Vote against converting Tata Sons into a Private Ltd company: Cyrus Mistry

MUMBAI: Former Tata Sons Chairman Cyrus Mistry urged all Tata companies that own shares in the investment holding companies to vote against the proposal to convert it into a Private Ltd company from a Public Ltd company as it is against the interests of public shareholders.

The letter was sent to Tata Motors, Tata Power, Tata Steel, Tata Chemicals, Tata Global Beverages and Indian Hotels. Tata Sons AGM is scheduled for Sept 21.

He said moving from public to private Ltd would impose a restriction on the free transfer-ability of shares held by the company in Tata Sons and the company would face greater challenges in divesting its shareholding in Tata Sons and see lesser realisation of value.

He added that various corporate governance standards will get diluted in Tata Sons if it becomes a Private Ltd company. In a letter to the Tata Sons board, Mistry raised concerns around the opaque governance at the trusts followed by the opaque management of the largest holding company in the country which hecalled a retrograde step. Making Tata Sons a private company will lower standards of governance and disclosure in a private company, he said in a letter dated 14th September.

Cyrus Mistry family firms own 18.4 % percent stake in Tata Sons. Tata Trusts, a bunch of charitable organisations chaired by Ratan Tata, own 66% in Tata Sons. The remaining stake is owned by Tata group companies and some Tata family members.
According to the Companies Act, 2013, certain types of related party transactions and transactions where value is beyond prescribed limits require approval from the Board of Directors and shareholders. However, Private Ltd companies are exempted from such requirements.

Since Mistry lost board seat after being removed as the chairman of Tata Sons last year, his power to control decisions of Tata Group companies is curtailed further. Also, a Private Ltd company restricts the rights of the transferability of shares.

The reinstatement of Tata Sons as private company was considered by the board to be in the best interest of the company, a Tata Sons spokesperson said.