Alembic Rejects Portfolio Fund Manager’s Bid To Appoint Small Shareholder Director
Alembic blocks portfolio fund manger’s bid to turn shareholder activist.
Drugmaker and real estate developer Alembic Ltd.’s board on Friday rejected an unprecedented attempt by a portfolio fund manager to appoint a director to represent small shareholders.
Chennai’s Unifi Capital Private Ltd. had sought a board seat for its vice-president Murali Rajagopalachari under Section 151 of the Companies Act, 2013. It allows a director to represent investors who hold shares of nominal value of not more than Rs 20,000.
The Alembic board, which approved quarterly results, rejected the move citing “nexus and direct conflict” between Rajagopalachari, an employee of Unifi, its group companies and 914 shareholders who hold 3.75 lakh shares.
It’s the first time a portfolio fund manager resorted to shareholder activism to represent minority investors. So far, mutual funds and insurance companies have occasionally asserted themselves as activist shareholders.
Alembic said a third of investors party to Unifi’s application became shareholders just five days prior to the move and all are clients of Unifi. It alleged that Unifi tried to misuse the provision under the Companies Act.
It appears that Unifi has used these persons for ensuring that its nominee is put on the board by clearly misusing the provisions of Section 151 which is meant exclusively for genuine small shareholders.Alembic Statement To Exchanges
When contacted, Rajagopalachari told BloombergQuint over the phone “we will decide on our response shortly”. “We are just absorbing what we have seen.”
Alembic had included the proposed appointment of Rajagopalachari in the agenda for Friday’s board meeting, only to withdraw it later.
It said Unifi had made attempts in the past to force the company to restructure its operations. It seems small shareholders were artificially put together by Unifi for putting undue pressure on the board, the company said.