NOTICE UNDER SUB-SECTION (1) OF SECTION 472 OF THE COMPANIES ORDINANCE, 1984.
WHEREAS, Messrs Chaudhury Muhammad Eusaff, Chaudhury Muhammad Sadiq, Chaudhury Khudadad and Chaudhury Waqar Sadiq, directors of M/S Amin Spinning Mills Limited (the "Company") claiming to hold about 25% of the share capital of the Company in their names and in the names of their family members have represented to this Commission that the majority of the directors have committed gross violations while proposing increase in the paid up capital of the Company through further issue of 4.6575 million ordinary shares of Rs. 10 each of the Company to be offered to the existing members of the Company whose names would appear on the Register of Members as on the book closure date announced by the Company.
2. AND WHEREAS, it has also been represented to this Commission that the right issue shall not bring any fresh equity to the Company and it is an attempt to convert directors loan into share capital in order to become extreme majority, to further consolidate their shareholdings and to keep management control over the Company which would jeopardize the interest of the other shareholders of the Company.
3. AND WHEREAS, the documents submitted by the Company regarding the offer of new shares indicated that the decision to offer right shares was made by the Board of Directors in their adjourned meeting held on June 25, 2001 initially convened on June 21, 2001. The following directors attended both the meetings: ?? Khawaja Muhammad Jahangir, Chief Executive ?? Khawaja Muhammad Jawed, Director ?? Khawaja Muhammad Kaleem, Director ?? Khawaja Muhammad Tanveer, Director ?? Khawaja Muhammad Nadeem, Director
4. AND WHEREAS, the following resolution was passed by the directors while proposing offer of new shares: "Resolved that the paid up capital of the Company be raised from Rs. 51.750 million to Rs. 98.325 million by issuing 4.6575 million shares of Rs. 10 each of the value of Rs. 46.575 million by giving an opportunity to the shareholders to subscribe the shares in the Company in the ratio of nine right shares for every ten shares held (90%) in accordance with the provisions of Section 86 of the Companies Ordinance, 1984 read with rule 5 of the Companies (Issue of Capital) Rules, 1996. If any shares are not taken up by the existing shareholders, these shares shall be allotted by the Board of Directors in any manner they deem fit or they may subscribe to such shares themselves by conversion of deposit for shares and directors loan, subject to compliance of all legal formalities".
5. AND WHEREAS, the information provided by the Company to the Commission vide letter dated July 13, 2001 revealed that the Company had received loans from the following directors: ?? Khawaja Muhammad Jahangir, Chief Executive ?? Khawaja Muhammad Jawed, Director ?? Khawaja Muhammad Kaleem, Director ?? Khawaja Muhammad Tanveer, Director ?? Khawaja Muhammad Nadeem, Director Rs. 2.654 million Rs. 10.734 million Rs. 77.928 million Rs.
0.013 million Rs. 0.012 million
6. AND WHEREAS, it is evident from the above information that the directors who have passed the aforesaid resolution for offer of new shares were interested to the extent of conversion of their loan into the right shares in case these are not taken up by the existing shareholders.
7. AND WHEREAS, the aforesaid directors have entered into an underwriting agreement with the Company which was signed on behalf of the Company by Khawaja Muhammad Jahangir, Chief Executive whose authority to sign the underwriting agreement has not been made available to the Commission.
7. AND WHEREAS, the provisions of Sub-section (1) of Section 214 of the Ordinance provides that every directors of a Company who is in any way, whether directly or indirectly, concerned or interested in any contract or arrangement entered into or to be entered into, by or on behalf of the Company shall disclose the nature of his concern or interest at a meeting of the directors.
8. AND WHEREAS, the provisions of Sub-section (1) of Section 216 of the Ordinance provides that no director of a Company shall as a director, take any part in the discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the Company, if he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement, nor shall his presence count for the purpose of forming a quorum at the time of any such discussion or vote; and if he does vote, his vote shall be void.
9. AND WHEREAS, clause 99 of the Articles of Association of the Company provides that " if as a consequence of the directors or some of them being concerned or interested in any contract or arrangement, a quorum is not available for the transaction of any business relating thereto on account of the provisions of Section 216 of the Ordinance, such business shall be referred to the Company in General Meeting whose decision shall be carried into effect."
10. AND WHEREAS, prima facie, the resolution for the conversion of loan into the right shares is not a valid resolution because it was passed by the directors who are interested in the conversion of their loan into the right shares.
NOW THEREFORE, under the aforesaid circumstances, you are hereby called upon in terms of Sub- section (1) of Section 472 of the Ordinance, to undo the aforesaid irregularities within thirty days of the date of this notice. Please note that the conversion of directors' loan on the basis of resolution passed by the interested directors would be unlawful.
In case of non-compliance, the Commission would be constrained to take action in terms of provision of Section 495 of the Companies Ordinance, 1984.
This notice is being issued without prejudice to any other provisions under which action may be taken in respect of the default as aforesaid.
The receipt of this notice must be acknowledged within ten days of the date of this notice.