Tata Sons shareholders okay change of status to private ltd

All the resolutions placed before shareholders at its annual general meeting were passed with requisite majority. The nod comes on a day the National Company Law Appellate Tribunal (NCLAT) granted ousted chairman Mistry a waiver from the minimum shareholding requirement to bring charges of mismanagement and oppression against Tata Sons.

Tata Trusts holds 66 per cent in Tata Sons. At least 75 per cent of shareholders’ nod was required for the proposal to go through. The Tata Sons’ move comes almost a year after Mistry was ousted as chairman of the Tata Group, triggering a bitter boardroom battle. N Chandrasekaran was appointed chairman in January this year.

According to Indian laws, a public limited company allows shareholders to legally sell their stake to anyone but a shareholder of a private limited firm cannot sell the shares to outside investors. In a notice to its shareholders, Tata Sons’ board had sought approval through special resolutions to amend its article of associations to bring about the change. It sought to amend the memorandum of association to change its name to Tata Sons Pvt Ltd from Tata Sons Ltd.

Cyrus Investments Pvt Ltd, belonging to the Cyrus Mistry family, on Monday asked directors of different Tata group firms, including Tata Steel, Tata Motors and Tata Power, to vote against the move to convert Tata Sons into a private limited firm. These resolutions, if passed, would impose restriction on the free transferability of shares held by the companies in Tata Sons and they would “face greater challenges” in disinvesting their shareholding in Tata Sons, the Mistry letter said.

The letter sent by the Mistry firm further said any resolution such as the ones proposed to be passed at the AGM of Tata Sons would be detrimental to the companies and “contrary to the interests” of their public shareholders.

According to the letter, another disadvantage of converting Tata Sons from a public company to a private one from the standpoint of minority shareholders “is that various governance standards would potentially get diluted in relation to private companies”. “As directors of public limited company holding shares in Tata Sons, it is incumbent on you to apply your mind to these important issues and discharge your duties in law, also being mindful of the fact that the investments involved are material in nature and size,” the letter said. It further reminded the directors that part of being listed companies, they also have additional responsibilities owed to public shareholders and investors in securities of the companies.