Invesco Approaches NCLT to Call EGM for Change of Zee Board

In an interesting development, the largest shareholder of Zee Entertainment, Invesco Fund, has moved the National Company Law Tribunal (NCLT). It has asked the NCLT to intervene and instruct the Zee board to call an Extraordinary General Meeting (EGM) to decide on the future composition of the board post the merger with Sony Pictures.

Invesco holds 18% in Zee Entertainment, while the Subhash Chandra family holds just about 3.44% pre-merger. Invesco had earlier sought the removal of Punit Goenka from the post of MD & CEO of Zee Entertainment. Just a week later, Zee Entertainment announced a merger with Sony Pictures with an agreement that Punit Goenka would continue for 5 years.

Invesco has made Punit Goenka, Zee chairman R Gopalan and independent director Vivek Mehra respondents to the petition. The matter will be heard by the NCLT today i.e. 30-Sep. Invesco had two demands. Firstly, it wanted Punit Goenka and 2 other directors to be moved out. Secondly, it wanted to nominate its own set of 6 directors on the board of Zee.

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

In response, the two directors; Manish Chokhani and Ashok Kurien, resigned from the board but Punit Goenka was reappointed for a period of 5 years as part of the merger deal with Sony Pictures. Invesco wants the new board, consisting of 6 of its nominees, to take a final call on the Sony Pictures merger, purely on the merits of the case.

One of the concerns for Invesco is that the merger will dilute the stake of Zee shareholders in favour of Sony Pictures shareholders, since the merger is in the ratio of 47: 53. This would also result in Invesco Fund having a much lower stake in the merged entity. A couple of years back, the Subhash Chandra family had lost control of Zee and was reduced to just 3.44%, after these shares had been pledge for loans to group companies.

The Subhash Chandra family is likely to end up with enhanced stake in the merged entity due to the 2% stake that Sony will forfeit to the ex-promoters as part of non-compete clause.

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