SECP barred from approving EOGM’s decisionOctober 25, 2014
KARACHI: The Sindh High Court (SHC) barred Securities and Exchange Commission of Pakistan (SECP) from according its approval to decision of the extraordinary general meeting of the Jahangir Siddiqui & Company Limited regarding issuance of right shares.
A single bench headed by Justice Amer Raza Naqvi gave the injunction on lawsuit filed by 10 small shareholders who approached the court to seek recovery of Rs424.94 million paid to the director of the JSCL as advisory fee.
The plaintiffs had claimed that the fee in question paid to Ali Jahagir Siddiqui constitutes about 300 percent of the total expenses of the company. The court had earlier granted an interim stay in respect of such amount on April 9.
During pendency of hearing on the main lawsuit, the plaintiffs again moved the court to stop the JSCL from convening its EOGM, which was scheduled to be held on September 19, to put into effect any decision/approvals taken in the meeting.
According to the minority shareholders an EOGM of JSCL was being convened on September 19 and it has been proposed to empower JSCL to raise its capital by Rs1.144 billion by issuing Class Preference Shares of Rs 10 each.
Moreover, the said notice is extremely cursory and vague in nature and it does not clearly state the benefits that will accrue to the company and also the way and manner in which the funds shall be used to the benefit of the company,” they stated.
Furthermore, the said issuance shall also be detrimental to the interest of the minority shareholders including but not limited to the plaintiffs since a 12% per annum dividend on a cumulative basis shall be paid on the issued preference shared, they added.
The plaintiffs apprehended that if the proposed transaction is allowed the existing majority shareholders or controllers of the company shall ensure that no money is received by the minority shareholders. Therefore, they pleaded to the court to grant a stay against calling of the EOGM, as thousands of the minority shareholders would suffer irreparable loss and the wrongdoers would be allowed to commit another wrong to the company.
The court declared that the stay would remain in field till disposal of a lawsuit.