The Islamabad High Court (IHC) has allowed Mari Energies Limited to sell bonus shares previously withheld from shareholders in order to recover unpaid taxes, marking a significant legal development in the enforcement of Section 236Z of the Income Tax Ordinance, 2001.
In a letter sent to the Pakistan Stock Exchange (PSX), Mari Energies informed that the court has upheld the company’s right to recover due tax amounts from shareholders by disposing of the bonus shares they received earlier. The case pertains to the company’s massive 800% bonus share issuance, and its legal obligation to withhold tax on such issuances under Pakistani tax law.
The IHC directed the Central Depository Company (CDC) to transfer 10% of bonus shares (in the case of tax filers) and 20% (in the case of non-filers) — which were previously placed under lien — into the company’s account. This enables Mari Energies to sell those shares to recover the unpaid taxes, as provided under Section 236Z(5) of the Ordinance.
Introduced through the Finance Act, 2023, Section 236Z requires companies to withhold tax on the value of bonus shares issued to shareholders. The tax is collected in kind — that is, through a portion of the bonus shares themselves — rather than in cash. Companies must retain and possibly sell a portion of these shares to pay the due tax to the government. For tax filers, the rate is 10% of the bonus share value; for non-filers, 20%.
This ruling clears the way for Mari Energies to recover over PKR 3.5 billion in unpaid taxes, according to previous estimates tied to the bonus issue (Note: Exact figure not disclosed in the company’s current statement but was widely reported earlier during the tax dispute. See Business Recorder, March 2024).
The company also said that any remaining shares after recovering the due tax from the sale will be released back to the shareholders.
Additionally, for shareholders who have already paid their taxes, the lien on their withheld bonus shares will be removed, and their full bonus entitlement will be credited to their accounts.
The move comes after a legal battle between Mari Energies and several shareholders who had challenged the company’s decision to withhold and lien their bonus shares. The IHC’s ruling confirms the legality of the FBR’s directive and the company’s actions under the new tax framework.
The PSX has been requested to disseminate the IHC’s directive and the company’s course of action to its members.
