Mistry free to sell $17 bn. stake in Tata Sons

Cyrus Mistry

Cyrus Mistry   | Photo Credit: PTI

NCLAT order has set aside the conversion of the firm into private concern

The National Company Law Appellate Tribunal (NCLAT) had set aside the Registrar of Companies’ (RoC) decision to change Tata Sons Limited from a public company to a private company, terming it illegal and ordered the RoC to make a correction in its records showing Tata Sons as public company.

It has also said the company cannot exercise its powers under Article 75, under which the board can transfer anyone’s shares by passing a special resolution.

Seen together, this means that former Tata Sons chairman Cyrus Mistry, who owns 18.4% stake in Tata Sons valued at over $17 billion, is free to sell his stake.

Confirming this, a lawyer in the know of the development told The Hindu, “Controversial Article 75 relates to company’s power to transfer shares.

“Under it, the minority shareholder could not transfer or sell his shares without the permission of the majority shareholder. Conversion into a private limited company meant erosion in the value of Mr. Mistry’s investment.”

According to Article 75, Tata Sons can transfer ‘ordinary shares’ of any shareholders, including that of SP Group, without notice through a special resolution in the general meeting of the ordinary shareholders of the company in the presence of nominated directors of ‘Tata Trusts.’

“In view of ‘prejudicial’ and ‘oppressive’ decision taken during last few years, the company, its board of directors and shareholders, which has not exercised its power under Article 75 since inception, will not exercise its power under Article 75 against appellants and other minority members,” said the NCLAT order adding such power can be exercised only in exceptional circumstances and in the interest of the company, but before exercising such power, reasons should be recorded in writing and intimated to the concerned shareholders whose right will be affected.

“Tata’s have converted Tata Sons into a private limited [concern]. This conversion was very serious as as the provisions of public limited company would not apply on Tata Sons and Mr. Mistry would have been forced to sell his stake to Tata’s at peanuts,” investment adviser S. P. Tulsian told The Hindu.

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Printable version | Feb 18, 2020 6:49:48 PM |

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