Bengaluru: Ahead of a possible acquisition of Uber Eats by Swiggy, the latter has made changes to its articles of association to possibly avoid ceding control to investors of Uber Technologies Inc. in the future. Bundl Technologies Pvt. Ltd, which runs and operates Swiggy, has added a clause that any Swiggy investor can’t hold a board seat in Uber or any of its entities, according to the company’s filings with the ministry of corporate affairs (MCA), sourced through business intelligence platform Paper.vc.
According to the changes reported to the MCA in January, other restrictions include any of Swiggy’s investors cannot hold an aggregate of more than 4.99% of Uber’s entities and the aggregate amount invested in such entities cannot exceed 20% of the total assets under management of the investor and its affiliates.
“It is about boardroom dynamics—Swiggy wouldn’t want Uber investors to be in a position to make decisions for the company in the future," said a legal expert. “Such clauses are definitely not uncommon when large investors are involved," the legal expert said, requesting anonymity.
Swiggy’s move reflects a growing awareness among Indian founders who want to ensure they do not lose control of their company to investors.
Mint recently reported this trend among domestic startup founders—who are more careful about their rights with deep-pocketed investors—following the ouster of Sachin Bansal and Binny Bansal from Flipkart (after the Walmart deal) and the continuous boardroom battle that Ola’s Bhavish Aggarwal has with its shareholder SoftBank Group Corp.
Uber Eats is in the final stages of selling its India business to Swiggy, The Economic Times reported last month. “In this case, (if) Swiggy would be acquiring the India business of Uber Eats, there are other geographies where they could still be competitors if Swiggy looks to expand its presence outside India," said a top executive at one of the consumer internet firms, requesting anonymity. “Introducing such clauses can protect the company from competitors," the person added.
Swiggy did not respond to emailed queries till the time of publishing this story.
Legal experts said company-specific clauses are not uncommon in the industry.
In 2017, ANI Technologies Pvt. Ltd, which runs cab-hailing platform Ola, had also altered its articles of association—a document that defines the company’s operations and purpose. The amended terms said SoftBank and its affiliates would need approval of Ola’s founders—Aggarwal and Ankit Bhati—and company’s board to purchase any additional shares of Ola from other stakeholders.
More recently, when Walmart acquired 77% of Flipkart last year, there was an Alibaba-specific clause included in the documents filed with the US regulator, Securities and Exchange Commission (SEC). This was to ensure that any of the shareholders could not sell their shares to Alibaba Group Holding Ltd without first offering it to Tencent Holdings Ltd, which competes with Alibaba through its investment in China’s JD.com.
That said, the changes in Swiggy’s document do not mean that Uber’s investors would never be able to come on Swiggy’s board.
The amended articles allow for these redefined terms to be changed if approved by 85% of the company’s preference shareholders.