sound which is reflected through the accounts of petitioner and which has been audited by Ford Rhodes Sidat Hyder & Co., Chartered Accountants.
8. Learned counsel has also pointed that notice in pursuance of Rule 781 SCCR (OS) and Rule 19 of the Companies Court Rules, 1997 and publication of this petition were prominently published in Daily Dawn and Daily Jang on 28.5.2009 and the same was also published in the Gazette of Pakistan in Part VI on 10.6.2009 and in response thereof no opposition have been received, except for the parawise comments received from Additional Registrar of Companies; Company Registration Office at Karachi on behalf of S.E.C.P. The learned counsel submits that the main objection of S.E.C.P.
9. Have been complied by obtaining approvals/consent from all the secured creditors and the other formal objection as to the adding of the words "and reduced" in terms of Section 98 should be overruled for the reasons that (a) not a single objection has been received from any person, shareholder, creditor of the petitioner; (b) the general rationale for such addition is to inform all those persons interested with the company at a future date of the fact that the company had, until a point in time, a specific share capital which has for some reason now been reduced. Ln those company making a loss or having unhealthy balance sheet, the need for the words "and reduced" may be justified, but that certainly not is the case with the petitioner, which is a profitable company, having healthy balance sheet, with huge reserves and reduction in capital would not reduce its financial strength, moreso when all the shareholders and creditors have given their consent; and (c) would unnecessarily burden the petitioner by . Way of making changes in the letterheads, invoices, purchase orders, stationery, cheque books, ' stamps, common seals, advertising materials and other instruments and documents.
10. The learned counsel for the petitioner has stated that the proposed reduction in the paid up capital of the petitioner will result in reducing the paid up capital of the petitioner to Rs. 49,004,630/- divided into 4,900,463 paid up ordinary shares of Rs. 10/- each. The learned counsel states that from the audited balance sheet it can be safely concluded that such reduction in the paid up capital of the petitioner would not affect the required "Debt-Equity Ratio" and "Current Ratio" of the petitioner and the same will remain within the prescribed limits of the Prudential Regulations issued by the State Bank of Pakistan for purposes of borrowings from commercial banks. Further, the petitioner does not require to borrow or raise any finance for paying off and returning to the shareholders the amount of two-third of the paid up capital of the petitioner.
11. After the above submissions and satisfactorily replying to all the Court queries, the learned counsel has prayed for sanction and confirmation to the 2/3rd reduction in the paid up share capital of the petitioner, with further prayer that company may be dispensed with from using the word "and reduced" in terms of Section 98. The learned counsel has stated that the said reduction is sought due the availability with the petitioner of excess capital, due to various restructuring activities of the petitioner, including closure of. Factories and changing the sourcing of its products, which has resulted in significantly simplification and minimum capital requirements to carry out its business.
12. After hearing the learned counsel of the petitioner, the law officer of the S.E.C.P. And perusal of the petition, it appears that prior to filing of the petition, the petitioner has made efforts to inform its shareholders and creditors towards proposed reduction of its shares capital No objection has been received, other than that of S.E,C.P-. The documents annexed with the petition are sufficient to prove that shareholders have consented to the reduction, the creditors have also no objection and the financial position of the petitioner is sound and secured.
13. With the assistance of the learned counsel I have perused various statements and documents, which satisfactorily shows that financial position of the company, prior to and even after proposed reduction of 2/3rd paid up share capital will remain sound and none of the shareholder or the creditor is likely to suffer, rather the shareholders will get return of amount without affecting their voting strength and interest in the petitioner.
14. Keeping in view above submissions by the learned counsel for the petitioner, as well as scrutiny of the documents filed alongwith this petition, I hereby allow the prayers (a), (b) and (c) of this petition which have also been reproduced above.