MERGER ORDER ABID AZIZ SHEIKH, J.---This is a petition under sections 284 to 288 of the Companies Ordinance, 1984 ("Ordinance") seeking sanction of Scheme of Arrangement for amalgamation between PRD (Pvt.) Limited (Petitioner No. 1) ("Transferor Company") and City Housing (Pvt.) Ltd. (Petitioner No.2)
("Transferee Company").
2. The said Scheme has been approved by the Board of Directors, as well as, share holders of the Companies in Extra Ordinary General Meetings held on 15.9.2014.
OBJECT OF THE SCHEME
3. The principal object of this Scheme is to effect a scheme of merger between PRD and City Housing through the transfer to and vesting in City Housing of the whole undertaking of PRD, in consideration whereof the allotment of fully paid ordinary shares of City Housing to the registered holders of the shares in PRD, in lieu of the shares of PRD held by them and the dissolution of PRD without winding up.
STRUCTURE OF THE COMPANIES
4. Both the Companies are Private Limited Companies. Authorized capital of the Transferee Company is Rs.1,000,000/- divided into 10,000/- ordinary shares of Rs.100/- each of which 600 shares of Rs.100/- each are fully paid in cash. The authorized capital of the Transferor Company is Rs.1,00,00,000/- divided into 100,000/-ordinary shares of Rs.100/- each, of which 100,000/- shares of Rs.100/- each are fully paid in cash.
BENEFITS OF MERGER
5. (i) Resource Mobilization: The business set up as a single unit would be enlarged with a stronger equity and a larger asset base, more opportunities and options for deployment of funds.
(ii) Economy of Scale: The major contribution to profitability will arise from economy of scale.
Further; reduction in operating costs is projected immediately upon merger.
CONSIDERATION/SWAP RATIO
6. In pursuance to paragraph No.VI of the Scheme, the consideration and the manner in which such consideration shall be settled for the Scheme of Merger is that:-
(i) Consideration for the transfer to and vesting in City Housing of PRD undertaking, City Housing shall issue at par and allot ordinary shares of Rs.100/- each of City Housing credited as fully paid up to the persons who on a day to be fixed by the Directors of City Housing after the completion date (the record date) are registered holders of the ordinary shares in PRD and such allotment shall be made on following terms and conditions:-
(a) In respect of every one (1) share of Rs.100/- each in PRD, there shall be allotted One (1) ordinary share of Rs.100/- each of City Housing.
(b) All entitlements of the registered holders of the ordinary shares of PRD to the ordinary shares of City Housing shall be determined in the proportion aforesaid, Fractional shares shall not be issued.
All fractions less than a share shall be consolidated into whole shares which shall be allotted to the secretary of City Housing upon trust to sell such shares to any of the registered holder of ordinary shares of PRD and to pay the net sale proceeds realized (less the expenses of sale) to those of the registered holders of the ordinary shares of PRD who are entitled to fractions in proportion to their respective fractional entitlement.
(ii) Seven (7) days, notice at least shall be given of the Record Date to the registered holders of the ordinary shares of PRD on the Completion Date. Such notice shall specify the date by which such holders of the ordinary shares of PRD shall deliver to City Housing for cancellation of all share certificates representing the ordinary shares in PRD held by them, and such share certificates shall be delivered to City Housing on or before that date. -
(iii) That share certificates relating to issued and paid up ordinary shares of PRD, held by the registered holders of such shares on the Record Date shall, as at the Record Date, stand cancelled and upon delivery to City Housing of the share certificates in the aforesaid manner shall entitle each such shareholder of the ordinary shares of PRD to share certificate of City Housing for the number of fully paid shares in City Housing to which such registered holders of the ordinary shares of PRD are entitled in accordance with Clause VI(1)(a).
(iv) The allotment of the ordinary shares of City Housing in accordance with Clause VI(1)(a) hereof shall be made by City Housing within 30 days from the Record Date. The share certificates for such shares shall be made ready for delivery as soon as practicable thereafter and notice of their readiness for delivery shall be given to the persons entitled thereof in the manner provided in articles of association of City Housing. Share certificates not collected within the time specified in any such notice shall be sent by registered post in prepaid envelopes addressed to the persons entitled thereto at their respective registered addresses.
(v) Upon the allotment of the ordinary shares of City Housing to the holders of the ordinary shares of PRD in the manner aforesaid, all share certificates representing the ordinary shares of PRD shall stand cancelled and the entitlement of the holders of the ordinary shares of PRD shall stand fully satisfied.
(vi) The ordinary shares of City Housing upon issue and allotment pursuant to this Scheme shall rank pari passu with the existing ordinary shares of City Housing in all respects and shall be entitled to all dividends declared after the Completion Date.
PROCESS ADOPTED BY THE COURT
7. Vide order dated 21.1.2015 Rai Muhammad Shehbaz Bhatti, Advocate and Mian Rehman Aziz Chann, Advocate were appointed as chairmen to call and hold Extra Ordinary General Meetings of the petitioner Companies under section 284(1) of the Companies Ordinance, 1984 read with Rules 55 and 61 of the Companies (Court) Rules, 1997. Notices were issued to the Securities and Exchange Commission of Pakistan ("SECP"), Competition Commission of Pakistan ("CCP"). The notices through publication in Daily "Nawa-e-Waqt on 30.01.2015, 03.03.2015, 13.04.2015 and in Daily "Dawn" on 13.02.2015, 06.03.2015 and 16.04.2015 were also issued to creditors, shareholders, stake holder and contributors.
' The Chairmen have submitted their Report dated 04.05.2015 which states that Extra Ordinary General Meetings of the Companies were held on 30.4.2015 wherein the Director/shareholders unanimously approved the said Scheme of Arrangement.
OBJECTIONS TO MERGER
8. Learned counsel for the SECP submits that he has no objection to the instant merger. No one has come forward from the "CCP" or any of the creditors in spite of notice. The learned counsel for the petitioner categorically stated that there are no secured creditors of the petitioner , companies. The NOCs of the unsecured creditors to the sanction of the Scheme of Arrangement are on the file.
STAMP DUTY
9. During the course of proceedings question of stamp duty under the Stamp Act, 1899 ("Act") has not been raised by any of the parties. However, if the concerned authorities under the Act discover that any immovable property is being transferred under the sanction of the scheme, they are free to raise the question regarding imposition of stamp duty in accordance with law.
SANCTION OF SCHEME OF ARRANGEMENT 10, The Scheme of Arrangement is not prejudicial to the members and creditors of the Companies. I am, therefore, satisfied with the merits of Scheme which is placed on the record as Annexure "E" and has been duly stamped and signed by the Court Associate of this Court. The Scheme is, therefore, sanctioned and will take effect in terms of Clause X(7) of the Scheme.
11. Subject to above, it is further ordered:-
(i) That the Undertaking of the Transferor Company shall stand transferred to the Transferee Company as provided in the Scheme;
(ii) The Transferee Company shall allot shares in lieu thereof, according to the Scheme;
(iii) The legal proceedings pending by or against the Transferor Company to the extent of Transferor Company shall be continued by or against the Transferee Company;
12. Petitioners Nos. 1 and 2 are directed to submit certified copy of this Order with the SECP within 30 days in terms of section 284(3) of the Companies Ordinance, 1984.
13. This Scheme of Arrangement is duly sanctioned for the above reasons and shall be effective in terms of Clause X(7) of the Scheme.