Huafa Urban Operation Gwadar (PVT.) Limited V. Securities and Exchange Commission of Pakistan,

PLJ 2025 Quetta 124 Present: G UL HASSAN TAREEN , J. HUAFA URBAN OPERATION GWADAR (PVT.) LIMITED --Petitioner versus SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN--Respondent C.O.P. No. 01 of 2024, decided on 20.5.2024. Companies Act, 2017 (XIX of 2017) -- ----Ss. 19 & 89--Reduction of share capital --Confirmation of --Convening of EGM --Registration of resolution-- Financial statement --No objection was raised by SECP --Direction to --Decline in business --The resolution was registered with SECP under Form 26-- The financial statements revealed that petitioner had a substantial balance which exceeded current liabilities being accrued expenses and others payables --The petitioner had capacity to pay of all its liabilities --Petitioner was authorized by Article 19 of Articles of Association and had passed a special resolution in its EGM, thus petitioner might reduce capital under Section 89, Act 2017--The petitioner had complied with all legal formalities, consequently, there was no impediment to grant that petition - -The petitioner could reduce its paid- up capital as per special resolution which reduction stand confirmed --Petition allowed. [Pp. 127 & 128] A, B & C 2022 CLD 1999 ref. Syed Iqbal Shah, Advocate for Petitioner. Mr. Abdul Rehman Khan Tareen, Deputy Registrar, Securities and Exchange Commission of Pakistan (SECP) for Respondent. Date of hearing 10.5.2024. JUDGMENT This petition filed under Section 89 of the Companies Act, 2017 (‘Act 2017’), for confirming the reduction of share capital, carries the following prayer clause: “i. grant confirmation and approval for reduction of Capital of petitioner/Company; i. direct the respondent for initiating necessary process for recording of said reduction; ii. any such order as this Hon’ble Court shall deem fit.”

2. I have heard learned counsel for the petitioner and Deputy Registrar, SECP and gone through the available record.

3. The petitioner -company was incorporated on 22 January 2001 by the SECP as Private Limited Company by shares under Section 16, the Act 2017, having its object to layout, construct, build, demolish and do any other work in connection with any infrastructure and other allied objects, as disclosed in the Memorandum of Association of petitioner. It has an Authorized and paid- up capital of Rs. 2,300,000,000/ - at its incorporation divided into 23,000,000 shares of Rs. 100/ - each. Petitioner made attempts to acquire capital from its parent company, Zhuhai Huafa Urban Operations and Investment Housing Co. Ltd, however, on account of business crunch in China due to the Corona Pandemic, resulting in their inability to fully subscribe to the paid-up capital and was only able to subscribe to a partial amount of Rs. 552,111,600/ -divided into 5,521,116 share of Rs. 100/ -each. The parent company in China has experienced a decline in business, the directors have decided to reduce its paid- up capital from Rs. 2,300,000,000/ - to Rs. 552,111,600/ -divided into 5,521,116 shares of Rs. 100/ -each.

4. The Article 19 of the Articles of Association allows the petitioner company to reduce its share capital subject to confirmation by the Court. Article 19 reads as under: “19. The company may, by special resolution reduce its share capital in any manner and with, and subject to confirmation by the Court and any incident authorized and consent required, by law.”

5. The petitioner convened Extraordinary General Meeting (EGM) on 15 December 2023 after issuance of notice dated 22 November 2023. In EGM, on the recommendation of shareholders, the special resolution was passed in term of Section 89, the Act 2017 and resolved as under: “RESOLVED THAT the paid -up capital of the company be and is hereby reduced from Rs. 2,300,000,000/ -(Pak Rupees Two Billion Three Hundred Million) divided into 23,000,000 Ordinary Shares of Rs. 100/ -each to Rs. 552,111,600/ -(Rupees five hundred and fifty -two million one hundred and eleven thousand and six hundred) divided into 5,521,116 / -ordinary shares of Rs. 100/ -each. FURTHER RESOLVED THAT shares of each member be reduced in proportion to their holding as under: Name of shareholder No. of shares held at present No. of shares reduced No. of shares after proposed reduction of capital. Chen Sicong 1 0 1 Wang Shi 1 0 1 Zhuhai Huafa Urban Operations & Investment Holding Co. Ltd. 22,999,998 17,478,884 5,521,114 Total 23,000,000 17,478,884 5,521,116 FURTHER RESOLVED that Mr. Waqar Anwer, Head of Legal of the company be and is hereby authorized on behalf of the Company and all the shareholders to complete all the legal formalities necessary in this respect to file the Petition before the Honorable High Court at Balochistan for reduction of capital. He is further authorized on behalf of company and all the shareholders to institute, file, sign and verify any petition, appeal, application, reply, counter affidavit, rejoinder, objection etc. in the said proceedings, to institute, file, sign any appeal, review and revision against any order arising out of the said legal proceedings, to swear affidavits and counter affidavits, produce documentary and/or oral evidence and to withdraw the case; to engage any counsel/advocates and to sign power of attorney for the said purpose on behalf of company and to do all other acts that are necessary and incidental to all the above.”

6. The resolution dated 15 December 2023 was registered with the SECP under Form 26 dated 21 March 2024. The financial statements as available of 30 June 2023, reveal that petitioner has a substantial balance in the sum of Rs. 3,278,206/ -which exceeds the current liabilities being accrued expenses and others payables in the sum of Rs. 95,000/ -. The petitioner has the capacity to pay of all its liabilities.

7. The petition was advertised in daily ‘Jang’, Quetta, and daily ‘The Balochistan Times’, in terms of Rules 19 and 76 of the Companies (Court) Rules, 1997, for the hearing fixed on 26 April 2024, but none has entered appearance to oppose or contest the proposed reduction. A notice was also issued to the Securities and Exchange Commission of Pakistan who filed para - wise comments and did not raise an objection on the proposed reduction.

8. Petitioner is authorized by Article 19 of the Articles of Association and has passed a special resolution in its EGM, thus the petitioner may reduce its capital under Section 89, the Act 2017. The petitioner has complied with all legal formalities, consequently, there is no impediment to grant this petition. Reliance is placed on the case reported as Ali Hussain Rajabali Limited (2022 CLD 999), the relevant therein is reproduced hereunder: “10. In case for confirmation of resolution of reduced share capital the question for consideration are, should the Court refuse its sanction to the reduction out of regard to the interest of those members of the public who may be induced to take shares in the company; is the reduction fair and equitable between different classes of shareholders; whether the reduction is shared by all; and is it designed to work justly and equitably and whether it does not involve diminution of the liability in respect of unpaid capital or payment of any shareholder of any paid up capital; and there is evidence regarding loss of capital and non-representation of available assets. None of these impediments exist in the case of the petitioner’s company and consequently in view of above proposed reduction in the share capital, as resolved by the company itself, apparently seems to be just, fair and reasonable and not likely to adversely affect the interests of shareholders who have themselves resolved to the approval of this scheme of reduction. The proposal for reduction of share capital is therefore confirmed in terms of the requirements of Companies Act, 2017.”

9. Thus, the petition is allowed with direction that the petitioner could reduce its paid- up capital from Rs. 2,300,000,000/ - of Rs. 100/ - each to Rs. 552,111,600/ -divided into 5,521,116/ - of Rs. 100/ -each as per special resolution dated 15 December 2023 which reduction stands confirmed. (Y.A.) Petition allowed