Jupiter AMC raises concerns over corporate governance issue at Godfrey Phillips

Concerns related to alleged corporate governance and disclosure violations have been raised against Godfrey Phillips India (GPI) by Jupiter Asset Management, which owns more than 9 per cent stake in the company.

GPI, one of the largest cigarette manufacturing companies in the country, is now embroiled in a promoter family feud. Jupiter Asset Management, the largest shareholder in the company after the promoters, has written to the board seeking replies on corporate governance issues raised by a proxy advisory report.

An email query and phone messages to GPI’s spokesperson remained unanswered.

In a letter written by Jupiter, seen by BusinessLine, it has stressed on GPI’s obligations and failure to disclose matters regarding a family trust deed that made specific reference to succession plan for the Modi Family Trust, which the shareholders, including themselves, should know about.

Jupiter in its letter to GPI dated January 7 said, “We understand that under SEBI regulations, listed companies have an obligation to provide information to shareholders on capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership. Should such an arrangement exist between the company and its promoters (or between its promoters) that the company’s directors or officers are aware of, we understand that the board of GPI and its promoters would be required to make such a disclosure.

Query on trust deed

“It should cover the existence of any trust deed and its significant provisions, which may enable certain shareholders/ promoters, for instance, the Modi Family Trust to exercise control disproportionately to their equity ownership. Any shareholder agreement between the promoters and or with the company, which may affect control, eg, voting agreement, and whether there are any clauses in the trust deed, which when enacted and disclosed could have material impact on the share price and if so any such clause has been triggered.”

Jupiter also asked GPI to disclose to shareholders if no such arrangements existed.

BusinessLine reported on January 28 that according to Lalit Modi, a trustee of Modi Family Trust, there exists a trust deed with regard to GPI, which has several succession planning related clauses that have already been triggered.

A governance report from proxy advisory firm IiAS dated November 30, 2019, points out corporate governance related issued in GPI with regard to disclosure of related-party transactions (RPTs), succession planning, board evaluation, board committee composition, board composition, etc.

The IiAs report, seen by the BusinessLine, says that “GPI has a high value of RPTs amounting to 18 per cent of consolidated revenues in financial year 2019; the accuracy and completeness of RPTs have been pointed out as a key audit matter by the statutory auditors.

“Given the significant quantum of these transactions, GPI must provide additional disclosures regarding its RPTs including the need, expected frequency and pricing terms for such RPTs. The company must also provide a rationale for engaging promoter group companies instead of an independent third-party vendor to provide the same goods/services.”