Vijay Mallya era at UB to end as Heineken moves to curtail powers of promoters

K Giriprakash Bengaluru | Updated on July 07, 2021

Vijay Mallya   -  REUTERS

Dutch beer giant seeks to amend Articles at July 29 AGM

The end of the Vijay Mallya era at United Breweries appears imminent.

A lifetime chairman of the beer company with brands such as Kingfisher and UB Export, Mallya is expected to step down from his post following a board decision to amend the Articles of Association to nix a crucial provision relating to the rights and privileges of all promoter shareholders to appoint a chairman. Heineken, which owns a nearly 62 per cent of the company, is understood to have received the support of financial institutions for its resolution.

This is part of a list of AoA provisions the board is seeking to remove for which it has sought shareholders’ approval at the July 29 AGM. As a lifetime chairman, Mallya had the right to nominate a successor, but with the board seeking to amend this provision, this will not happen, and the fugitive liquor baron is likely to step down from the post.

The beer major will also see the exit of another prominent executive and a close associate of Mallya, with AK Ravi Nedungadi, who is a non-executive member of the UB board, conveying his decision to the board to step down.

‘Fait accompli’

Terming it a fait accompli, Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research Services, pointed out that a chairman can be removed if 75 per cent of the shareholders vote for the resolution. With Heineken holding nearly 62 per cent, this should be accomplished without any issues, he said.

In a notice to the stock exchanges, United Breweries said the VJM Group and the Heineken Group had entered into an alliance in 2009 whereby the two groups would be equal co-promoters of the company holding 37.5 per cent of the total equity share capital in the company. For the effective management of the company, the two group promoters had certain rights and privileges, which were codified into the AoA.

But with the Heineken Group steadily increasing its stake in UB, the notice said that it is proposed that it would be in the best interests of the company to delete various provisions relating to the rights and privileges of all promoter shareholders (that is, the VJM Group and the Heineken Group) from the AoA.

Published on July 06, 2021

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