Jet-Etihad revise SHA, investment agreement

The Etihad management will revise the shareholder and investment agreement while the final decision on effective control has been placed in the hands of the aviation ministry, report CNBC-TV18's Kritika Saxena and Rituparna Bhuyan, quoting sources.

There were four parts of the agreement that the two players had signed. One was the shareholders agreement, investment agreement, commercial cooperation agreement and the government code agreement.

Also Read: Jet-Etihad: Sebi tosses management restructuring at FIPB
According to sources, the shareholder and the investment agreement are likely to be revised. There is no major change to the commercial cooperation agreement and the government code pact that the two companies have filed.
The changes in the revised agreement are with respect to the effective control. They may comply with norms for conduct of AGM and EGM. Etihad will not have a majority on Jet Airways board seat, so that was a major concern raised by the regulators.
 They have also agreed to adhere to the corporate government norms under Clause 49 of the Companies Act. They have clarified that the vice chairman and the key executives will be decided unilaterally by the board and will not have any exclusive rights.
They will continue as public shareholder in Jet Airways and will not act in concert with Naresh Goyal. The move is aimed at skirting over the takeover code issue that the government, Securities and Exchange Board of India (Sebi) and Foreign Investment Promotion Board (FIPB) had raised. Also as a part of this particular amended agreement, they will be extending deadline.
They are likely to extend the July 31 deadline considering the fact that Directorate General of Civil Aviation (DGCA) approvals haven’t come in.
It is up to the government and FIPB to take a call on revised pact. Today was the last date that they could have finally submitted to the regulatory authorities as July 29 is the last date and now, the ball is in the governments and FIPBs court.
It was agreed between various ministry’s that the definition of control will be bought in sync with the Companies Bill as well as the foreign direct investment (FDI) policy.
After the Department of Industrial Policy and Promotion (DIPP) floated in note on the new definition of control, the minister of corporate affairs Thursday said that a new definition of control is not in sync with the definition of control in the Companies Bill. If DIPP’s proposal is carried out then changes will have to be made to the Companies Bill definition of control and that will be long drawn process. The final call on this matter will be taken by the Cabinet itself.
If the FIPB goes ahead and takes up the proposal on Monday then it will be taking up Jet-Eithad proposal as per the definition that exists now in the FDI policy and hence this back and forth on the new definition of control.

According to FIPB, members should not impact FIPB's decision to take up the proposal. However, they also say that the effective control provisions that are paramount for this entire deal to be approved by FIPB, the final call on this matter regarding effective control will lie with the aviation ministry as it is part of their internal guidelines.