Activists object to Jet Airways' plan to replace company's articles
The proposed AoA has given special privileges to Etihad despite the foreign airline being classified as a public shareholder.
By ET Bureau |
MUMBAI: Jet Airways' proposal to replace its Articles of Association (AoA) following Etihad's acquisition of 24% in the company with a completely new set of articles has not gone down well with an investor activist group, which has recommended voting against the proposal.
The proposed AoA has given special privileges to Etihad despite the foreign airline being classified as a public shareholder. For instance, the foreign airline has a say in important matters such as appointment of auditors and vice-chairman, removal of directors, gaining access to company records.
Mumbai-based Stakeholders Empowerment Services (SES), an advisory firm on corporate governance, has recommended the shareholders of Jet Airways to vote against the company's decision to adopt a new set of AoA as they claim the company's disclosures are not transparent. "SES believes that each shareholder should get similar rights irrespective of its shareholding in the company," said SES in an advisory note. "Further, a particular shareholder should not get access to information which is not available to other shareholders.
The company, the promoters and Etihad have entered into a shareholders' agreement. Accordingly, the board has proposed to modify the existing AoA and called an extraordinary general meeting of shareholders on May 24 for the approval.
A company's AoA is in the form of a document that forms its constitution, defines its purpose and lays out how tasks are to be accomplished within the organisation, including the process for appointing directors and how financial records are to be handled, the manner in which a company will issue stock shares, pay dividends and audit financial records and power of voting rights.
SES believes that shareholders must receive equitable rights. One of these rights is the right to nominate directors on the board. Through the article, the company is providing the promoters and Etihad a right to fill half the board seats with their nominees.
Also, the proposed AoA under Article 44 says that five members present in person (who shall include at least one authorised representative of the promoter and one authorised representative of the Investor) shall form the quorum. The article provides that a general body meeting will not meet the quorum requirements unless at least one representative of the promoters and investors is present.
Investors says the article is not only against the principle of equitable treatment of shareholders and provides unequal rights to a particular shareholder but may also be in violation of the Companies Act.
The proposed Article 81 of AoA says the company shall have two firms to be engaged as joint auditors. One such firm shall be selected by the promoters and one such firm shall be selected by the investors.
SES believes that the article may usurp the role of audit committee and send negative signals to the market about the autonomy of the audit committee and the intentions of the company with reference to governance.
The proposed AoA has given special privileges to Etihad despite the foreign airline being classified as a public shareholder. For instance, the foreign airline has a say in important matters such as appointment of auditors and vice-chairman, removal of directors, gaining access to company records.
Mumbai-based Stakeholders Empowerment Services (SES), an advisory firm on corporate governance, has recommended the shareholders of Jet Airways to vote against the company's decision to adopt a new set of AoA as they claim the company's disclosures are not transparent. "SES believes that each shareholder should get similar rights irrespective of its shareholding in the company," said SES in an advisory note. "Further, a particular shareholder should not get access to information which is not available to other shareholders.
The company, the promoters and Etihad have entered into a shareholders' agreement. Accordingly, the board has proposed to modify the existing AoA and called an extraordinary general meeting of shareholders on May 24 for the approval.
A company's AoA is in the form of a document that forms its constitution, defines its purpose and lays out how tasks are to be accomplished within the organisation, including the process for appointing directors and how financial records are to be handled, the manner in which a company will issue stock shares, pay dividends and audit financial records and power of voting rights.
SES believes that shareholders must receive equitable rights. One of these rights is the right to nominate directors on the board. Through the article, the company is providing the promoters and Etihad a right to fill half the board seats with their nominees.
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Also, the proposed AoA under Article 44 says that five members present in person (who shall include at least one authorised representative of the promoter and one authorised representative of the Investor) shall form the quorum. The article provides that a general body meeting will not meet the quorum requirements unless at least one representative of the promoters and investors is present.
Investors says the article is not only against the principle of equitable treatment of shareholders and provides unequal rights to a particular shareholder but may also be in violation of the Companies Act.
The proposed Article 81 of AoA says the company shall have two firms to be engaged as joint auditors. One such firm shall be selected by the promoters and one such firm shall be selected by the investors.
SES believes that the article may usurp the role of audit committee and send negative signals to the market about the autonomy of the audit committee and the intentions of the company with reference to governance.
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