Invesco on September 29 moved the National Company Law Tribunal (NCLT) against Zee Entertainment Enterprises Ltd for not announcing a date for an extraordinary general meeting (EGM) sought by the US fund to reconstitute the board of the media company and oust its chief executive and managing director Punit Goenka.
The Mumbai Bench of the NCLT will likely hear the case on September 30.
Invesco, which along with OFI Global China Fund LLC holds a 17.88 percent stake in Zee, will be represented by Dhruve Liladhar & Co in court and Trilegal will represent Zee.
“The Board of the Company remains committed to act within the framework of law and is focused towards enhancing the Company’s growth and shareholder value. It is in the process of taking the required steps within the statutory period. The Company does not wish to comment on any impulsive or premature steps taken by Invesco Developing Markets Funds and OFI Global China Fund, LLC,” said a Zee spokesperson in an emailed statement
As per rules, listed companies are supposed to announce a date for an EGM within three weeks of receiving such a request from an investor holding at least 10 percent shares.
Invesco first sent a letter to Zee requesting the company to convene an EGM on September 11, which the latter received on September 12. Therefore, Zee needs to announce an EGM date by October 2 at the latest. Proxy advisory firms Moneycontrol spoke to said they were puzzled why Invesco jumped the gun when Zee has time till the weekend to announce an EGM date.
JN Gupta, the co-founder of Stakeholder Empowerment Services, said: “Invesco’s move is premature as the law gives 21 days to Zee to call for an EGM and there is still time for the company to comply with it. The law does not provide any provision for NCLT to intervene at this stage.”
Apart from removing Goenka, the US fund wanted to induct six of its nominees on the Zee board.
However, within days of it sending the letter to Zee, the latter announced a merger deal with Sony Pictures. According to the terms of the proposed merger with Sony, Punit Goenka will continue as MD and CEO.
Later, in a second letter dated September 23, Invesco referred to the non-binding merger announcement between Zee and Sony and said, “Your disclosure of September 22, 2021, is symptomatic of the erratic manner in which important and serious decisions have been handled at the Company”. Moneycontrol has reviewed a copy of the letter.
To be sure, Invesco did not reject the deal negotiations with Sony and highlighted in the letter that the business of Zee Entertainment Enterprises is valuable, “whether on its own or in strategic alignment with partners such as Sony.”
It added further that “a newly constituted board supported with the strength of independence will be best suited to evaluate and oversee the potential for strategic transactions, like the one announced on 22 September 2021 on a non-binding basis, as well as to make determinations on the future leadership of the Company.”
Elaborating on the rationale for the EGM requisition, Invesco said, “Precisely to protect shareholder value and in exercise of our statutory rights as an ordinary shareholder, we have called upon the Company to hold an EGM, and it is your duty under company law to now do so. At this EGM, shareholders of the Company will decide the composition of the Company’s board of directors in a free and democratic manner.”