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Punit Goenka, the promoter of Zee Entertainment Enterprises Ltd (ZEEL), has time till October 3 to decide on holding the extraordinary general meeting (EGM) called by the largest shareholder in the company, Invesco.
Experts believe that Zee cannot stall the EGM because if it does not respond, Invesco can call upon the meeting to pass the resolution on its own. Therefore, ZEEL is at a critical juncture, racing against time, to confirm whether the EGM is going to happen or not, and more importantly, to muster enough votes to ensure that the Invesco’s resolution falls.
On September 12, Invesco sent a letter to ZEEL, titled “Requisition for calling an Extraordinary General Meeting” calling for Punit Goenka along with two other directors to be ousted from the company’s board. Invesco was also seeking the appointment of six additional directors to the board.
Sony merger hits a bump
Invesco, which holds around 18 per cent stake in the company, reiterated this position again in a September 23 letter to ZEEL, sent a day after Zee and Sony announced their plans to merge, stating “decisions of material and strategic import must follow and not precede actions towards the establishment of a proper and independent governance structure as determined by the company’s shareholders”.
Experts believe that the EGM is inevitable. Mukund P Unny, Advocate at Supreme Court, said, “As per the Companies Act, Section 100(4), the Board of the ZEE will have to decide on the EGM within a period of 21 days from the receipt of the requisition by Invesco, and if the same is not forthcoming, Invesco can go ahead and call for the EGM on its own terms.”
In case ZEEL wants to stall the EGM further, Zee will have to take the matter up with the National Company Law Tribunal (NCLT) which could jeopardise the merger with Sony itself, he added.
Invesco needs to ensure that more than 50 per cent of shareholders vote in favour of Goenka’s removal, in order for the resolution to pass. Rahul Kamerkar, Advocate, said, “Shareholders appoint directors to the board, and also have the power to remove directors. So if Invesco and OFI are able to garner 51 per cent of the eligible voters at the EGM, for the removal of Goenka, then he will be removed.”
Invesco and OFI have 18 per cent shares together, and the promoters own 3.99 per cent shares at the moment. Entities such as HDFC Life insurance, Life Insurance Corporation (LIC) India, SBI are at play, holding 1.66 per cent, 4.89 per cent, 1.80 per cent shares respectively.
Experts tracking the ongoing conflict between Essel Group, Goenka and Invesco believe that going by the market sentiments following the merger announcement, things appear to be in favour of the promoter.
“Boost in ZEEL share price and the market reaction clearly reflect that it will be hard of Invesco to convince shareholders to vote against ousting Goenka from the board,” said an expert on conditions of anonymity.
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