20000225

Draft rules for floating shares notified

Recorder Report

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has notified draft rules for the companies to float different classes of shares as provided in the amendment of the Companies Ordinance, 1984.

The commission has invited public comments from interested parties for finalising the rules by its Policy Board.

Several countries have different kinds of share capital. In India, these are of two kinds preference shares and equity shares. In England, there are equity shares, preference shares, non-voting shares, redeemable shares, and shares with special rights.

The SECP draft rules suggest non-voting shares with preferential right for dividend. The companies can have different kinds of shares, through a special resolution, which is approved by three-fourths of the members.

The text of the notification reads:

The following draft of the Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000, which are proposed to be made in exercise of the powers conferred by sections 90 and 506 of the Companies Ordinance, 1984 (XLVII of 1984), read with section 43 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) is hereby published as required by sub-section (2) of section 506 of the Companies Ordinance, 1984 (XLVII of 1984) for the information of all persons likely to be affected thereby and notice is hereby given that the draft will be taken into consideration after 14 days of its publication in the official Gazette.

Any objection or suggestion which may be received from any person in respect of the said draft before the expiry of the said period will be considered by the Securities and Exchange Policy Board.

The Companies' Share Capital (Variation

in Rights and Privileges) Rules, 2000

In exercise of the powers conferred by section 90, read with section 506, of the Companies Ordinance, 1984 (XLVII of 1984), and clause (b) of section 43 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), the Securities and Exchange Policy Board hereby makes the following rules, the same having been published previously as required under the said section 506, namely:

The Companies' Share Capital (Variation

in Rights and Privileges) Rules, 2000

1. Short title and commencement: (1) These rules may be called the Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000.

(2) They shall come into force at once.

2. Definitions: (1) In these rules, unless there is anything repugnant in the subject or context,-

(a) "Commission" means the Securities and Exchange Commission of Pakistan; and

(b) "Ordinance" means the Companies Ordinance, 1984 (XLVII of 1984).

(2) All other terms and expressions used but not defined in these rules shall have the same meaning as assigned to them in the Ordinance.

3. Kinds and classes of share capital: (1) A company limited by shares may have more than one kind of share capital and may have different classes of shares under each kind.

(2) Where a company intends to have different kinds of share capital and classes of shares therein, it shall specifically so provide in its memorandum and articles.

4. Nature of rights and privileges: Each kind of share capital of a company and class or classes of its shares, if any, as specified in the memorandum and articles may have different rights and privileges, which shall be provided in the articles. The variation in the rights and privileges of the shareholders in a kind of share capital or class or classes therein may be of the nature, including the following:

(a) Different voting rights; voting rights disproportionate to the paid-up value of shares held; voting rights for specific purposes only; or no voting rights at all.

(b) Different rights for entitlement of dividend, right shares or bonus shares or entitlement to receive the notices and attend the general meetings.

(c) Rights and privileges for indefinite period, for a limited specified period or for such periods as may from time to time be determined by the members through special resolution.

5. Conditions: (1) No company shall issue further share capital of any kind or class carrying different rights and privileges except with prior approval of the Commission to be obtained on the basis of a special resolution.

(2) Offer of further share capital of any kind or class carrying different rights and privileges shall be made to each existing shareholder proportionately without any discrimination.

(3) If any of the existing shareholders declines to accept the offer made under sub-section (2) above, the shares so declined shall be disposed of by the directors in such manner as may be provided in the articles or in accordance with the special resolution passed by shareholders from time to time.

(4) In case share capital of a company has different classes having different rights and privileges and the same is to be offered to the general public, the fact should be distinctly mentioned in the offering document and the difference in the rights and privileges of any class of share capital should be conspicuously mentioned in the offering document/prospectus, etc.