Zee - Invesco Fight Turns Ugly; Zee Board Rejects Invesco’s Demand for EGM
Moneylife Digital Team 01 October 2021
In another unexpected twist in what is turning out to be an Ekta Kapoor-style television drama, the Zee board has adopted a confrontational stance and rejected the demand of Atlanta-based Invesco Developing Markets Fund to convene extraordinary general meeting (EGM). The board has cited 'multiple legal infirmities' setting the stage for a legal battle that will inevitably push the battle into the next year, when new voting rules become applicable.
In a regulatory filing to the exchanges this afternoon, Zee said the board had convened a meeting on 1st October to discuss the demand raised by the shareholders for the EGM.
"In the best interests of the company as a whole, including all its shareholders and stakeholders, we express our inability to convene the EGM," the company said.
In a supreme show of confidence, the company also claimed that it arrived at this conclusion after consulting and obtaining written legal advice from legal experts including senior corporate lawyers and former judges of Supreme Court.
Zee pointed out that Invesco had called for the EGM to push for the ouster of directors Ashok Kurien and Manish Chokhani, apart from MD and CEO Punit Goenka. However, Mr Kurien and Mr Chokhani have already resigned from their posts, thereby, making the resolution moved by Invesco 'infructuous', it said.
"The Board deliberated, and unanimously concluded that the Requisition Notice is not valid, as it suffers from multiples legal infirmities," the company said. Zee also said that since Goenka was an interested party, he recused himself and did not attend, participate or vote in the board meeting.
In a press release issued after rejecting Invesco’s call for the EGM , Zee said the board arrived at this decision after "referring to various non-compliances under multiple laws, including the Securities and Exchange Board of India (SEBI) Guidelines, Ministry of Information and Broadcasting Guidelines and key clauses under the Companies Act & Competition Act." However, the company has refused to comment on any future actions since the 'matter is sub-judice'.
In her column earlier today, managing editor of Moneylife -- Sucheta Dalal had explained that since Invesco is firm on Mr Goenka’s exit, it needed to act within the calendar year, because voting rules currently allow a director to be voted out by a simple majority of shareholders; it would need a 75% vote after January 2022.  The priority for Invesco was to push for the EGM where it hopes Mr Goenka will be ousted and a new board, led by Invesco’s own appointees as independent directors, will be ushered in.
The board’s rejection to call the EGM on such technical grounds appears to be a tactical move to delay holding the EGM till January or till the merger with Sony is complete (whichever happens first). 
As per rules, the Zee board has time up to 2nd October to call for an EGM, which is 21 days from Invesco's requisition and another 21 days to hold it.
EGM has to be called within 45 days with a 21-day notice period. So, the company can push it to a maximum period of 24 days from receipt of investor request. Earlier, Zee had maintained a stoic silence on the request to call an EGM. 
Invesco moved National Company Law Tribunal (NCLT) on 29th September seeking an order from the Tribunal for an EGM. In its petition, Invesco had termed Zee’s action of not convening the EGM, 'a deliberate and oppressive act'. During the hearing on 30th September, NCLT had noted that any entity with at least 10% stake in a listed company has the right to call for an EGM and asked Zee to consider the requisition. All eyes will be on NCLT where the next hearing is scheduled on Monday 4th October. 
During the NCLT hearing, senior advocate Janak Dwarkadas, who is representing the investors, had expressed concern that the Zee board may delay the calling of an EGM till the Zee-Sony merger comes into effect. The investors’ shareholding will be diluted post the merger, he had elaborated.  
However, the Tribunal had observed that the merger with Sony should not be a concern as it cannot go through without Invesco's approval.
According to JN Gupta, founder of proxy advisory firm Stakeholders Empowerment Services (SES), the rejection of EGM on technical grounds 'does not amount to good governance'. "Zee should have raised an objection to EGM notice earlier if they felt it was untenable," Mr Gupta told CNBC TV 18.
It is a race against time for Zee to get certainty on the proposed merger with Sony to gather shareholder's votes in its favour.
While the Essel group holds only a 3.99% stake, Invesco and OFI Global have 17.88%. Hence, a lot will depend on which way the other investors swing.
Many experts had earlier termed the proposed merger with Sony a ‘masterstroke’ strategy by Zee promoters to stave off Invesco’s challenge to oust Punit Goenka.
“A majority of the board of directors of the merged entity will be nominated by the Sony Group,” Zee had said in a statement after the merger announcement.
It may be recalled that before the merger announcement, Invesco and OFI Global had sought the appointment of Surendra Singh Sirohi, Naina Krishna Murthy, Rohan Dhamija, Aruna Sharma, Srinivasa Rao Addepalli and Gaurav Mehta as independent directors on Zee’s board.
Ace investor Rakesh Jhunjhunwala’s RARE Enterprises and BoFA Securities picked up close to 0.5% stake each during the surge in the Zee stock after Invesco’s EGM requisition. Any share purchase before the record date of the EGM will get a voting right.
Other dominant institutional shareholders are: Vanguard (5.8%), Life Insurance Corporation of India (4.9%), Amansa Holdings (3.4%), SBI Life Insurance (1.8%), HDFC Life Insurance (1.66%).
Mutual fund asset management companies (AMCs) Nippon Life India Trustee, Mirae Asset Emerging Bluechip Fund, ICICI Prudential Equity Arbitrage Fund, Kotak Equity Arbitrage Fund and Aditya Birla Sun Life Trustee each owns over 1% stake in Zee.
Meanwhile, after Invesco moved NCLT, Life Insurance Corporation (LIC) (which owns a 4.89% stake in Zee) said that it is monitoring the situation and will decide on whether to vote in favour, against or abstain closer to the EGM date. LIC has stated that policyholders' interest and the company's value in Zee would be paramount factors to be considered during the vote.
8 months ago
It is clearly pump and dump created by operators and manipulators .ultimately it is very big drama.stay away from ZEE stock.or sell if any retailers holding.
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