Zee Entertainment agrees to consider Invesco’s EGM demand

The broadcaster’s counsel Gopal Subramaniam told a single-judge bench of Justice GS Patel that it will inform the court about the date it plans to convene an Extraordinary General Meeting (EGM) on Friday.

“This is not a fight between the demander (Invesco) and the board (Zee). It is up to the shareholders to determine,” Justice Patel said. “You cannot have a position that I, as a board, tell the shareholders that because of the consequence of the illegality, I will not convene the meeting. By all means, you can campaign at the EGM, convince them.”

Justice Patel said asking the court to pronounce a verdict on the shareholder’s motion would set a “very dangerous precedent” by denying the democratic rights of shareholders.

“The order Zee seeks is under a statutory provision (provisions of the Companies Act, 2013). I can’t see if the motion is going to pass, and I don’t see why I should assume it will be passed. If the resolution is passed, the best we can ask is that it should not be acted upon for a week,” Justice Patel said.

Thursday’s development is a victory for Invesco Developing Markets Fund, which in a letter dated September 11 to the board of India’s largest publicly traded broadcaster had sought an EGM for the first time.

An executive in a proxy advisory, seeking anonymity, said, “If I have to draw an analogy of a tennis match, I will say after today’s proceedings in the Bombay High Court, it is 40-30 in Invesco’s favour. ” It remains to be seen whether the EGM will be convened before Zee convenes the shareholders’ meeting to vote on the planned merger with Sony.”

Both companies have said that they will complete due diligence within 90 days, which means they should be in a position to sign a binding agreement by about December 22. There is always the possibility that both companies could expedite the process, and shareholders could be asked to vote on the deal before both companies plan. This may help the Zee promoter to retain control as the promoter is more likely to retain control if the shareholders approve the deal as compared to the promoter facing the shareholders in the EGM.”

Invesco, which holds 17.88% shares in Zee, is unhappy with how the current board and managing director Puneet Goenka, son of founder Subhash Chandra, has run the company. Chandra holds 3.99% shares in the company.

The investor has asked Zee to hold an EGM and ask shareholders to vote on the recommendations to remove Goenka and induct six independent directors.

So far, Zee has rejected Invesco’s demands as illegal, and has filed a petition before the Bombay High Court to decide on the legality of Invesco’s demand.

The past month has been a rollercoaster ride for Zee’s investors, analysts, proxy advisory firms as both the parties have leveled allegations against each other.

The first salvo was fired by Zee, which announced on September 22, 10 days after receiving Invesco’s letter seeking an EGM, that it had signed a non-binding agreement to be bought by Sony Pictures Networks India.

A week later, Invesco dragged Zee to a corporate court to force Zee to respect the laws governing listed companies, which required a public company to make such a demand by an investor holding at least 10% of the shares. The date of the EGM is required to be announced within three weeks after the . But, even when the National Company Law Tribunal heard the arguments, Zee founder Chandra took to television and appealed to the regulators and the government to stop a hostile takeover by a foreign company.

Last week, Zee, in one of its half-dozen disclosures made to exchanges, said it was on restructuring of the Invesco board after Goenka rejected a US investor’s demand to agree to a merger with an unnamed Indian business conglomerate. was stressing. Invesco later revealed that it had facilitated negotiations between Reliance Industries Ltd and Zee, but the deal fell through.

Still, it is not certain whether Zee will actually give the date for conducting the EGM on Friday; Instead, the company can challenge the observation of a single-judge bench and file a petition before a larger three-judge bench in the Bombay High Court, according to an executive familiar with the development.

Mint could not independently ascertain whether Zee was looking to appeal and file before a larger bench.