Not Convening EGM A Deliberate And Oppressive Act By Zee, Says Invesco Petition
The board of Zee Entertainment Enterprises Ltd. has maintained a stoic silence on the request to call an Extraordinary General Meeting, Invesco Developing Markets Fund and OFI Global China Fund LLC have told the court.
Invesco and OFI Global, together owning 17.88% of Zee Entertainment, have approached the National Company Law Tribunal against Zee Entertainment, Chief Executive Officer Punit Goenka and the company's board.
The petition requests the tribunal to order an extraordinary general meeting on or before Oct. 28 or soon thereafter.
A court-ordered and monitored extraordinary general meeting would ensure the company’s compliance with its statutory obligations and is in public interest.Invesco and OFI's Petition
Invesco and OFI have filed this petition under sections 98 and 100 of the Companies Act, 2013.
Section 98 grants the tribunal power to order an extraordinary general meeting of a company in the manner it thinks fit. And section 100 gives a shareholder, with not less than one-tenth of paid up share capital, power to request for an EGM.
The petition comes after Invesco sent a letter renewing its demand for an extraordinary general meeting to replace Zee Entertainment's board. Earlier this month, Invesco had asked for an EGM to oust Goenka along with two board members.
Under the company law, shareholders holding not less than 10% of paid-up share capital can requisition an extraordinary general meeting.
On receiving a valid requisition, the company, as per law, has to hold an EGM within 45 days, failing which the meeting may be called by the shareholders (requisitionists) themselves within three months.
Invesco has stated while Section 100(4) of the Companies Act, 2013 grants them the power, they are foreign funds with no access to information required for the purposes of calling an EGM on their own.
Given the "likely obstructive conduct of the company it is impracticable for them to call an EGM" and the tribunal should instead order and monitor the extraordinary general meeting—Invesco and OFI's petition
The time for Zee to respond to Invesco‘s letter demanding an EGM ends on Oct. 3. The funds chose to approach the tribunal before this deadline.
'Surprised' By Zee-Sony Transaction
Sony Group Corp.’s Indian unit last week signed a non-binding offer to buy Zee. The companies said they are entering a 90-day exclusive talks period during which they will conduct mutual diligence and negotiate a binding agreement.
About 53% of the merged entity would be owned by Sony India's shareholders and the rest by Zee, and Sony would nominate a majority of the board.
In their petition, the funds have said they were taken by surprise by the transaction and that there was no prior information of any recent discussions between Zee and Sony regarding the proposed merger.
It is in the interest of the company and the minority shareholders and creditors that an EGM of Zee Entertainment Enterprises is called and held on or before Oct. 28 or soon thereafter.Invesco and OFI's Petition
Intend To 'Strengthen Governance'
Invesco and OFI also highlighted the circumstances that prompted them to ask for an EGM.
According to the petition, these include:
Serious financial trouble of the company since 2019 as admitted by founder-promoter Subash Chandra in open letters in January and August 2019.
Resignation of three directors of the company in November 2019 after flagging serious issues around governance and capital allocation in the company.
The letter by Securities and Exchange Board of India in June 2021 revealing various irregularities including continuing outstanding dues from related parties without any definitive recovery plan, letters of comfort issued by directors of the company without informing the board as well corrective action required in systems and processes with regard to documentation of advances.
The case before the tribunal is likely to come up for hearing on Thursday.