Ola amends shareholding terms, limits say of investors
Startup looks to shield itself from hostile action by shareholders
Cab-hailing firm Ola has made sweeping changes in its shareholder terms, strengthening the rights of its founders and restricting those of its largest investor SoftBank Group Corp. and others.
It’s the first instance of start-up leaders shielding themselves against potentially hostile action by powerful shareholders after some of the country’s top entrepreneurs lost control of their companies this year.
The move by Ola co-founder and chief executive Bhavish Aggarwal to put restrictions on SoftBank’s rights comes as the Japanese investor is close to winning a boardroom battle at another portfolio company, Snapdeal (Jasper Infotech Pvt. Ltd). SoftBank is in the process of selling Snapdeal to Flipkart amid a bitter boardroom battle in which Snapdeal co-founders Kunal Bahl and Rohit Bansal iniANI tially wanted to keep the company independent despite the fact that it had lost out in the e-commerce battle to Flipkart and Amazon India. Ola counts Bahl and Bansal as two of its early investors.
In January, another powerful Ola investor, Tiger Global Management, had installed its senior-most India employee, Kalyan Krishnamurthy, as CEO of Flipkart, replacing co-founder Binny Bansal.
Ola will issue additional shares to co-founders Aggarwal and Ankit Bhati to keep their composite shareholding in the company at between 10.9% and 12.38%, according to the latest articles of association (AoA) filed by Ola’s holding company Technologies Pvt Ltd. Their exact shareholding will depend on the amount Ola finally raises in its ongoing funding round. In any case, their shareholding will not drop below 10.9% from roughly 12% before the latest capital infusion.
According to the AoA, reviewed by Mint, Ola’s founders have secured rights to restrict the ability of its investors to increase their stake. Any transfer of equity shares by Ola investors representing 10% or more of the company’s capital will need to be approved by Aggarwal and Bhati, who is also Ola’s chief technology officer.
SoftBank, in particular, cannot buy more equity shares in Ola without approval from the founders and board of directors, according to the amended AoA that define the terms of governance and management. The exceptions to this clause include one on SoftBank’s right to buy more shares to maintain its stake (but not to increase it).