Board seat: Alembic junks small shareholder plea

The country's oldest pharmaceutical company Alembic on Friday turned down the request of a section of small shareholders to have their representative on its board, citing "conflict of interest" and “misuse“ of the Companies Act. The small shareholders' request for a board seat was led by Unifi Capital, which directly and indirectly holds about 3% stake in the company .

In a filing to the stock exchanges, Alembic said that its board of directors has rejected Unifi Capital's proposal to appoint its candidate Murali Rajagopalachari as small shareholders' director.

The company said the rejection was because it noticed a “very close nexus“ between Unifi Capital, some of the shareholders and their nominee Rajagopalachari, who is an employee of Unifi and a director on various Unifi group entities. The company added that 914 shareholders who proposed the candidature of Rajagopalachari were clients of Unifi Capital.

The company said that of the 914 shareholders, 320 had become shareholders only in the last five days prior to making the request, "primarily for supporting the application".

Section 151 of the Companies Act enables small shareholders with a nominal value of less than Rs 20,000 to elect a director who will represent them on the board of a company . The invoking of Section 151 by Unifi is the first such move by small shareholders in Corporate India since the amended Companies Act came into play in 2013.

Unifi has been seeking better investor returns through reorganisation moves in the company which is led by Chirayu Amin. Alembic elaborated that its current independent directors “are taking adequate steps and measures to protect the interest of all shareholders including small shareholders“.

Shriram Subramanian, MD, InGovern Research Services, said, “Regulators should take note of this development to ensure that the rights of minority shareholders are protected. Otherwise, Section 151will become irrelevant.“