NCLT Instructs Zee Entertainment Board to Call for EGM

In its preliminary hearing on 30th September, the National Company Law Tribunal (NCLT) has instructed Zee Entertainment board to consider the EGM requisition put forth by Invesco Fund. Incidentally, Invesco Fund holds 17.88% stake in Zee Entertainment and is the single largest shareholder in Zee. The case is slated for its next hearing on 04-October.

After listening to the arguments put forth by both the counsels, the NCLT bench observed that holding of the EGM was not at the discretion of the board of the company. On the contrary, under Section 100 of the Companies Act, 2013, the board was obliged to call the AGM if shareholders with more than 10% of the paid-up capital demanded an EGM.

Check:- Invesco Approaches NCLT to Call EGM for Change of Zee Board

Invesco has not objected to the merger of Zee Entertainment with Sony Pictures. However, it has a problem, with the board composition. On 11-Sep, Invesco had called for the resignation of CEO Punit Goenka as well as directors; Manish Chokhani and Ashok Kurien. On 13-Sep, Zee announced that Kurien and Chokhani had resigned. However, Punit Goenka was appointed CEO of the merged entity for another five years.

Invesco has called for the AGM on two grounds. It wants Punit Goenka removed from the post of CEO and MD of Zee Entertainment. Secondly, it wants to nominate 6 directors to the board of Zee. Invesco is of the view that the Subhash Chandra family was exercising clout that was much larger than their pre-merger holding of 3.44%.

Also Read:- Invesco wants EGM to Replace Punit Goenka from the Post of MD & CEO

Invesco has demanded that the new board that is appointed based on the EGM voting should reconsider the merger proposal with Sony from ground zero. One objection that Invesco has is that the merger gives 53% stake in the combined entity to Sony and only 47% to Zee. This will substantially dilute the holding of Invesco from 18% to 8.4%. Ironically, the Subhash Chandra family will hike its stake in the combined entity from 3.44% to 4%.

Normally, any appointment or removal of directors of media companies requires the prior approval of the Ministry of Information and Broadcasting.