The Securities and Exchange Commission of Pakistan (SECP) has empowered listed companies to purchase their own shares on fulfilment of proposed conditions of the Companies Bill 2015. The draft of the Companies Bill 2015 issued by the SECP has introduced a new section 91 to explain the power of a company to purchase its own shares.
According to the new law, notwithstanding anything contained in the Companies Act or any other law, for the time being in force, or the memorandum and articles, a listed company may, subject to the provisions of this section and the regulations specified in this behalf, purchase its own shares.
The shares purchased by the company may, in accordance with the provisions of this section and the regulations, either be cancelled or held as treasury shares. The shares held by the company as treasury shares shall, as long as they are so held, in addition to any other conditions as may be specified, be subject to the following conditions:
The voting rights of these shares shall remain suspended and no cash dividend shall be paid and no other distribution, whether in cash or otherwise of the company's assets, including any distribution of assets to members on a winding up shall be made to the company in respect of these shares. Provided that nothing in this sub-section shall prevent-an allotment of shares as fully paid bonus shares in respect of the treasury shares and the payment of any amount payable on the redemption of the treasury shares, if they are redeemable.
The Board of Directors shall recommend to the members purchase of the shares. The decision of the board of directors shall clearly specify the number of shares proposed to be purchased, purpose of the purchase ie cancellation or holding the shares as treasury shares, the purchase price, period within which the purchase shall be made, source of funds, justification for the purchase and effect on the financial position of the company.
The purchase of shares shall be made only under authority of a special resolution. The purchase of shares shall be made within a period as specified in the regulations. The proposal of the board of directors to purchase shares shall, on conclusion of the board's meeting, be communicated to the Commission and to the stock exchange on which shares of the company are listed. The purchase of shares shall always be made in cash and shall be out of the distributable profits or reserves specifically maintained for the purpose, it maintained. It said that the purchase of shares shall be made either through a tender offer or through stock exchange as prescribed by regulations.
(10) The company may dispose of the treasury shares as prescribed by regulations.
Where a purchase of shares has been made under this section, the company shall maintain a register of shares so purchased and enter therein the particulars including number of shares purchased; consideration paid for the shares purchased; mode of the purchase; the date of cancellation or re-issuance of such shares; number of bonus shares issued in respect of treasury shares and number and amount of treasury shares redeemed, if redeemable. A person guilty of an offence under this section shall be liable on conviction to a fine of level 1 on the standard scale and shall also be individually and severally liable for any or all losses or damages arising out of such contravention, it added.
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