Proxy advisory firm Stakeholders Empowerment Services (SES) stated that there were “serious governance” lapses at Dish TV and the resolutions proposed by YES Bank could have unintended consequences.
An unintended consequence would be the takeover code becoming applicable, like triggering an open offer by Yes Bank. If Yes Bank’s resolutions were approved, most directors would be appointed by the bank as a shareholder, which could lead to a change in control, SES said in a note. “If such a scenario is indeed possible, one hopes that Yes Bank would have thought it through when it opted to seek a change in control of the company,” it said.
On September 6, Dish TV informed the stock exchanges that it had received a notice from Yes Bank (dated September 3), seeking removal of its managing director and directors. The lender, which holds about 25.63% stake in the company, had also opposed its Rs 1,000-crore rights issue.
Dish TV is a part of Essel Group and is helmed by Jawahar Goel, Zee group patriarch Subhash Chandra’s brother.
YES Bank’s holding more than 25% in the company was by way of pledging of shares. If the banks were cautious from the beginning (when companies start pledging shares), many such issues can be nipped in the bud.
Serious governance issues
Agreeing that there are serious governance issues at Dish TV, SES said that those responsible for the same must be penalised. “However, there is a difference in penalising wrong-doers and the company itself. The special notices by YES Bank and suggested resolutions, if acted positively, would leave the company in a serious problem, without any board, non-compliant in many respects and may end up in consequences not envisaged by YES Bank,” it said.
“The special notices by YES Bank and suggested resolutions, if acted positively, would leave the company in serious problem, without any board, non-compliant in many respects and may end up in consequences not envisaged by YES Bank,” it added.
According to SES, Yes Bank should have proposed appointing new directors without removing the existing ones and should have obtained the Ministry of Information and Broadcasting’s approvals. Following the approvals, removal of existing directors should have been sought. Then they would have seen the “writings on the wall and bowed out”, it added.
Further, it also asked shareholders to support the resolution to remove Ashok Mathai Kurien as director, who had also resigned from Zee Entertainment Enterprises’s board on Monday. The proxy advisory firm also supported removal of Jawahar Lal Goel as a director.
However, it was against the motion to remove directors such as Rashmi Aggarwal, Bhagwan Das Narang and Shankar Aggarval as YES Bank failed to provide specific reasons.