In a landmark ruling, the Sindh High Court has blocked the attempted takeover of TRG Pakistan Limited by Bermuda-based Greentree Holdings, declaring that the shares acquired by Greentree, nearly 30% of TRG’s stock, were unlawfully financed using TRG’s funds, in violation of Section 86(2) of the Companies Act 2017.
Justice Adnan Iqbal Chaudhry concluded that the directors of TRG Pakistan allowed company assets to be funnelled through offshore affiliates TRGIL and Greentree for acquiring TRG’s shares, a move deemed both fraudulent and oppressive to minority shareholders.
The Court ruled that such financial assistance undermined corporate governance, violated fiduciary duties, and aimed to transfer control of the company unfairly.
Background
The last we left off the TRG saga, the company had been delaying their election for board of directors while cases were pending at the Sindh High Court. A power struggle was going on where Zia Chishti, founder and ex-CEO, was looking to make a comeback as it’s new CEO. After allegations of sexual assault, the entrepreneur had to step down as he faced the charges levelled against him.
Since then, he has won a defamation lawsuit against The Telegraph which can be seen as a redemption of his reputation. This would have allowed him to use his substantial shareholding to elect the directors of his choosing and try to be appointed as CEO again.
The other side of this battle has TRG Pakistan which is looking to retain the control over their board room. As Chishti actively pursued redemption, TRG Pakistan tried to gain one thing that they did not have. Shareholding. This would allow them to foil any coup attempt that could have been carried out.
With the battle lines drawn, the only option available to TRG Pakistan was to go after the shareholding that was held by the participants in the market. Chishti had previously alleged that Greentree Holdings was a company which was being used to buy the shares of the company on behalf of TRG Pakistan.
A buyback was announced which would have allowed Greentree Holdings to buy the shares from the public. In order to sweeten the deal, a price of Rs 75 was offered when the shares were trading at Rs 65. Easy money for the investors.
Well not quite. Seeing the buyback going through, Chishti filed a plea in the courts to stop any such buyback from going through. The buyback which was announced in the early part of the year has now been delayed multiple times and still hasn’t gone through.
Now that buyback has been suspended by the Sindh High Court. Rumours were abound in the market since earlier in the day that the buyback had fallen through and had been disallowed by the court. A small victory for Chishti it seems.
With no communication by TRG Pakistan or AKD Securities Limited, manager to the offer, nothing can be confirmed for now. However, the rumours do gain some credence when it is seen that the share lost almost Rs 6 or nearly 10 percent of its value from the high it was trading at in the morning. The share price suddenly dropped and crashes around the 9 45 AM mark in today’s trading which does show some apprehension. By the time of the market’s close, TRG’s share had eroded over 8.2% of its value marking a significant crash.
The cancellation of the buyback, if true, would mean that Greentree Holdings will not be able to buy any more shares and will have to return the shares to the investors they bought them from in the first place. The chaos this will create will be a spectacle in itself, however, this will also damage any future buybacks from taking place as well. Considering this is just another small development in the case, it can be expected that TRG Pakistan will plan their next action while licking their wounds. On the other side, Chishti will be expected to have his strategy inline as well.
