Invesco Takes Zee to NCLT; Reiterates Demand To Oust Punit Goenka from the Board
Moneylife Digital Team 29 September 2021
In an interesting twist to the Zee saga, Invesco Developing Markets Fund has approached the National Company Law Tribunal (NCLT) on Wednesday against Zee Entertainment Enterprises Ltd (ZEEL) for failing to announce a date for the extraordinary general meeting (EGM), that it had requisitioned, for seeking removal of Zee’s chief executive and managing director Punit Goenka and reconstituting the board.
                                       
The Mumbai bench of NCLT is scheduled to hear the case on Thursday 30th September.
 
Invesco, which holds a 17.88% stake in Zee , had also proposed  the names of six independent directors as part of the EGM requisition.
 
As per rules, listed companies are supposed to announce a date for an EGM within three weeks of it receiving such a request from an investor holding at least 10% shares.
 
Invesco, which is the largest shareholder of Zee, will be represented by Dhruve Liladhar & Co in court whileTrilegal will represent Zee.
 
The stage looks set for some fireworks as Invesco has put its foot down and insisted on the EGM even after Zee announced its merger plans with Sony Pictures India last Wednesday (22nd September). As per the terms of the Zee-Sony non-binding merger announcement, Punit Goenka will remain in charge of the merged entity as managing director (MD) & chief executive officer (CEO) for the next five years.
 
Subsequently, in a second letter dated 23rd September addressed to the board of directors of Zee Entertainment Enterprises, Invesco referred to the non-binding merger announcement and said “your disclosure of 22 September 2021 is symptomatic of the erratic manner in which important and serious decisions have been handled at the Company.” Invesco Developing Markets Fund and OFI Global China Fund Llc, the largest shareholders of Zee Entertainment Enterprises Ltd, thus renewed their call for an EGM to remove the CEO and MD Punit Goenka. On 13th September, the two institutional investors in Zee had also called for the removal of independent directors Ashok Kurien and Manish  Chokhani from the Zee board.
 
While Invesco has not rejected the deal negotiations with Sony, it has noted in its letter that the business of Zee Entertainment Enterprises is valuable, "whether on its own or in strategic alignment with partners such as Sony."
 
The letter further said “a newly constituted board supported with the strength of independence will be best suited to evaluate and oversee the potential for strategic transactions, like the one announced on 22 September 2021 on a non-binding basis, as well as to make determinations on the future leadership of the Company.”
 
Invesco had reasoned its rationale for calling the EGM, by writing “ Precisely to protect shareholder value and in exercise of our statutory rights as an ordinary shareholder, we have called upon the Company to hold an EGM, and it is your duty under company law to now do so. At this EGM, shareholders of the Company will decide the composition of the Company’s board of directors in a free and democratic manner.” 
 
The letter ends with an urgent request to call the EGM by reminding the board of directors of their fiduciary responsibilities saying, “We trust that the current board of directors of the Company will adhere to its fiduciary duties and not violate its statutory obligations to convene the EGM as requisitioned by Invesco under its letter dated 11 September 2021. We urge the board to reflect on this communication and act in the best interest of the Company, its public shareholders and uphold the highest standards of corporate and board governance.”
 
However, within days of it sending the first letter to Zee, the latter had announced a merger deal with Sony Pictures.
 
Commenting on the development, a spokesperson for Zee said “The Board of the Company remains committed to act within the framework of law and is focused towards enhancing the Company’s growth and shareholder value. It is in the process of taking the required steps within the statutory period. The Company does not wish to comment on any impulsive or premature steps taken by Invesco Developing Markets Funds and OFI Global China Fund, LLC.”
 
Since the first letter requesting Zee to convene an EGM was sent by Invesco on 11th September, which was received on 12th September, Zee needs to announce an EGM date by 2nd October at the latest.
 
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