AGM and members..

[tahmans]

As per the companies ordinance, a public LISTED company requires atleast 3 members and 7 directors to operate..

question 1- If there are 3 members, how can there be 7 directors?? so effectively, for a public listed company, there should be atleast 7 members all of whom are directors for it to commence....this means initially the subscribers to the memorandum should be 7... true? if not, where am i wrong?


For an AGM, a public listed company requires 10 members present personally having atleast 25% voting power personally or in proxy..

question 2- If there are 7 directors (or 3 members), how can the AGM be held, as the quorum would not be there..the 10 members requirement would not be fulfilled..??

[student_of_law]

A very good analysis - really appreciable.

Regarding first, justification may be given that, a company is not a listed company since its incorporation. It has to take steps afterwards for getting listed at stock exchange. So there is no need of having seven subscribers at the beginning. Many companies decide to get listed after several years of commencement of business, so law has rightly not imposed the requirement of seven members at the time of incorporation. If any company is certain to go into listing just after incorporation, it is not debarred from having seven subscribers to its memorandum of association. Otherwise, increasing number of members is an option always open for companies.

However, your second objection with respect to s.160(2) is very right. It provides quorum of at least ten members for AGM, but no where in the Ordinance, it has been provided that Listed company should have ten members. In section 160(2) amendment was made in 2002 whereby figure of at least 3 members was substituted with 10. But no corresponding amendment was made in s.47 which provides minimum number of members.

Another interesting conflict, is in s.305(d). It says, that where number of members of a public company is reduced below 7, it may be wound up by the Court. Though, unlisted/unquoted public companies only need three members u/s 15.

Actually minimum number of members required for a public company was seven since 2002. In 2002 amendment was brought in s.15 and this was reduce to three by amendming s.15. But no corresponding amendment was made in s.305.

Conflict remains where amendments are drafted, reviewed and passed by incompetent people.

[bilalfca]

salam

i have a different opinion..

practically, a Listed Co. will gonna float it shares in Stock Exchange so it ll definitely get applications from a large no. of people.. So the Co. will definitely have more than 10 members (to which the Co will allot shares) to held its AGM!!

Moreover, keep in mind Sec 146... Commencement of Business!

So when u read Sec 146 and other relevant Sections of CO 1984, it doesn't seems conflicting as per my understanding..

Regards!

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by bilalfca</i>
<br />salam

i have a different opinion..

practically, a Listed Co. will gonna float it shares in Stock Exchange so it ll definitely get applications from a large no. of people.. So the Co. will definitely have more than 10 members (to which the Co will allot shares) to held its AGM!!

Moreover, keep in mind Sec 146... Commencement of Business!

So when u read Sec 146 and other relevant Sections of CO 1984, it doesn't seems conflicting as per my understanding..

Regards!
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Listed company enjoys good credit rating, banks do not ask for personal guarantees from their directors, though generally rate is high however they have certain other tax benefits. It is quite possible that a seven memberse company may go into listing but does not offer shares for sale. Further , it is common that a company goes into listing for issue of new capital but could not float IPO for next two years for any contingency.

Law has to address all the situations and different provisions should be in harmony with one another. Inconsistencies are referred to by the author are absurdities in law. Such inconsistencies are called bad draftmanship all over the legal world. This inconsistency was not part of original law, rather in 2007 through reckless amendment change was made. Originally three members were required to conduct meeting and same was the requisite number for members. Then only quorum was changed without changing number of meeting.

You have said s.146 and other relevant sections have made you understand that there is no such conflict. I would be pleased if you share with the readers in detail that which sub-section of s.146 and which other RELEVANT SECTION has made you understand that there is no conflict. WE would be grateful if instead of giving vague verdict you may share your logic train leading to your judgment/understanding by quoting RELEVANT SECTIONS and their contents.

[bilalfca]

Well Mr Student of Law, would u mind telling me a Public Listed Co name, which is not having or does not have more than 7 members for 2 years?

Now

Sec 146(1)c

No amount is or may become liable to be repaid to "Applicants" for any shares or ... offered for public subscription. (A public listed co has to raise Minimum subscription before commencement of business... (The directors are not trillionaire unlike u) They have to float shares to raise min. subscription so the Co will definitely have more not less than 10 members in practical sense)

Sec 158(1)

Every Co. (including a Public Listed Co) shall hold an AGM within 18 months of its incorporation........ (So a public listed co must have not less than 10 members having not less than 25% voting power to hold that AGM.)

Theoretically what u think is possible but in real sense, i'm afraid, its not...

Student of "Law" u need some additional insight of LAW..

Regards!

[bilalfca]

One more thing, I will clarify your doubts in just a sentence.

Its Public Listed Co's responsibility to have not less than 10 members having not less than 25% Voting Power. Thats it.

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by bilalfca</i>
<br />Well Mr Student of Law, would u mind telling me a Public Listed Co name, which is not having or does not have more than 7 members for 2 years?

Now

Sec 146(1)c

No amount is or may become liable to be repaid to "Applicants" for any shares or ... offered for public subscription. (A public listed co has to raise Minimum subscription before commencement of business... (The directors are not trillionaire unlike u) They have to float shares to raise min. subscription so the Co will definitely have more not less than 10 members in practical sense)

Sec 158(1)

Every Co. (including a Public Listed Co) shall hold an AGM within 18 months of its incorporation........ (So a public listed co must have not less than 10 members having not less than 25% voting power to hold that AGM.)

Theoretically what u think is possible but in real sense, i'm afraid, its not...

Student of "Law" u need some additional insight of LAW..

Regards!
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

On what basis you think that minimum subscription should always be in trillion? Why it cannot be one million? Section 146 (1)(c) has nothing to do with minimum subscription. Secondly, minimum subscription amount is not achieved after getting listed rather it has to achieved before. Unless, minimum subscription amount is achieved , company cannot offer shares to public. Read s.68(1)

You reliance upon s.146 that deals with issuance of commencement of business certificate, is irrelevant. If you look at Rule 6 (iv) of the Listing Regulations of Karachi Stock Exchange, you will find that a company applying for listing is required to furnish Commencement of Business Certificate along with the other documents. So commencement business certificate stage is already over before applying for listing. (There may be a few exceptions but general rule is before you) Section 146 is irrelevant.

To clear your concept, minimum subscription is raised before getting listed . [s.68(1)]
Commencement of business certificate is obtained before getting listed. [ Rule 6 of KSE Listing Regulations]


You are acting under misconception, that a listed company is a listed company since its incorporation. Every company is incorporated by SECP. Then it may get listed with stock exchange at any time; either within 6 months of incorporation or after 60 years of incorporation.

Further, misconception of yours is that listed company should always have a capital of a trillion rupees. Where you have found written that a company with 1 million rupees paid up capital can't go into listing?

The appreciable point that original author (Tahmans) of this post raised was several inconsistencies in company law, some of them have been caused by reckless amendments. It is an inconsistency that at one place law requiring public limited company, listed and unlisted, to have three members requirement. At another place it is saying ten members would formulate quorum. This is example of bad draftsmanship that will remain so no matter how aggressively, illogically, and by quoting irrelevant provisions of law, you try to defend it.

On one point I agree with you. i.e. your recommendation that "I need some additional insight of law." Yes of course , I fully agree with you , I am a student of law and I need to add to my study of law and insight of law till my last breath for my improvement. Thanks for your advice.

[watson70]

question 1- If there are 3 members, how can there be 7 directors?? so effectively, for a public listed company, there should be atleast 7 members all of whom are directors for it to commence....this means initially the subscribers to the memorandum should be 7... true? if not, where am i wrong?