Invesco may move court if Zee Entertainment fails to take call
The ZEEL board has three weeks to convene the EGM. If it fails to do so, Invesco may call the meetings within six months. Legal experts say that both the camps are strict on their positions, this could lead to a legal battle.
In a letter dated 23 September, Invesco and Oppenheimer Funds asked ZEEL to perform its fiduciary duties and not to violate its statutory obligations to convene the EGM expected by Invesco on 11 September. “We urge the Board to consider this communication and take action. Upholding the best interests of the Company, its public shareholders and the highest standards of corporate and board governance,” the fund said.
In its earlier letter, Invesco had asked the company to remove existing managing director and chief executive Puneet Goenka and induct six of its nominees on the board. But within days, Zee announced a merger deal with its rival Sony Pictures, creating a $2 billion revenue company with 25 percent market share.
A ZEEL spokesperson said: “The Board is aware of the matter. The company will take necessary action as per applicable law.” The “letter bomb” by Invesco is expected to rattle Zee Board as they will have to take it on record and either accept or reject the demand.
“If ZEEL denies the request, it could lead to a legal battle,” said an expert. In its letter, Invesco said it has been an investor in ZEEL for more than 10 years and continues to believe that ZEEL’s business is valuable, whether by itself or in strategic alignment with partners such as Sony. letter has been reviewed business standard.
“However, the content should comply with strategic import decisions and should not be preceded by action towards the establishment of a fair and independent governance structure determined by the Company’s shareholders. In this context, and against the background of our EGM demand, September 22 Your disclosure of this is symptomatic of the precarious manner in which important and serious decisions have been taken in the Company,” it said.
Invesco asked to protect shareholder value and in exercise of its statutory rights as a common shareholder, it had called upon the company to conduct the EGM, and it was the duty of the Board under the Companies Act to do so. “At this EGM, shareholders will decide the composition of the board of directors in an independent and democratic manner,” it said.
Invesco has proposed the removal of non-independent directors and recommended six additional independent directors for shareholders to consider and vote, and in the process constitute a purely and truly independent board of directors. “These six additional independent directors come from diverse backgrounds and are expected to bring additional professionalism, guidance and standards of governance to the company’s operations,” the fund said.
“With the current set of independent directors, we are confident the board will have the depth to navigate the company in the future. A newly formed board backed with the strengths of independence will be best suited to evaluate and monitor the potential of strategic transactions, as announced on September 22 on a non-binding basis, as well as to make a determination on the future leadership of the company,” it said. “We note that the September 22 disclosure refers to the company’s future board composition, at a time when the current board structure is subject to a shareholder vote behind our EGM requirement,” it said.
Two independent directors, Ashok Kurian and Manish Chokhani, quit the ZEEL board just before the AGM following allegations of lapses in corporate governance by two proxy advisory firms.
The promoters of Zee enlist control of the company after it defaults on bank loans taken by the promoter entities. As shares of listed entities like Zee and Dish TV were pledged with lenders, the promoters’ stake in both the companies fell in the low single digits. Last week, Yes Bank, which holds 26 per cent stake after implementing promoters’ pledge, asked Dish TV to convene an EGM to induct six of its nominees on the Dish board and remove Dish TV CEO Jawahar Goyal. asked for
The Sony deal will ensure that the Subhas Chandra family will hold 4 per cent stake in the merged entity and Goenka will retain his job. Proxy advisory firms had said that Goenka’s salary had gone up in the 2020-2021 financial year when the rest of the employees got zero increments.
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