INSUBCONTINENT EXCLUSIVE:
Mumbai: Defeat of three related party transactions by shareholders of Tata Sponge at the recently-concluded AGM is an eye opener and
requires the regulator to have a relook at the laws, say experts.
Tata Sponge had proposed, for shareholder consideration, three related
party transaction (RPTs) resolutions at its AGM
The company faced defeat on all the three resolutions for approval of RPTs with just 3.77 per cent of the total shareholders opposing it
Interested parties cannot vote in RPTs resolutions.
Out of the 45.5 per cent non-promoter shareholders, only 12.43 per cent participated in
the voting; of which 66.76 per cent opposed the resolution
Section 188 of Companies Act, 2013 prohibits voting of interested party while Sebi LODR prohibits all related parties from voting
irrespective of whether the shareholder is a party to the transaction or not.
Effectively, shareholders with just 3.77 per cent of total
equity capital defeated the resolution, while promoters with 54.50 per cent supported the resolutions and another 41.73 per cent were
indifferent in that they abstained from voting
This indicated that shareholders holding 3.77 per cent were able to bulldoze the wishes of 96.23 per cent because of the law created for
class of people must be used responsibly and judiciously, and the shareholders of the company, whether minority or majority, are no
flip side of the RPT legislation, given abysmal participation of investors in the voting process.
Related party transactions (RPTs) is at
the centre stage of corporate governance arena for the past couple of years initially due to problems associated with RPTs and later due to
the legislative reform in this regard namely.
