Any resolution passed at the extraordinary general meeting will be put on hold until the Bombay High Court decides on the legality of Invesco's request for such a meeting
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Bombay High Court on Thursday asked Zee Entertainment Enterprises to call for an extraordinary general meeting (EGM) of shareholders as asked by top investor Invesco for removing the company's Chief Executive and Managing Director Punit Goenka as well as two other directors of ZEEL.
“EGM resolution to be kept in abeyance till court decides on the legality and validity of EGM requisition," the court added, headed by a single judge bench of Justice GS.
EGM resolution to be subject to Ministry Of Information & Broadcasting (MIB) approval, it said.
Any resolution passed at the extraordinary general meeting will be put on hold until the Bombay High Court decides on the legality of Invesco's request for such a meeting.
Invesco, which owns nearly 18% of Zee via two funds, is pushing for a management and board revamp at the TV network.
WHAT ARE INVESCO'S DEMANDS?
Invesco's legal filings reviewed by Reuters - which are not public - show it wants changes at Zee in light of corporate governance and financial irregularities that have plagued the company, and have even been flagged by India's market regulator.
Invesco's Developing Markets Fund and its OFI Global China Fund LLC own a near 18% stake in Zee. They have suggested six new independent board members to be appointed and remove Zee's current CEO, Punit Goenka.
Invesco asked Zee on Sept. 11 to call an "extraordinary general meeting" of shareholders to consider its demands.
Recently, Invesco released an open letter reinstating the urgent need for strengthened independence on the board given "governance and leadership failures."
In the letter, Invesco clearly stated, “We are disappointed that the leadership of Zee has resorted to a reckless public relations campaign in response to the overwhelming demand from shareholders for leadership changes at Zee."
However, Zee in its fiery response to Invesco's open letter, said the shareholder's actions of the past few weeks including open letters against the company and their general lack of transparency, is more than reasoned enough to believe it is motivated by concerns entirely extraneous to any corporate governance issue.
Responding to Invesco's demand on the need to evaluate deal with Sony, Zee said that all shareholders, including Invesco will get the opportunity to evaluate and consider the deal with Sony.
HOW DOES ZEE VIEW INVESCO'S DEMANDS?
Zee on Oct. 1 rejected Invesco's request to revamp the board, saying that the move had legal infirmities.
Invesco then took the battle to India's companies tribunal, where it is trying to force Zee to call the meeting, saying Zee's behaviour is "oppressive". Zee has two weeks to respond, as per a tribunal order on Friday.
The Indian TV giant says that it has implemented corrective plans to address concerns raised by the market regulator and that it follows "highest standards of governance".
It remains unclear which way the shareholders will vote if a meeting is called, but Zee's founder Subhash Chandra, father of CEO Goenka, has accused Invesco of plotting a hostile takeover.
"They want to take over the company against Indian laws," Chandra has said. Invesco hasn't commented on the allegation.
IS THE ZEE-SONY DEAL AT RISK?
While Invesco was pushing for a Zee shareholder meeting, the Indian giant announced its merger talks with Sony. The deal terms say Goenka plans to continue to be the CEO of the merged entity, which will be majority owned by Sony.
Invesco has in Indian tribunal hearings said it's not against the Zee-Sony plan, but its filing does criticize how the two entered into talks.
The Sony deal would allow Chandra's family to raise their shareholding to up to 20%, from 4% now, Invesco said, adding that it was "plainly an attempt to distract the general public" and stall the convening of a shareholder meet.
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