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A revolt by the single-largest shareholder in both Dish TV India Ltd and Zee Entertainment Enterprises Ltd (ZEEL) is limiting these companies from reappointing directors despite tenures of some of these officials set to run out in the coming months.

The imbroglio will affect operations because of the depleted board strength and their continuing battle against the shareholders, Yes Bank Ltd and Invesco for Dish TV and Zee, respectively, according to investors and proxy advisors.

At Dish TV, the term of four of six directors, including chairman and managing director (MD) Jawahar Goel and chief executive officer Anil Dua, will end by March. Yes Bank has sought the removal of Goel and four of the five other directors and sought shareholder approval for the induction of seven directors.

Racing against time
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Racing against time

Dish TV’s board comprises two executive directors, including Goel and Dua, and Ashok Kurien, a non-independent and non-executive director. B.D. Narang, Rashmi Aggarwal, and Shankar Aggarwal are the three independent directors.

Kurien’s term has ended already and Dish TV was to seek investor nod for his reappointment at an annual general meeting (AGM) originally slated for 27 September. However, the firm deferred the AGM indefinitely after Yes Bank’s demand to hold a special shareholder meeting. This has impacted Kurien’s reappointment.

Goel’s two-year term runs out on 31 March, while Dua’s three-year term will end on 25 March. Narang is slated to leave the board at the 2022 AGM.

Dish TV can reappoint both Goel and Dua and, under the current rules, has up to a year to secure shareholder approval on their reappointments. However, new rules on appointment and removal of directors at listed companies are set to come into effect on 1 January. Under rules prepared by the Securities and Exchange Board of India, the reappointment of both Goel and Dua will need to be stamped by 75% of shareholders within three months of them starting their new term.

Considering that Yes Bank, which owns 25.63% shares in Dish TV, has sought the removal of five of six directors, the lender looks unlikely to approve Goel’s reappointment.

“Dish TV and its board of directors are committed to ensuring non violation of any extant statutory laws/regulations/guidelines and, therefore, every step (including extension of AGM) has been taken to ensure compliance, which is in the interest of all shareholders of the company," said a spokesperson for Dish TV.

“It is also clarified that requisition by shareholders (including requisition for calling EGM) which may lead to serious breach of any extant statutory laws/regulations/guidelines, is being dealt with in accordance with laid down legal procedures. Further, we are hopeful that all stakeholders shall participate towards growth and progress of the company and shall take only such steps which are in its best interest."

For Zee, the company’s board comprises seven members, including MD Punit Goenka and six independent directors. This after directors Kurien and Manish Chokhani stepped down on 12 September. R. Gopalan is chairman, while Alicia Yi, Piyush Pandey, Vivek Mehra, Sasha Mirchandani and Adesh Gupta are the five independent directors.

Gupta’s ongoing second three-year stint as a director on the Zee board ends on 29 December, according to regulatory filings reviewed by Mint. This implies starting next year, Zee’s board will have only six members and three vacancies, which would require approval from 75% of shareholders to fill. Zee had nine directors on its board, as of 11 September, the day Invesco urged the company to hold an EGM, remove three directors, and appoint six independent directors.

A single-judge bench of the Bombay high court will pronounce an order on Tuesday on Invesco’s demand for an EGM.

With Invesco seeking a board reconstitution, it appears unlikely that the US fund manager will approve candidates proposed by Zee. “In the current situation, where the largest share owner is trying to oust managing directors at the two companies, a control over the board becomes important," an investor at Dish TV said on condition of anonymity. “This inability to replace a new director will hamper the management at both companies to continue with their fight for a long-time," the investor said.

For now, Zee isn’t concerned with the vacancies as new board appointments will be done post completion of a proposed merger with Sony Pictures Network India. This will place Zee in a better position than Dish TV, where Goel, the younger brother of Zee founder Subhash Chandra, runs the risk of being ousted. As part of the proposed non-binding deal announced on 22 September, Sony will induct new directors on the Zee-Sony merged entity while Goenka will continue as MD for five years.

A spokesperson for Zee declined to offer a comment.

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