Yes Bank, the largest shareholder in Dish TV, operated by the Zee Group, has called for holding an extraordinary general meeting (EGM). The private lender holds 25.63 percent in Dish TV.
Through the EGM, Yes Bank wants to appoint new independent directors and remove MD and Director Jawahar Lal Goel.
We explain what the issue is all about.
What is the tussle about?
In May 2020, Yes Bank invoked the pledged shares of Dish TV, and it emerged as the largest investor. Subsequently, in February 2021, Dish TV approved a rights issue of Rs 1,000 crore. On September 3, Yes Bank objected to the approval and sought the reconstitution of the board.
Dish TV argues a nod is required from the information and broadcasting ministry for board-level appointments.
Yes Bank had previously loaned Rs 3,000 crore to the Essel Group promoters, and the promoters had defaulted on the dues.
Subhash Chandra’s Zee Group was rescued by Dish TV owner Jawahar Goel in 2018 when he pledged his personal holdings of Dish TV. Jawahar Goel is the younger brother of Subhash Chandra.
There are several dimensions to this battle: legal dimensions, business impact, human capital, and, of course, governance, said Ketan Dalal, Founder, Katalyst Advisors.
Why Yes Bank is seeking a new board?
One reason, of course, is that Yes Bank is not happy at the way the rights issue was approved. The bank had failed to see eye to eye with the board of Dish TV on many issues earlier as well. Yes Bank says the rights issue is meant to dilute the majority shareholding of the bank in Dish TV.
Yes Bank, in a notice to the company, said: “The board is not acting in line with good corporate governance standards and is not a fair representation of the significant shareholders (various banks and financial institutions) which hold about 45% shareholding in the company.”
“The Dish TV board is purportedly acting at the behest of certain minority shareholders, holding merely 6% shares,” the bank said.
The bank said it had asked the Dish TV board to desist from approving the proposed rights issue without consulting the significant shareholders. But the board went ahead and made a press announcement on May 28, 2021, regarding its intention to proceed with the Rs 1,000-crore rights issue.
Yes Bank is seeking to reconstitute the board and doesn’t want to go ahead with the rights issue till a new board is constituted.
The requisition from Yes bank has listed out the resolutions which are intended to be put up at the EGM; 7 of these are for appointment of new directors (subject to approval of ministry of information and broadcasting), and 5 are for removal of existing directors out of the 7 directors currently on the Dish TV board, Dalal said.
The 2 whose removal has not been called for are the Executive director-CEO, and the CFO who is also on the board, obviously, this seems to be due to business continuity reasons, Dalal added.
What’s next for Yes Bank?
On the appointment of a new board, Dish TV, on September 6, had notified the bank that a change in directorship requires a prior approval of the ministry of information and broadcasting, and, hence, the removal and appointment of directors could not be placed before the AGM.
Upon this, Yes Bank issued revised notices, stating that instead of placing the resolutions before the shareholders of the company at the AGM, which was to be held on September 27, the company is now seeking to postpone the AGM on unfounded reasons.
Hence, Yes Bank said, in the notice, the bank is constrained to issue the present notice under Section 100 of the Companies Act, 2013, for holding an EGM of the company.
Dalal of Katalyst Advisors adds, The section further provides that if the board does not so call for an EGM, the requistionists may themselves call for an EGM within 3 months. In this context, it remains to be seen as to what the board of Dish TV does, Dalal said.
Dalal further explained that there are several issues arising here, for example, what happens if I&B ministry does not approve of the appointment of new directors? or approves some but not others? and what happens if the shareholders vote for appointment of some of the new proposed directors but not others?
According to reports, the lender is also seeking legal recourse to appoint new directors. Further, the private lender wants to learn about the investments made by Dish TV as it feels the company has not made satisfactory disclosures.
At the EGM, Yes Bank needs to get simple majority to get their directors appointed, said Shriram Subramanian, Founder and MD, InGovern, a proxy advisory firm. They will have to go and canvas with the other shareholders as well and everything depends on what happens at the EGM, Subramanian added.