Tata Sons going private ‘will not change’ rights of any member

RAJESH KURUP SURESH P IYENGAR Mumbai | Updated on January 10, 2018

Proxy advisory SES says no oppression of minority shareholders

The move to make Tata Sons a private company will make it more agile and swift-footed, according to corporate law experts.

“The decision-making would become much faster with shorter notice period and quicker board decisions due to the less bureaucratic set up of a private firm. This would make it a more agile group,” Ramesh Vaidyanathan, Managing Partner at Advaya Legal, told BusinessLine.

“I don’t think courts will interfere in such as move,” he added.

Tata Sons, in its AGM notice, had sought shareholders’ approval to convert the firm, which is the holding company of all group firms, from a public to a private company. Tata Sons has convened its AGM on September 21. The move was opposed by ousted chairman Cyrus Mistry who termed it as a move to oppress minority shareholders.

While some stakeholders had raised concerns over potential issues with transfer of shares , proxy advisory firm SES said there shall be no change in the provisions relating to transferability of shares, despite the company presently being a public company. “The shares were neither freely transferable before, nor will they be now. And AoA contains elaborate procedure on valuation of shares etc.

“Therefore, with TSL becoming private company, there is no variation in the rights of any member, as far as transfer of shares is concerned.,” SES said, adding that the move by Tatas does not in any manner pass the test of oppression of minority shareholders.

Tata Sons was incorporated under the Companies Act, 1913, when its Articles of Association (AoA) had the features of a private limited company. With effect from May 1, 1975, Tata Sons became a “deemed public company” under the provisions of the Companies Act, 1956.

However, its AoA remained unchanged, that is, it continued to contain features of a private limited company, Mistry alleged.

Thereafter, the Companies Act was amended in 2000 under which Tata Sons was required to inform the Registrar of Companies (RoC) if it had become a private company.

According to the Mistry camp, Tata Sons failed to make any such application to the RoC for reconversion into a private limited company. Therefore, Tata Sons became a public company, the letter added.

The Shapoorji Pallonji (Mistry) family through two investment firms — Cyrus Investments and Sterling Investment — owns 18.4 per cent in Tata Sons. Tata Trusts own 66 per cent stake, while the remaining shares are held mostly by the Tata family, a few group companies and individuals. In all, Tata Group holds about 81 per cent in Tata Sons.

The feud between the Mistry family and the 149-year-old Tata Group came to light last October leading to the unceremonious ouster of Cyrus Mistry as Chairman of Tata Sons and operating companies.

Published on September 20, 2017

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