[vc_row][vc_column][vc_column_text dp_text_size=”size-4″]On Tuesday, the Rawalpindi bench of the Lahore High Court (LHC) issued a notable verdict that redefines certain aspects of partnership within a family business.
This ruling stems from a petition filed by two brothers, Shaukat Ali Noon and Arshad Ali Noon, who contested the control and ownership of a business outlet managed by their three siblings.
The petitioners sought either the liquidation of the family business or a court decree granting them an equal share in it. The case delved into the family’s business history, starting with a bakery in Rawalpindi in 1947, eventually evolving into Rahat Bakers, later renamed Tehzeeb Bakers due to legal disputes among family members.
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According to the petition, the deceased father of both the petitioners and respondents initiated the business, and following his demise, joint business efforts began. The dispute arose when the petitioners claimed entitlement to a 20 per cent share in the business based on partnership deeds dated October 29, 1994, October 28, 2002, and December 2, 2011.
The petitioners alleged that the respondents changed the business name and registration with the Securities and Exchange Commission of Pakistan (SECP) without providing them their due share. During court proceedings, Saqib Shafique, advocate for the petitioners, argued that the business, generating daily sales revenue exceeding Rs40 million, was not honoring the agreed-upon shares.
Advocate Kashif Ali Malik, representing Khalil, countered that the petitioners were never legitimate members or shareholders and presented allegedly forged documents.
The court, in its observation, underscored the requirements for intervention under Section 286 of the Companies Act, emphasizing the necessity of a member holding at least 10 per cent of the issued share capital and demonstrating that the company’s affairs are being conducted unlawfully.
Moreover, the court clarified that the documents provided did not establish unlawful conduct, and thus, the petitioners couldn’t be declared partners due to a lack of compliance with the legal prerequisites.
This ruling sets a precedent in defining the criteria for partnership claims in family businesses, emphasizing adherence to legal requirements in such disputes. The court referenced Sections 119 and 286 of the Companies Act 2017, highlighting the need for accurate entry in the register of members and the specific conditions for making applications to the court regarding company affairs.[/vc_column_text][/vc_column][/vc_row]
