Company

Question as to whether presidents' non-disclosure of interest expressed by the company in acquiring the group constituted a civil fault and if so, then what was the appropriate remedy.

Identity of a company as a juristic person and consequently its assets are separate from the identity and assets of its shareholders.

Instances of piercing or lifting the veil of incorporation are by way of an exception to the general rule that at law a company is a person separate and distinct from its shareholders.

Number of circumstances are by now recognized as grounds for lifting the veil of incorporation, including the circumstance where the arrangement between the company and the shareholders is such which makes the business, the business of the shareholders

At the same time, actual instances of lifting the veil of incorporation are few and far between

Whether the Court lifts the veil of incorporation or not, actually depends on the facts and circumstances of each case.

For a court dealing with company matters, if the thing complained before it of was a thing which in substance majority of the company was entitled to do, or if something had been done irregularly which majority of the company was entitled to do regularly, or if something had been done illegally which the majority of the company was entitled to do legally, then there existed no use for litigation about such matter as ultimate end of such matters was only that a meeting had to be called, and then ultimately majority got its wishes

Individual shareholder could not bring an action before courts to complain of an irregularity (as distinct from an illegality) in conduct of the company's internal affairs provided that such irregularity was one which could be cured by a vote of company in a general meeting

Court was to be reluctant to give relief where to do so would provided no concrete result.

Scope of reflective loss principle provided by Lord Bingham in Johnson v. Gore Wood & Co [2002] 2 AC 1.

Whether rule against reflective loss applied to claims made by creditors against companies or was the rule limited to claims by shareholders for diminution in value of shares or dividends.

Antonym to marriage is the divorce, and the term "corporate divorce" is used to define how previously merged companies are separated

De-merger is a situation where an entity undertakes a reorganization of its operations and structure, leaving its members in the same economic position as they were immediately before the reorganization

Marger is form of structural readjustment for corporations in which a corporate or trust group splits into two or more entities or groups.

Corporate strategy to sell off subsidiaries or divisions of a company is called de-merger.

Action of estimating or fixing the monetary or other value of something, especially by a professional evaluator.

Antonym to marriage is the divorce, and the term "corporate divorce" is used to define how previously merged companies are separated

De-merger is a situation where an entity undertakes a reorganization of its operations and structure, leaving its members in the same economic position as they were immediately before the reorganization

Merger is form of structural readjustment for corporations in which a corporate or trust group splits into two or more entities or groups.

Corporate strategy to sell off subsidiaries or divisions of a company is called de-merger.

Action of estimating or fixing the monetary or other value of something, especially by a professional evaluator.

For a court dealing with company matters, if the thing complained of before it by minority shareholder(s), was a thing which in substance majority of company was entitled to do, or if something had been done irregularly which majority of the company was entitled to do regularly, or if something had been done illegally which majority of company was entitled to do legally, then there existed no use for litigation with regards to such matter as ultimate end of such matter was only that a meeting had to be called, and then ultimately majority got its wishes

Individual shareholder could not bring an action before courts to complain of an irregularity (as distinct from an illegality) in the conduct of the company's internal affairs provided that such irregularity was one which could be cured by a vote of company in general meeting.

For a court dealing with company matters, if the thing complained of before it by minority shareholder(s), was a thing which in substance majority of company was entitled to do, or if something had been done irregularly which majority of the company was entitled to do regularly, or if something had been done illegally which majority of company was entitled to do legally, then there existed no use for litigation with regards to such matter as ultimate end of such matter was only that a meeting had to be called, and then ultimately majority got its wishes

Individual shareholder could not bring an action before courts to complain of an irregularity (as distinct from an illegality) in the conduct of the company's internal affairs provided that such irregularity was one which could be cured by a vote of company in general meeting.

Company is a separate juristic person distinct from its shareholders or directors.

Any director or employee of a company is not personally liable for liability of company even if he acted on behalf of the company, conversely, a company is also not liable for the liability of its directors/employees arising out of an act in their individual capacity

Directors of a company are liable for misappropriation of company funds and other misfeasance but not for ordinary contractual liability of the company

Directors or employees of company cannot be fastened with ordinary contractual liability of the company.

Any director or employee of a company is not personally liable for liability of company even if he acted on behalf of the company, conversely, a company is also not liable for the liability of its directors/employees arising out of an act in their individual capacity

Directors of a company are liable for misappropriation of company funds and other misfeasance but not for ordinary contractual liability of the company

Directors or employees of company cannot be fastened with ordinary contractual liability of the company.

Any director or employee of a company is not personally liable for liability of company even if he acted on behalf of the company, conversely, a company is also not liable for the liability of its directors/employees arising out of an act in their individual capacity

Directors of a company are liable for misappropriation of company funds and other misfeasance but not for ordinary contractual liability of the company

Directors or employees of company cannot be fastened with ordinary contractual liability of the company.

Allegation against accused was that he in connivance with co-accused persons enriched themselves by diverting colossal sums of money received from general public into the account of various companies of which they were directly and indirectly the beneficiary

Held, that persons who were found to be handling the affairs of a corporate and or legal entity in whatever legal attire or facade and carried out any commercial and or other activity which resulted in commission of any wrong or omission would come within the mischief of S. 9 & 10 of the National Accountability Ordinance, 1999 read with Schedule thereto

Said provisions gave sufficient power to NAB authorities to lift the veil of incorporation and trace out the real actors and masterminds behind the alleged offence

In the present case the role of accused was detailed in the investigation report and his name appeared in Form-29 and Form-A of the offending companies

Signatures of accused appeared on documents and cheques of substantial amount deposited in the accounts of offending companies of which the accused was a shareholder

Serious allegations were made against the accuscd including siphoning off and misappropriating colossal sums of money from 10421 members of the public

Accused could not be given the benefit of corporate veil when the National Accountability Ordinance, 1999 empowered the NAB authorities to pierce the veil of incorporation and prosecute the real persons under whose dictate and command affairs of offending corporate entity were conducted and to find out who was the actual beneficiary of crime committed under the Ordinance

Sufficient material was available on record to connect the accused as exercising effective control of the errant companies

Bail granted to accused by the High Court was cancelled in circumstances and orders were given for his immediate arrest. The State v. Haji Kabeer Khan PLD 2005 SC 364; Meeran Bux v. The State PLJ 1986 SC 83; Murad Khan v. Fazal-e-Subhan and another PLD 1983 SC 82 and Nisar Ahmed v.The State and others PLD 2016 SC 11 ref.

Company is a separate juristic person distinct from its shareholders or directors.

"Deferred cost" was a cost that had already been incurred but could not be charged to expense until a later reporting period and in the meantime it appeared on the balance sheet as an asset

Reason for deferring recognition of cost as an expense was that item had not yet been consumed and from a practical perspective it was customary to charge all smaller costs to expense at once, since they would otherwise require too much effort to track on a long-term basis

Immediate charge-off was only practiced when impact on financial results of a business was immaterial and costs of some expenditure may be deferred when generally accepted accounting principles or international financial reporting standards required that be included in costs of a long-term asset and then charged to expense over a long period of time.

When a complainant moved the court for holding a corporate Director personally liable for his oppressive conduct, the court had broad discretion to "make any interim or final order it thinks fit" [section 241(3) of the Canada Business Corporations Act, R.S.C. 1985, c. C-44]

Said remedy was an equitable remedy that sought to ensure fairness and it gave the court broad, equitable jurisdiction to enforce not just what was legal but what was fair

Courts considering claims for oppression should engage in fact-specific, contextual inquiries looking at business realities, not merely narrow legalities

Determining the personal liability of Director [under section 241(3)] required a two-pronged approach

First, the oppressive conduct (of the director) must be properly attributable to the Director because of his or her implication in the oppression; and second, the imposition of personal liability must be fit in all the circumstances

Four general principles should guide courts in fashioning a fit remedy against the oppressive conduct of the Director [under S. 241(3)]

First, the oppression remedy request must in itself be a fair way of dealing with the situation

Holding a Director personally liable may be fair where he or she had derived a personal benefit in the form of either an immediate financial advantage or increased control of the corporation, breached a personal duty or misused corporate power, or where a remedy against the corporation would unduly prejudice other security holders

Said factors merely represented indicia of fairness

Presence of a personal benefit and bad faith remained hallmarks of conduct attracting personal liability, but like the other indicia, they did not constitute necessary conditions

Fairness principle was ultimately unamenable to formulaic exposition and must be assessed in light of all the circumstances of a particular case

Second, any order should go no further than necessary to rectify the oppression

Third, any order may serve only to vindicate the reasonable expectations of security holders, creditors, Directors or officers in their capacity as corporate stakeholders

Oppression remedy protected only those expectations derived from an individual's status as a security holder, creditor, Director or officer, and it should not be used for purely tactical purposes

In particular, a complainant should not be permitted to jump the creditors' queue by seeking relief against a Director personally

Fourth, a court should consider the general corporate law context in exercising its remedial discretion

Director's liability could not be a surrogate for other forms of statutory or common law relief, particularly where it may be more fitting in the circumstances.

Petitioner-University challenged the demand notice for contribution issued by the Employees Old Age Benefit Institution under Employees' Old Age Benefit Act, 1976

Petitioner-University contended that the University being a statutory body being the creation of Abasyn University Act, 2009, no contribution could have been demanded from the University under S.47 of the Employees' Old Age Benefit Act, 1976 and the recovery of certain amount effected from the University were in fact dues of a company, a distinct person, with no concern with the petitioner-University; therefore, said payment had been illegally extracted through coercive measures

Institution raised the objection that the University had the alternate remedy before the Institution under Ss.33, 34 & 35 of the Act and contended that the University, being a profit earning establishment, did not fall within the purview of statutory body as provided under S.47(f) of the Act, and that a case for contribution was made out as the Chancellor of the University was also the Chief Executive of the company that owned and controlled all the assets of the petitioner-University and was being run on profit basis and sought that the Court was to pierce the veil of incorporation of the University and the said Company to see the will and mind behind the legal facade created by establishing the Company and the University, which was meant to circumvent the spirit of the regime provided for paying contribution under Employees' Old Age Benefit Act, 1976

High Court, declaring the petitioner-University as statutory body in terms of S.47(f) of Employees' Old Age Benefit Act, 1976 and as such not liable to any contribution, declared the impugned demand notice as having been issued without lawful authority

Principles.

Agency principles and rules of attribution in relation to contracts to protect third-party interests while dealing with companies and their agents acting within the apparent or ostensible scope of their authority

Actual authority and apparent authority

Principles and comparative statutes and case-law from various jurisdictions, examined.

"Swap ratio" was the exchange ratio in which the shares of a target company were swapped for a share in an acquiring company

Said ratio largely depended on the total value of assets of a target company, though at times it could also depend on negotiations and benefits that acquiring company would be receiving by taking over operations of a target company

"Swap ratio's" rationale was to give investors the same relative value in shares of a new company so that the investment remained relatively unaffected from an investor's perspective

Such arrangement was essential in giving same amount of confidence to investors even after the merger or acquisition went through and at the same time, it was not fair for the investors of the acquiring company to offer high returns for investors of the target company, which is why the "swap ratio" was kept reasonable to maintain an equilibrium between investors of both the companies.

Additional Commissioner of Income Tax considered that the assessment framed under S.59(1) of the Income Tax Ordinance, 1979 on account of claiming exemption by the assessee was erroneous and prejudicial to the interest of revenue; and took action in the case of assessee, as an "Association of Persons"

Taxpayer had contended that Inspecting Additional Commissioner of Income Tax had passed order under S.66-A of the Income Tax Ordinance, 1979 in the case of "Association of Persons" and not in the case of appellant "company"; and since the base of order of the Taxation Officer was non-existent in the case of the appellant company, same was liable to be cancelled instead of setting aside the same

Validity

Order under S.66A of the Income Tax Ordinance, 1979 supported the contention of the appellant company that no order under S.66A of the Income Tax Ordinance, 1979 was passed in its case

Taxation Officer had misdirected himself in starting and finalization of proceedings under S.63 of the Income Tax Ordinance, 1979 in the case of taxpayer company

Very basis of the order under S.63 of the Income Tax Ordinance, 1979 was non-existent and liable to be cancelled and Appellate Tribunal ordered accordingly

Other grounds of appeal were not found necessary to be adjudicated by the Appellate Tribunal.

Company may incorporate in its Memorandum of Association, besides the main object of the company and its ancillary purposes, certain other objects as well which may be independent of its main object/business

Company thus may have a primary object and purpose, but still there may also be several other objects mentioned in the objects clauses, and after proper construction of such objects, by resorting to the relevant rules of interpretation, it should be considered whether those were ancillary to the main object of the company or could be held to be independent of each other

Memorandum of Association of a company should be read and construed liberally and be given a wide meaning through literal interpretation of the clause

Since objects were considered to be the permissive activities which a company could undertake in order to do its business, the same should not be given a restrictive meaning

In any case, rigid construction of the Memorandum of Association, unless and until inevitable and insurmountable, must be avoided.

Anything done by a company which was beyond the scope of its Memorandum of Association was ultra vires and thus could not be given any legal sanctity

Company could not engage in a business which was not fairly covered by any of its independent objects, or such objects which were ancillary and incidental to those for which a company had been created and its Memorandum of Association was duly recognized and accepted by the regulatory bodies meant for the incorporation of a company and oversight thereof.

Company may incorporate in its Memorandum of Association, besides the main object of the company and its ancillary purposes, certain other objects as well which may be independent of its main object/business

Company thus may have a primary object and purpose, but still there may also be several other objects mentioned in the objects clauses, and after proper construction of such objects, by resorting to the relevant rules of interpretation, it should be considered whether those were ancillary to the main object of the company or could be held to be independent of each other

Memorandum of Association of a company should be read and construed liberally and be given a wide meaning through literal interpretation of the clause

Since objects were considered to be the permissive activities which a company could undertake in order to do its business, the same should not be given a restrictive meaning

In any case, rigid construction of the Memorandum of Association, unless and until inevitable and insurmountable, must be avoided.

Anything done by a company which was beyond the scope of its Memorandum of Association was ultra vires and thus could not be given any legal sanctity

Company could not engage in a business which was not fairly covered by any of its independent objects, or such objects which were ancillary and incidental to those for which a company had been created and its Memorandum of Association was duly recognized and accepted by the regulatory bodies meant for the incorporation of a company and oversight thereof.

Appeal filed by company without legal sanction of a valid resolution of Board of Directors was incompetent.

Constitutional petition by company lacked requisite resolution of Board of Directors which was mandatory for any company to initiate proceedings

In absence of resolution, which was a legal requirement; such constitutional petition could not be termed as competent

Constitutional petition was dismissed.

Limited company was a juristic person and a legal entity separate from its share-holder and any change in the shareholding of a company did not mean change in the title of assets of the company or premises occupied thereby

Properties of a company could not be inherited by the legal heirs of one of its Directors or even ordinary shareholders of the company

Legal heirs of a deceased director or shareholder of a company could claim inheritance only to the extent of shareholding of the deceased Director or shareholder in the company and not in the assets of the company as estate of the deceased.

Court had the power to lift the veil of incorporation while construing the statute or documents or when the court was satisfied that the company was a mere facade concealing the true facts or where it was established that the company had an authorized agent as its controller or member.

Constitutional petition, in the present case, had not been filed by the petitioner on the basis of the resolution of the company

Effect

When law required a thing to be done in a particular manner, the same must be done accordingly and if prescribed procedure was not followed, presumption would be that the same had not been legally done

Subsequent resolution of the company authorizing the petitioner to ratify would not resolve the issue as for that matter there should have been some powers vesting in the Directors to ratify the wrong and no such power had been provided in the Memorandum and Articles of the company

Constitutional petition, on such score, was not maintainable.

Act of ratification of petition can only be availed, if Directors were empowered in the Articles of Association.

Constitutional petition, in the present case, had not been filed by the petitioner on the basis of the resolution of the company

Effect

When law required a thing to be done in a particular manner, the same must be done accordingly and if prescribed procedure was not followed, presumption would be that the same had not been legally done

Subsequent resolution of the company authorizing the petitioner to ratify would not resolve the issue as for that matter there should have been some powers vesting in the Directors to ratify the wrong and no such power had been provided in the Memorandum and Articles of the company

Constitutional petition, on such score, was not maintainable.

Act of ratification of petition can only be availed, if Directors were empowered in the Articles of Association.

Even a single transaction entered into by a company which was in accordance with its laid down objectives, constitute an adventure in the nature of trade.

Dividends income was held as income from business and not from other sources, because such income had been earned in accordance with the company's Memorandum and Articles of Association indicating company's objectives as investment in stocks, shares etc.

Income earned in consequence of the objectives laid down in Memorandum and Articles of Association was nothing but income from business.

Public sector company is not only to look after the interest of its shareholders alone but has a wider responsibility as it acts as a trustee for the people of Pakistan

Higher standard of governance stricter fiduciary duty and an institutional collegiality in decision making process is an expected operational benchmark of a public sector company

Principles.

Legal status stated.

Public sector company is not only to look after the interest of its shareholders alone but has a wider responsibility as it acts as a trustee for the people of Pakistan

Higher standard of governance stricter fiduciary duty and an institutional collegiality in decision making process is an expected operational benchmark of a public sector company

Principles.

Scope stated.

Department contended that appeal was required to be filed by new entity on behalf of amalgamated company; that appeal was incompetent just like that a dead person could not file an appeal; that a defunct company could neither sue nor be sued; and that documentation regarding amalgamation was required to be filed along with appeal papers and failure to do so was fatal to the proceedings

Validity

Appeal filed before the Appellate Tribunal was not maintainable being filed by an `incompetent person' which merited dismissal.

Company, its development, with particular reference to India and Pakistan.

Company, its development, with particular reference to India and Pakistan.

Question whether the permission of closure of Company under S.O.11-A, West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 was legal or not was not material in circumstances, as the fact remained that company no more existed and whereabouts of the owners were not known

Entire cause of action had become infructuous

Company being not in existence, any order passed by High Court shall not be executable; courts do not pass such order, which could not be executed

Constitutional petition was dismissed.