Activism by ‘10.3% shareholder family’ in conflict with the rest, says Rana Kapoor

At the near end of the two-year legal battle, YES Bank is looking to grow into a large bank by 2020.In an emailed interview with Business Line , Rana Kapoor, Managing Director and CEO of the bank, highlights how the current scenario borders on activism when a 10.3 per cent shareholder family is in conflict with remaining shareholders of the bank who have cast their vote in favour of the bank and that there is a need to reflect the “DNA of being a professionals’ bank”. Excerpts:

How do you view the judgment passed by the Bombay High Court?

I believe that the judgment is a victory for corporate democracy and also a lesson for all young organisations in their growth process and institution building. If I had to point at one thing which went slightly amiss, we did not realise that somebody one fine day will find loopholes in the Articles of Association and exploit them and use them for personal advantage.

We needed to refresh our Articles as we have grown steadily to have a larger board with seven independent directors out of 10. Especially after our very successful IPO in 2005 and the series of capital raising we did every two-three years to build the bank.

From 2004 to 2015, we have emerged as the largest medium-sized bank and we aim to become a large bank by 2020.

What does the joint nomination verdict mean to you and the bank?

The verdict clearly upholds the unanimous decision of the YES Bank board of directors to reject Shagun Gogia’s nomination as she does not meet the ‘fit and proper’ regulatory criteria. The High Court has also rejected the repeated expectation of a reserved seat for Madhu Kapur.

We have also been advised by the court to rework the Articles which is dated to 2003 when were a start-up company and became a bank in August 2004…Hence the AoA might not be relevant in today’s operational scope of the bank and needs to be revalidated.

As far as the joint nomination is concerned, the verdict says that if Madhu Kapur has to exercise any right reflected in the Articles, she would have to exercise that right in conjunction with YES Bank’s promoter, which is Rana Kapoor.

The fact is that I have not exercised any right and don’t have any nominated directors on the board of YES Bank. So there is no further or retrospective action that needs any form of joint decision.

The board, in fact, intends to refresh the Articles, to reflect our DNA of being a professionals’ bank and not a family-run estate.

The court has questioned the procedure (as per existing Articles of Association of the bank) of nominating the existing directors. How do you see this?

The Articles, as I mentioned earlier, date back to 2003 when we, the three promoters of the bank — myself, Ashok Kapur, and the nominee of Rabobank were then founder and directors of the bank. Two of these co-promoters are no more. As we have institutionalised the bank as the professionals’ bank in the last 11 years, these Articles have become redundant and their relevance has become subservient to the regulations of the RBI and the Banking Regulation Act.

All the directors in question have been overwhelmingly approved by the shareholders across the world. In a professionally run company, shareholder approval is supreme. The current scenario borders on activism, when a 10.3 per cent shareholder family is in conflict with remaining shareholders of the bank who have cast their vote in favour of the bank, its directors and all business resolutions.

Will the joint nomination aspect go away?

Yes, clearly as there are more practical alternatives. The nomination aspect requires banking ability and experience. It is hence imperative that anyone recommending a nomination should have the ability to understand the workings of a bank in the same way that Ashok Kapur did.

We have been clear from inception that Ashok Kapur was a co-promoter, since he and I got a banking licence in individual capacities and were proven bankers with a diversified track record and that too after considerable due diligence.

It’s the view of the board that the same knowledge and depth of Ashok Kapur on banking matters does not apply or get bequeathed to his family, these are not rights which can be inherited and thus the rights of Ashok Kapur cannot be bequeathed.

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