Tata Sons has called for its 99th Annual General Meeting (AGM) on September 21 seeking shareholders approval for two special resolutions to amend the Articles of Association (AoA) of the company to Tata Sons from a public limited company to a private limited company and to amend the Memorandum of Association (MoA) of Tata Sons to change the name from Tata Sons Limited to Tata Sons Private Limited following such conversion.
Shapoorji Pallonji Group investment firms, the minority shareholders of Tata Sons have strongly objected to the Tata's move to make company private.
In a letter addressed to the Tata Sons Board, Cyrus Investments Private Limited, one of the investment firm of the Mistry family said, “The proposal to convert Tata Sons from a public company to a private company constitutes yet another act of oppression of the minority shareholders of Tata Sons at the hands of the majority shareholders; the real motive behind convening the proposed AGM is malafide and for an ulterior purposes and the proposed resolutions are not in the interests of Tata Sons as a whole or at all. The contents AGM Notice and Explanatory Statement - suggesting that the conversion of Tata Sons from a public limited company to a private limited company is merely a formality - are misleading.”
“A public limited company is more transparent and is subjected to more scrutiny compared to private company. I don’t think the resolution will sail through because they (Tata’s) need approval of the majority of the minority shareholders for this resolution to pass through. Mistry’s hold a majority of the minority shares with over 18% stake. Tata’s being a interested party, will not be able to vote for the resolution,” Anil Singhvi, chairman of proxy advisory firm I-Can Investments told The Hindu.
Converting a public company to a private company requires the approval of the National Company Law Tribunal (NCLT), according to the Companies Act, 2013. The Mistry family firms with 18.4% in Tata Sons and have already filed a suit against Tata Sons citing oppression at the tribunal, will vote against the proposal and also appeal against it at the tribunal.
The Explanatory Statement fails to consider that upon becoming a public company, Tata Sons could never have retained the features of a private company in its Articles of Association - such as restrictions on transferability of shares, or any Articles for forced transfer of shares which are opaque or unfair in their operation and which entitle Tata Sons to compel its shareholders to transfer shares to any person of its choosing, as well as any other Articles incidental and consequential thereto, said the letter, a copy of which is with The Hindu.
The letter also alleged that the Explanatory Statement fails to disclose that the true effect of converting the status of Tata Sons in to a private company is to introduce / re-introduce restrictions on transferability of shares which otherwise today are void and unenforceable under law and norms applicable to public companies; and which ought to never have been included in the Articles of Association of a public company in the first place.
Mistry's firm pointed out that given the nature of grievances already raised and reliefs sought in the NCLT petition, the timing and issuance of the AGM Notice is a 'subversion of the judicial process'.
Further, the majority shareholders are attempting to equip themselves with yet another weapon to oppress the minority shareholders of Tata Sons i.e. by restricting the free transferability of shares of Tata Sons and that too by seeking to give such restrictions the cloak of enforceability and legality by converting Tata Sons to a private limited company,said the letter adding that that it is going to oppose the proposal during the AGM adding that the letter is addressed to the board without prejudice to Cyrus Investments’s rights to adopt appropriate legal proceedings to challenge the AGM notice.
