Proxy advisory firm Stakeholder Empowerment Services (SES), flagging governance issues, has advised shareholders of Finolex Cables Ltd. (FCL) to vote against several key proposed resolutions at the company AGM on September 29, 2021.
Highlighting that some resolutions contradict each other, it has recommended shareholders to vote against the resolutions for appointment of three directors.
Pune-based FCL has been accused of following an improper process for appointment of directors and putting forth resolutions that do not serve any objective.
Stating that the Board of Directors of the company which had appointed P.R. Barpande, Avinash Shridhar Khare and Firoza Fredoon Kapadia as Additional Directors on the Board on 30 September 2020, it said, they were now seeking approval from the shareholders to appoint the same three as directors liable to retire by rotation (under resolution 3, 4 & 5); and again appoint the same three persons as Independent Directors (IDs) for a term of 5 years each (under resolution 8, 9 & 10), not liable to retire by rotation.
“The drafting of resolution does not clearly show as to what is the intent of the company for placing two different resolutions for same appointee. If both resolutions are treated as valid, there is inherent conflict in the two. Firstly, an ID cannot be appointed on retiring basis, it is against law,” it said.
“Secondly, as per first resolution director is appointed on rotation basis, whereas in another resolution on non-rotation basis. Which resolution will prevail,” it asked.
“SES is of the view that resolutions 3, 4 & 5 are superfluous and do not serve any objective since the company has proposed to appoint these directors as IDs, under resolution 8, 9 &10. For appointment of these three candidates as IDs, resolutions 8, 9 & 10 are sufficient and meet the requirement of law.,” it said.
“The superfluous Resolutions 3, 4 & 5 if passed would have the unintended consequence of allowing these directors to continue as directors even if their independence gets vitiated. Law never intended that an ID should continue to remain a director even if independence gets vitiated, unless expressly reappointed by shareholders,” it added.
The Companies Act and SEBI Regulations stipulate that IDs can be appointed for a maximum tenure of 5 years. Further, the law requires two thirds of the existing board directors to retire by rotation at the AGM.
Companies seek shareholder’s approval to re-appoint such directors. However, the requirement to retire by rotation does not apply to independent directors.
Recently another proxy advisory firm InGovern Research had stated that the actions of Finolex Cables defeat corporate governance norms and it had recommended shareholders to vote against these resolutions.