KARACHI: In the history of rowdy annual general meetings (AGMs), the latest huddle of the shareholders of Security Papers Ltd will go down as rather unusual.

Instead of a typical face-off between two parties, a group of fire-breathing “activist shareholders” found themselves at loggerheads on Thursday with not just the company’s management but also their fellow small investors who just wanted to... well, go home.

Stopping short of accusing the CEO of outright fraud, the activist shareholders levelled against the company’s management all manner of allegations ranging from the fudging of the minutes to nepotism, financial misreporting and playing fast and loose with corporate governance rules.

Security Papers Ltd makes specialised paper for banknotes and non-banknote security documents and sells it mainly to Pakistan Security Printing Corporation Ltd — which is also its largest shareholder with over 40 per cent stake — for the onward delivery of currency notes to the State Bank of Pakistan. Being a “key point installation” owing to its “strategic” nature, men from the army protect the company’s premises 24/7.

Meeting of Security Papers Ltd shareholders devolves into shouting match

The company is in profit: its earnings amounted to Rs967.4 million in 2022-23, up 1.9pc from a year ago.

But the problem, according to one vocal shareholder, is the wayward manner the current management runs what’s effectively a state-owned enterprise (SOE).

For example, a shareholder alleged that the total payments made to the directors for attending the meetings of the board and its subcommittees don’t reconcile with their attendance record. In other words, the shareholder accused the directors of billing the company for meetings that they didn’t attend.

A shareholder pointed out that there was on average a board or subcommittee meeting after every eight days if the number of working days in a typical year was divided by the number of such meetings (32) in 2022-23.

One of the resolutions approved — despite strong protests from some minority shareholders — on Thursday increased the director’s remuneration by 25pc to Rs200,000 per meeting because the earlier amount was “inadequate”.

One shareholder with proxies for 823,500 shares grilled the board for “reclassifying” a director from “independent” to “non-executive” after almost three years into her term on the board for technical reasons. Further embarrassing was the fact that

the board classified Muhammad Sualeh Ahmad Faruqui as an independent director even though he’s still working as federal commerce secretary. “How can a government employee be counted as an independent director on the board of an SOE?” he asked.

The company secretary responded that the law allowed it. Dumbfounded, the activist shareholder exclaimed the response must be made part of the minutes. The company secretary insisted that minutes were being duly taken. The shareholder alleged the company was in the habit of tempering with AGM minutes. It denied him access to last year’s AGM minutes for months, he said, adding that the furnished version of the document carried “huge oversights” and “redactions”.

“I attend 40-50 (AGMs) a year. I have yet to see any redaction by any company where they’ve purposely decided to remove questions,” he said.

Another shareholder questioned the celebratory tone taken by the management over less than 2pc growth in the firm’s bottom line. He also asked why the stock market valuation of the company declined from Rs8.4bn at the end of 2019-20 to Rs5.5bn at the end of 2022-23.

In response, the CFO quoted the declining price-to-earnings multiple of the company, which ironically reinforced the shareholder’s concern over the firm’s poor performance in the stock market.

Amid the extended back-and-forth, a rather significant number of minority shareholders started screaming that the financial accounts be approved pronto because they had a bus to catch — quite literally — to the city centre for another AGM.

With one eye on the boxes of sweetmeats that waited for them at the exit point, the motley group of shareholders, including women and school-age children, pleaded for a quick conclusion of the AGM.

In appearance at least, they belonged to that category of small investors who like to buy sometimes as few as one share in every local company. Come the AGM season, they wander from one meeting to another and make an occasion out of it.

“Please ask your ex-employees to leave if they want. I’ve got questions to ask,” said a shareholder while showing no willingness to part ways with the microphone. The implication of being planted by the management to disrupt his activism enraged the accused group of shareholders who rushed towards him as if to settle the score physically.

The company secretary intervened at this point. One after another, he bulldozed his way through resolutions even though the protesting shareholder kept shouting into a turned-off microphone.

“You can’t conclude the meeting without taking the shareholders’ questions,” he said to no one in particular, just when the company secretary officially concluded the 58th AGM of Security Papers Ltd.

Published in Dawn, October 28th, 2023