United Spirits (USL) on Friday said a special resolution for an exclusive manufacturing and licencing tie-up with its parent firm, Diageo, was not approved by shareholders with the requisite majority in a postal ballot.
The special resolution — on which the promoter group had abstained from voting as they were related parties — drew 20.35 million votes, of which 70.2% voted in favour and 29.80% voted against.
Most votes against the resolution were in the public institutional holders category.
While 50.17% of the company’s public institutional shareholders had participated in the poll, only 0.68% of the “public others category” were polled.
On October 20, USL’s board had approved a series of licence and distribution agreements with entities of the Diageo Group which will give it exclusive rights to import, manufacture and distribute liquor brands belonging to Diageo.
At present, these licences are held by Diageo’s Indian arm.
The transfer of these licences would mark the last leg of USL’s integration with the British spirits firm — which owns brands such as Johnnie Walker, Smirnoff and VAT 69 — in an acquisition process that began nearly two years ago.
The rules require 75% of votes in favour to pass a special resolution, said Shriram Subramanian, founder and managing director of InGovern Research Services, an independent proxy advisory and corporate governance research firm.
“For now, this proposal is defeated. They have to make a change in the proposal,” he said.
Companies are required to place material-related party contracts or arrangements before the shareholders for approval, under a recent circular of the Securities Exchange Board of India.
Many proposals are getting defeated since this rule was applied because promoters have to recuse and also because the polls are getting less participation, said Subramanian.
“The hands of the minority shareholders has been strengthened. But you must ensure there is greater participation,” Subramanian added.