Boardroom battle. Battle escalates as Zee junks Invesco’s request for EGM

The ongoing battle between Invesco and Punit Goenka, the promoter of Zee Entertainment, escalated on Friday with Zee’s board rejecting the American investment company’s request to hold an Extraordinary General Meeting. The board, controlled by Goenka, has taken a view that the request by Invesco was illegal and invalid.

“The board sought the opinion of independent counsel, legal experts including senior retired Supreme Court judges and evaluated the matter in a fair and transparent manner; and has accordingly conveyed its inability to convene the Extraordinary General Meeting to Invesco Developing Markets Funds and OFI Global China Fund, LLC,” said a Zee press statement.

Eyes on NCLT

While Invesco did not comment on the decision, all eyes are now on the National Company Law Tribunal, which will take up the matter on Monday. Invesco, which owns about 18 per cent in Zee Entertainment Limited, had filed a plea in NCLT on Thursday to enforce its rights as shareholders to call for an EGM.

The EGM requisition letter itself was sent to Zee on September 11, seeking the removal of Goenka on grounds of corporate mismanagement. Invesco is also seeking the appointment of six additional directors.

This stance was repeated again in Invesco’s September 23 notice, just after Goenka announced plans to merge two media behemoths, Zee and Sony Pictures Network India in a move to retain his leadership. Invesco has maintained that while it has no problems with a merger, it wants shareholders to decide whether or not Goenka remains at the helm.

Legal basis

According to sources close to the Goenka camp, Zee’s board had a strong legal basis for the decision. “First, Invesco’s proposal to make fundamental changes in the Zee board will result in non-compliance with SEBI’s Takeover Regulations. Zee has also argued that permission is needed from the Ministry of Information and Broadcasting before the proposed appointment of the directors is brought into effect. Furthermore, if Invesco’s proposal goes through, the entire board will comprise of non-executive directors,” the sources said.

JN Gupta, Managing Director of corporate governance firm Stakeholders Empowerment Services, said, “Legally, Zee might be on solid ground, but they should have told Invesco about the matter of legal irregularity much before the deadline, not two days ahead of it.”

Gupta added that from a corporate governance perspective, they should have conducted the EGM and put the matter of Goenka’s removal on the agenda because the merger with Sony makes his case strong.

Valid request

According to Anupam Shukla, Counsel, Pioneer Legal, Invesco’s requisition is valid. “The Companies Act is very clear that if you are holding the requisite stake in the company you are allowed to requisition a meeting. Section 100 of the Act does say that it must be a valid requisition. Legalities including the need to get approval from the I&B Ministry for the new board members need to be discussed at the meeting. There is no need to call the requisition invalid and put a roadblock on the rights of the shareholder,” he said.

Shriram Subramanian, MD of InGovern Research Services, which had raised corporate governance concerns against Goenka last month, told BusinessLine : “The future course of action depends on what direction the NCLT gives. For instance, in case of requiring approval from the I&B Ministry, the NCLT might decide whether the approval is required before or after the EGM.”

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