It’s not oppression of minority shareholders: SES

MUMBAI: Stakeholders Empowerment Services (SES), a proxy advisory firm, said Tata Sons’ proposal to convert into a private limited company, from a public limited one is not oppression of minority shareholders as alleged by former chairman Cyrus Mistry.

Tata Sons, holding company of the group, will vote on the proposal at its AGM on September 21. Mistry, whose family owns 18.4% equity stake in Tata Sons, is opposed to the move, saying it will restrict his family's rights to transfer or sell shares. “SES analysis concludes that the proposal does not change anything adversely for shareholders.

It does not find anything wrong with the proposal from the governance point of view and the proposal cannot be said to be an oppression of minority," said JN Gupta, MD, SES. According to the Companies Act, 2013, shares of a public limited company are freely transferable, unlike shares of private companies which need board approval. However, the proxy advisory firm argued as Tata Sons’ Articles of Association (AoA) already restricts the free transfer of shares it overrides the requirements of the Companies Act. "The shares were neither freely transferable before, nor will they be now.

And AoA contains elaborate procedure on valuation of shares etc. Therefore, with Tata Sons becoming private company, there is no variation in the rights of any member, as far as transfer of shares is concerned,” said SES.

“All shareholders have lived with these restrictions for a century, why protest now? The reason is simple, there is no bonhomie between them. SES feels that in such a situation the majority has every right to take action to protect its character, provided it does not trample on rights of minority, which it is not doing," SES stated. It recommended articles must provide to apply current standards of governance.