Karachi: Sindh High Court on Friday ordered that public offer made by Bermuda-based Greentree Holdings to acquire controlling shares of TRGP stands abated and directed manager to the offer AKD Securities to return the shares tendered by shareholders of TRGP to the respective shareholders.
The order came on application filed by the former CEO of TRGP Ziaullah Khan Chisti who challenged the public offer and purchase of 35 percent additional shares of TRGP to control the company as unlawful.
Greentree had made a public announcement of offer under Regulation 7 of the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations 2017 (Takeover Regulations), read with section 1112 of the Securities Act 2015, to acquire an additional 35% voting shares of TRGP to take its shareholding to 65% thus giving it control of TRGP.
Petitioner counsel submitted that all shares of TRGP purchased by Greentree and now the public offer as well, is funded by TRGP‘s own money i.e. financial assistance‘ by TRGP to buy its own shares which is prohibited by section 86(2) of the Companies Act 2017. The Petitioner submitted that such maneuver by directors of TRGP to deliver control of the company to Greentree is unlawful, fraudulent and oppressive of the members of TRGP.
SHC’s single bench headed Justice Adnan Iqbal Chaudhry after hearing the arguments of the counsel observed that it is equally frivolous to argue that when the Board of TRGP violates the statute, diverts the funds/assets of a public-listed company to create the largest shareholder (Greentree), and then maneuvers its affairs to deliver control to such shareholder then that does not oppress other shareholders who could have been contenders for control on a level-playing field.
The court observed that acts committed by the Board of TRGP in collusion with the largest shareholder i.e. Greentree, do oppress minority shareholders such as the petitioner who are in the category of substantial shareholder‘ as defined in section 2(7)(d) of the Companies Act i.e. holding an interest of 10% or more in the company.
The court observed that once oppression of minority shareholders is established, a case for winding-up stands made out in view of clause (g)(iii) of section 301 of the Companies Act and the court may then consider corrective orders instead under sub-section (2) of section 286.
The court observed that violation of section 86(2) of the Companies Act to divert the funds/assets of the company for no apparent gain to the company; and the deliberate violation 158(2) of the Companies Act to delay election of directors at the behest of the largest shareholder (Greentree), is also mismanagement by the Board of TRGP (separate from oppression) i.e. conducting the affairs of TRGP in an unlawful and fraudulent manner within the meaning of section 286.
The court observed that these become grounds for winding-up the company under clauses (g)(i) and (g)(iv) of section 301 i.e. where the company has been carrying on, unlawful or fraudulent activities; and is being run and managed by persons who commit fraud, misfeasance or malfeasance in relation to the company.
The court observed that affairs of TRGP are being conducted in an unlawful and fraudulent manner and in a manner oppressive to members such as the petitioner, the case falls for corrective orders under sub-section (2) of section 286 of the Companies Act.
The court ordered that shares held by Greentree in TRGP are declared to be the property of TRGP which shall be deemed to have been purchased by TRGP from its shareholders under section 88 of the Companies Act and held as treasury shares which are subject to the conditions set-out in sub-section (3) of section 88.
The court directed Central Depository Company of Pakistan Ltd to amend the central depository register accordingly.
The court directed TRGP to amend the register of its members accordingly and make other consequential alterations to its record.
The court ruled that the public offer made by Greentree to acquire controlling shares of TRGP stands abated and the manager to the offer AKD securities is directed to return the shares tendered by shareholders of TRGP to the respective shareholders.
The court directed board of directors of TRGP to forthwith issue notice for calling an extra-ordinary general meeting of the company for electing directors. The court observed that board of directors of TRGP constituted after election shall then decide whether to retain the treasury shares, to cancel them or to sell them as per Regulation 13 of the Listed Companies (Buy-Back of Shares) Regulations, 2019; provided that, where the treasury shares exceed the limit fixed by Regulation 9, the shares exceeding such limit shall be cancelled or sold.
