The development intensifies the battle between the US fund and the board of Zee, in which Invesco holds about 18%. The board’s decision comes a day after the National Company Law Tribunal (NCLT) directed it to consider Invesco’s request to hold an extraordinary general meeting (EGM) to remove Goenka and appoint multiple independent directors.
On Friday, Zee said its board decided not to hold an EGM because Invesco’s demand suffered from multiple legal infirmities. “The board has arrived at this decision by referring to various non-compliances under multiple laws… after taking into account the interests of all the company’s shareholders.”
Zee said the board’s decision was based on the legal advice it received from experts, including retired Supreme Court judges. The seven-member board comprises one non-independent director (Goenka) and six independent directors. Since Goenka was an interested party, he did not participate in Friday’s board meeting, the company said.
Zee will submit the board’s reply to the petition filed by Invesco in NCLT, which will hear the matter on October 4. Explaining the reasons for rejecting Invesco’s request, Zee said, the US fund’s proposal to appoint 50% of the company’s board would result in “it effecting a change in control of the company without making an open offer”.
However, a lawyer said Invesco has sought the appointment of “independent directors” on Zee board and “not their nominee directors”, raising doubts whether this would tantamount to change in control. Besides, according to Invesco’s governing guidelines, the US fund cannot hold more than 20% in any stock, which means it cannot make an open offer.
Zee further said that its Articles of Association (AoA) does not allow more than 12 directors on the board. Since the proposal to remove Goenka cannot be legally effectuated, and the proposal to appoint six independent directors are effected, the Zee board would consist of 13 members, which would be contrary to its (AoA), it said. Zee also said that the I&B ministry requires that to effect any change in the CEO and the board of a company their permission needs to be taken in advance.