With IndiGo shareholders rejecting attempts to change the Articles of Association, BusinessLine spoke to lawyers on what this means for the company and shareholders. Here’s what Siddharth Mahajan, Partner, Athena Legal, had to say. Edited excerpts:
Rakesh Gangwal failed in his attempts to amend the Articles of Association of Indigo’s holding company. What effect will that have on Indigo?
The existing Articles of Association of Indigo’s holding company remain and the amendments suggested by Rakesh did not get the approval of shareholders. These amendments would have allowed him to sell his stake fully or partially without the consent of Rahul. So, for now, status quo remains. The shareholders and their rights will remain as before in the company. Hence, nothing material changes. Which means that the dispute between shareholders continues. The approval of amendments would have given leeway to Rakesh or Rahul to exit in a manner they wanted without the consent of another partner.
How does the case move from here?
This was an attempt by Rakesh Gangwal to alter the Articles of Association, thereby giving him an opportunity to exit the airline without the consent of Rahul. This does not alter the dynamics of the dispute including the arbitration as existed. However, if the amendments would have been approved, one shareholder, most likely Rakesh, would have had an option to exit without consent of Rahul, and that could have put a quietus to the dispute.
Does the latest decision of the shareholders strengthen Rahul?
The amendments were moved by Rakesh and the failure to muster support among shareholders could strengthen the perception that shareholders are happy with the current arrangement on how the company is being run. In any event, as per publicly available information, Rahul enjoys better rights and that would have continued even in case of stake-sale by Rakesh. The impact on the arbitration in LCIA cannot be commented upon in the absence of fact.
Will the minority rights of shareholders now be better protected?
That inference cannot be drawn from the present proceedings.
Will it be easier to get Rakesh out of the airline?
No, that inference is tough to be drawn, since, as per information available, the Articles of Association of the company provide for the right of first refusal to the remaining partner and that was intended to be diluted by the proposed amendments to the Articles. Failure of the amendments means that share-sale by Rakesh cannot take place without the consent of Rahul.
Any other comments on the impact of the latest shareholders vote?
The impact is that the dispute will continue and Rakesh will not get unfettered right to exit the airline. The shareholders holding a significant stake in Indigo at loggerheads eventually may lead to more disputes between significant shareholders in terms of control of the airline.
However, as per the recent quarterly results, the operations of Indigo seem to be unaffected by shareholder disputes.