Will Tatas snare Mistry in their shareholding web?

The board proceedings at Tata-owned Indian Hotels Company last week signalled the possibility of a long and hard fight between the Tatas and Cyrus Mistry. The independent directors on the board of IHCL reposed their faith in their chairman Mr. Mistry, and even praised him for his strategic vision. If holding company Tata Sons, which removed Mr. Mistry as its chairman a fortnight ago, wants him out of the boards of group companies, it has to brace itself for due procedure and pray that there are no more surprises as the one that IHCL’s independent directors threw up last week.

If it cannot get the backing of all the directors on the board of individual companies, Tata Sons, as a shareholder, can still attempt sacking Mr. Mistry as a director. But, it would be an unpopular option, especially if the independent directors on the board reaffirm their confidence in Mr. Mistry as the chairman, as was done in IHCL. Legal consultants said that there were two elements to the issue: one, Mr. Mistry being removed from the chairman’s post of a group company, which can be done by the board; and two, his removal as a director, which needs shareholders’ approval.

“If a company wants to sack the chairman, then it can be done at the board level,” Sandeep Parekh, Fonder, Finsec Law Advisors said. “However, all the directors, not just independent ones, have to take a conscience call on how to vote in the best interests of the company.”

Three listed entities of the Tata Group — Tata Steel, Tata Motors and Tata Global Beverages — have a similar board structure. Each of these companies has a total of 11 directors, with six of those being independent, as per information available on their respective websites. TCS has six independent directors out of a total of 10 directors on its board.

 

 

 

 

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