‘Shriram Transport should not insist on appointing director rejected by shareholders’

PALAK SHAH Mumbai | Updated on August 30, 2020 Published on August 30, 2020

SES, a proxy advisory firm, had called for rejecting the director’s appointment; but the company defends its move

Shriram Transport Finance Company should not insist on appointing a director after public shareholders rejected the proposal, said JN Gupta, former ED of SEBI, and founder of SES, a proxy advisory firm.

In the context of the re-appointment of Puneet Bhatia, Co-Managing Partner and Country Head, India of TPG Capital Asia (TPG), as a director on the board of Shriram Transport Finance Company, he said, the shareholders have already rejected the appointment of the said director.

As per the Companies Act, if shareholders reject the appointment of any director, he cannot be re-inducted on the board. “The only other option is that if the Articles of Association (AoA) of the company state that the board can appoint one-third of directors without shareholder approval. However, still that would be poor governance practice as a director once rejected by shareholders is being re-inducted through alternative methods. Irrespective of the AOA, the Companies Act should be given more credence in this matter and law too would interpret it that way,” Gupta said.

SES had recommended that shareholders reject Bhatia’s re-appointment due to his poor attendance in company board meetings for the past few years.

Spell out contribution

“If the company feels that the said director had contributed to the company outside the board meetings, they should have further specified and clarified to the shareholders about the details of such contribution. Otherwise, the shareholders are bound to consider only the attendance records. Exigencies can happen once or twice and can’t be permanent,” Gupta said.

Defending its move, Shriram Transport Finance (STFC) said that TPG has been associated with the Shriram Group for over 15 years and been a Director of STFC since 2006 when the first investment from TPG flowed into the Shriram Group.

Company’s stand

“Bhatia has been representing TPG on the Boards of the various companies in the Shriram Group. He has been adding lot of value and immensely contributed to the growth of various businesses in the Group, including STFC. He has also been in discussions with the Leadership and Management on various occasions, apart from the meetings of the Board and Committees. It was unfortunate that recently some of the shareholders voted against his continuance as a Director, possibly solely relying on attendance not being very high for the Board meetings,” Shriram Transport Finance said in a statement.

“We, at STFC and SCL have requested his consent to act as a Director and be re-inducted into the Board of STFC as a “Nominee” of the Promoter (Shriram Capital Ltd). The Promoters and the key strategic Partner, Sanlam had backed his candidature in the past and will do so in future also. Bhatia has requested some time to consider our request. We plan his formal induction into the Board of STFC at a mutually convenient time, where we expect all the stakeholders to also back him,” the statement said.

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Published on August 30, 2020
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