10-02-2009, 07:12 PM
Dear KamranACA,
I agree with you there is no specific law about the issuance of warrants in Pakistan but we can derive the requirements of issing warrants from the provisions of CO1984 and the Rules issued under this ordinance.
Section 90 of the CO1984 provides
"A company limited by shares may have different kinds of share capital and classes therein as provided by its memorandum and articles
Provided that different rights and privileges in relation to the different classes of shares may only be conferred in such manner as may be prescribed."
In the above section, there is room in respect of different classes of share capital. Therefore, warrant may be considered as one class of share capital in which shares will be issued at future date at determined or determinable price.
Section 86 (1) last para states about the further issuance of shares other than right shares;
"Provided that the Federal Government may, on an application made by any public company on the basis of a special resolution passed by it, allow such company to raise its further capital without issue of right shares."
For the above purpose, if provided in the memordum and articles of the the Company, special resolution can be passed in respect of issuance of warrants (not being right shares).
If memorandum does not state about the warrant as class of share capital then same can be altered as provided in the Ordinance before passing special resoulution.
On the basis of special resolution, FG / SECP may allow to make the issue.
Now come to your point about the return / dividend /interest (cost of utilization of finance) which we say in daily life that nothing is free in our life. -)
While issuing warrants, these may be issued at below the market value (determined by the investor by statistical calculations etc.) keeping in view the free reserve limits of premium / discount to be charged on issuance of capital under the issuance of capital Rules 1996.
I think above procedure may be followed and warrants can be issued in Pakistan remaining in the boundries of law. Comments will be welcomed.
You have stated in your earlier post that call/ put Options may be used for this purpose. But I think this deal would be different as options do not not have dilutive effect on EPS because options are traded for the share capital already issued while in case of warrants share capital will be issued in future and this will be dilutive.
Regards,
*
think warrants can be issued in Pakistan
I agree with you there is no specific law about the issuance of warrants in Pakistan but we can derive the requirements of issing warrants from the provisions of CO1984 and the Rules issued under this ordinance.
Section 90 of the CO1984 provides
"A company limited by shares may have different kinds of share capital and classes therein as provided by its memorandum and articles
Provided that different rights and privileges in relation to the different classes of shares may only be conferred in such manner as may be prescribed."
In the above section, there is room in respect of different classes of share capital. Therefore, warrant may be considered as one class of share capital in which shares will be issued at future date at determined or determinable price.
Section 86 (1) last para states about the further issuance of shares other than right shares;
"Provided that the Federal Government may, on an application made by any public company on the basis of a special resolution passed by it, allow such company to raise its further capital without issue of right shares."
For the above purpose, if provided in the memordum and articles of the the Company, special resolution can be passed in respect of issuance of warrants (not being right shares).
If memorandum does not state about the warrant as class of share capital then same can be altered as provided in the Ordinance before passing special resoulution.
On the basis of special resolution, FG / SECP may allow to make the issue.
Now come to your point about the return / dividend /interest (cost of utilization of finance) which we say in daily life that nothing is free in our life. -)
While issuing warrants, these may be issued at below the market value (determined by the investor by statistical calculations etc.) keeping in view the free reserve limits of premium / discount to be charged on issuance of capital under the issuance of capital Rules 1996.
I think above procedure may be followed and warrants can be issued in Pakistan remaining in the boundries of law. Comments will be welcomed.
You have stated in your earlier post that call/ put Options may be used for this purpose. But I think this deal would be different as options do not not have dilutive effect on EPS because options are traded for the share capital already issued while in case of warrants share capital will be issued in future and this will be dilutive.
Regards,
*
think warrants can be issued in Pakistan
