In a significant move for the Pakistani corporate landscape, the High Court of Sindh, Karachi, has sanctioned a complex Scheme of Amalgamation involving Beach Luxury Holdings (Pvt.) Ltd. and its associated companies, Spencer & Company (Pvt.) Ltd. and Physons (Pvt.) Ltd.. The order, issued on April 24, 2025, by Justice Adnan Iqbal Chaudhry, approves a restructuring that will see Spencer & Company’s undertakings split and merged into Beach Luxury and Physons, with the aim of creating a “group” classification and unlocking tax benefits.
With a turnover exceeding Rs. 800 million ($2.85 million), Beach Luxury Holdings is the leading entity in the hotel business among the petitioners. Spencer & Company, on the other hand, had previously divested its pharmaceutical operations and is currently not carrying on any business. Physons (Pvt.) Ltd. was incorporated specifically for the purpose of this amalgamation scheme and has no business thus far.
The High Court’s approval follows a series of shareholder and secured creditor meetings held in late 2024 and early 2025, where the scheme received overwhelming support. Shareholders of Beach Luxury and Physons voted 100% in favor of the scheme, while Spencer & Company’s shareholders approved it with 99.7% of votes. All secured creditors of Beach Luxury and Spencer also voted in favor of the scheme. This met the three-fourths majority requirement of section 279(2) of the Companies Act, 2017.
The core of the scheme involves splitting Spencer & Company (Pvt.) Ltd. into three segments: ‘Spencer Demerged Undertaking-1’, ‘Spencer Demerged Undertaking-2’, and ‘Retained Undertaking’. Spencer Demerged Undertaking-1 will be amalgamated with Beach Luxury Holdings, while Spencer Demerged Undertaking-2 will merge with Physons (Pvt.) Ltd.. The Retained Undertaking will remain with Spencer & Company, which will not be dissolved, and will become a wholly owned subsidiary of Beach Luxury Holdings.
A key outcome of this demerger and merger is a reduction in the paid-up share capital of Spencer & Company by Rs. 196,900. This reduction was highlighted to shareholders and approved as an ancillary matter to the scheme. The court confirmed this reduction, noting that it does not involve any diminution of liability in unpaid capital or payment to shareholders of paid-up capital.
The scheme also addresses the concerns of secured creditors. Silk Bank, now succeeded by UBL, had initially conditioned its NoC on the running finance extended to Spencer & Company being taken over by Beach Luxury or settled. UBL has since confirmed that this condition has been satisfied. The Securities & Exchange Commission of Pakistan (SECP) did not raise any material objections to the scheme.
The petitioners anticipate several benefits from the amalgamation, including classification as ‘group’ companies and entitlement to group tax benefits. Additionally, shareholders demerging from Spencer & Company will be removed from risks associated with the operation of the Retained Undertaking. The court found the scheme to be for “viable reasons” and the share swap ratio worked out by the Chartered Accountant to be “reasonable”.
The order mandates the transfer of all property, rights, powers, liabilities, and duties related to the demerged undertakings to their respective new entities. Pending legal proceedings related to the demerged undertakings will also be continued by the acquiring companies. Physons (Pvt.) Ltd. is directed to allot shares to eligible members of Spencer & Company, leading to the cancellation of their existing Spencer shares.
Spencer & Company is required to deliver a certified copy of the order and the special resolution to the Registrar of Companies within seven days for registration of the capital reduction, and Beach Luxury Holdings must do the same for the scheme to become effective.
