Tata Sons seeks voting rights for preferential shareholders

MUMBAI: Tata Sons Ltd has sought to retain the characteristics of a public firm even though it has proposed converting itself into a private limited company, its notice to shareholders shows.

The firm has sought to amend its articles of association so that they align with the Companies Act, 2013. For instance, Tata Sons is seeking permission to introduce the definition of an independent director and norms pertaining to related-party transactions, two things required of only public companies.

Unlike a public limited company, a private limited firm doesn’t mandatorily have to appoint independent directors or female directors and constitute a remuneration and audit panel.

Tata Sons board is also seeking approval for the appointment of an “Alternate Director” who will fill in for independent directors during their absence for a period not less than three months.

“The key requirement as a public limited company will be followed by Tata Sons even as private company,” said a Tata Sons spokesperson. Among others, the notice clarifies the definition, role, appointment and qualification of an independent director in line with the Companies Act.

The annual general meeting notice specifies that an independent director should be unrelated to the promoters or directors of Tata Sons, or its holding, subsidiary or associate companies. It also specifies that the independent director should have no pecuniary (money related) relationship with Tata Sons or its holding, subsidiary or associate firms, or their promoters or directors, during the (two) immediately preceding fiscal years or during the current fiscal year.

Independent directors have been at the epicentre of the boardroom battle between Tata Sons and Cyrus Mistry.

Earlier, there was a concept of a “deemed public company”, but the new Company Act doesn’t have any such classification. Tata Sons has the choice of being either a public company or a private company, said JN Gupta, founder at Stakeholder Empowerment Services (SES), a proxy advisory firm.