The move came after the ZEEL board approved a merger of the company with rival Sony Pictures Networks India (SPNI), a subsidiary of Japan’s Sony Corp.
Invesco Developing Markets Fund, a foreign portfolio investor in Zee Entertainment Enterprises (ZEEL), has reiterated that the media company should hold an extraordinary general meeting (EGM) to evict certain directors.
The move came after the ZEEL board approved a merger of the company with rival Sony Pictures Networks India (SPNI), a subsidiary of Japan’s Sony Corp, to create the country’s largest media and entertainment firm. For the merger to go through, Zee will need approval from 75% of its shareholders.
“Decisions of material strategic import must follow and not precede actions towards establishment of a proper and independent governance structure as determined by the company’s shareholders. In this context, and against the backdrop of our EGM requisition, your disclosure of September 22 is symptomatic of the erratic manner in which important and serious decisions have been handled at the company,” Invesco said in a letter to the ZEEL’s board.
The letter was dated September 23, a day after the proposed merger with SPNI was announced. “We note that the disclosure refers to the future board composition of the company at a time when the current composition of the board is subject to a shareholder vote on the back of our EGM requisition,” it said.
Invesco (formerly Invesco Oppenheimer Developing Markets Fund) — which holds a 17.88% stake in ZEEL together with its subsidiary OFI Global China Fund — has been an investor in ZEEL for over 10 years. When contacted, a ZEEL spokesperson said: “The board is seized of the matter. The company will take the necessary action as per applicable law.” However, the fund did not reject the proposed merger with SPNI.
Invesco said it continues to believe that the “business is valuable, whether on its own or in strategic alignment with partners such as Sony”.
The fund said it had requisitioned for an EGM as an ordinary shareholder and to protect shareholder value. It was the board’s duty under company law to convene the meeting, where shareholders will decide the composition of the company’s board in a “free and democratic manner”.
Towards this end, Invesco had proposed the removal of non-independent directors and recommended six additional independent directors on the board. “These six additional independent directors come from diverse backgrounds and are expected to bring additional professionalism, guidance and standards of governance to the operations of the company,” the fund said.
Earlier, Invesco had sought the removal of chief executive officer and managing director Punit Goenka and non-executive directors Ashok Kurien and Manish Chokhani, citing corporate governance issues.
“A newly-constituted board supported with the strength of independence will be best suited to evaluate and oversee the potential for strategic transactions, like the one announced on September 22, 2021, on a non-binding basis, as well as to make determinations on the future leadership of the company,” it said.
“We trust that the current board will adhere to its fiduciary duties and not violate its statutory obligations to convene the EGM…,” it said.