Tata Sons’ shareholders agree to become a private company

THE MISTRY FIRMS WILL NOW NEED THE APPROVAL OF THE COMPANY’S BOARD TO SELL THEIR SHARES

Company Law Appellate Tribunal, waived a technicality that prevented the Mistry firms from suing Tata Sons for mismanagement and oppression of minority shareholders. A case on this will now be heard by the National Company Law Tribunal (NCLT). The shareholders ratified all the resolutions (there were 18) at the meeting, three people familiar with happenings in the meeting said on condition of anonymity.

The holding company of the Tata group had sought shareholder approval for three major resolutions: going private, giving preferential shareholders voting rights if Tata Sons failed to pay a dividend for two consecutive years, and amending the articles of association to adopt best governance practices.

These include: appointing a woman director; making sure at least a third of the board is made up of independent directors; and the appointment of an alternate director in case the independent director is out of the country. These requirements do not apply to private companies, and Tata Sons has chosen to meet them voluntarily. The proposal to go private will have to be approved by the NCLT. There is a mandatory waiting period of three months before Tata Sons can approach the NCLT. The meeting at Bombay House, the company’s corporate headquarters, lasted for over an hour and was attended by Chandrasekaran, Ratan Tata, the head of Tata Trusts that controls 66% of the holding firm, chief executives of some of the Tata companies such as Tata Motors Ltd and Tata Steel Ltd that have a stake in Tata Sons, and other directors on Tata Sons’s board.

Mistry had previously written to the boards of the Tata companies that hold shares in Tata Sons asking them to vote against the resolution because it would make their holdings illiquid. Tata Motors and Tata Steel own 3% each in Tata Sons, while Tata Chemicals Ltd and Tata Power Co. Ltd own 2.53% and 1.65% respectively, according to the Tata Sons annual report. Interestingly, in 2015, there was buzz that the Tatas were considering a proposal to list Tata Sons to make the holdings of the operating companies liquid. The holding company denied this at the time, although the news resulted in the stocks of most Tata companies running up smartly.

One of the three people said the stakes held by the Tata companies in Tata Sons were always illiquid because they couldn’t sell them to outsiders under the Articles of Association. The shareholders also approved a proposal to raise ₹45,000 crore of debt through the issue of non convertible debentures.