Shareholders will have a final say in the deal involving Hotel Leelaventures (HVL) and Canadian investment fund Brookfield. SEBI on Tuesday directed HVL to seek a fresh shareholder vote on “the asset-sale transaction of the company along with the additional IP (intellectual property) transaction of the promoters and their affiliates.”

SEBI said the new shareholder approval should be sought after making all the material disclosures. It also directed adjudication proceedings against JM Financial ARC for its failure to ensure compliance with takeover regulations in the deal.

LIC and tobacco major ITC that are shareholders of HVL had complained that its deal with Brookefield violated provisions of related party transactions. Following the complaints, SEBI had put the deal on hold earlier this year.

As per the proposed sale agreement, the promoters and affiliates of HVL were entitled to a consideration of ₹300 crore from Brookfield on account of any intellectual property held, apart from certain business expansion services that the promoters had agreed to provide to the investor. ITC had alleged that the company had listed the transaction as ordinary resolution but it should be a special resolution, considering that Brookfield would become a related party after the transaction was completed.

Additional disclosure

SEBI order said, “HVL should provide additional disclosure including all relevant details of each of the sale transactions including asset-sale transaction, IP transaction with specific information identifying the transactions between HVL, its promoters and Brookfield. It should include amounts involved therein under separate tables with the split consideration amounts for each head. Details of valuation of both the asset-sale transaction and additional IP transaction including the methods adopted by the company.”

SEBI has also directed HVL to keep the deal and IP valuation report ready for inspection by the shareholders of HLVL during the course of postal ballot.

SEBI has barred the promoters and promoter group of HVL from participate in the voting process. HVL will have to make all material disclosures including the litigations in the postal ballot notice to shareholders.

Earlier this year, SEBI had barred HVL from selling its assets including four hotels to Brookfield Asset Management LLC. The company’s board had sought shareholders’ approval through a postal ballot on April 24 for the sale of its assets to Brookfield for ₹3,950 crore. The assets include hotel properties in Delhi, Bengaluru, Udaipur and Chennai. It involved a separate deal between Brookfield and HVL promoters for IP where shareholders had raised objection.

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