Tata Sons get investors' nod to become private limited company; Mistry firms get NCLAT waiver

Tata Sons on Thursday received shareholders' nod to become a private limited company at its AGM (Annual General Meeting). The resolution to make Tata Sons a private limited company were passed with requisite majority, CNBC TV18 reported.

The approval from investors' came after the National Company Law Appellate Tribunal (NCLAT) granted special waiver to Cyrus Mistry family firms to file a case against Tata Group holding company, Tata Sons. Cyrus Mistry family firms had sought a waiver on the minimum shareholding requirement to petition against Tata Sons for alleged mismanagement and oppression of minority shareholder interests.

The Mistry family, which owns 18.4 per cent of Tata Sons, had called the move "oppression of the minority interests" and stated that it would vote against the proposal. Tata Trusts holds 66 per cent in Tata Sons.

The voting pattern was not immediately known. At least 75 per cent of shareholders' nod was required for the proposal to go through. The 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.

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 has also sought to amend the memorandum of association to change its name to Tata Sons Pvt Ltd from Tata Sons Ltd.

Last week, a Tata Sons spokesperson had stated: "The reinstatement of Tata Sons as a private company was considered by the board to be in the best interest of the company."

The switch, according to Tata Sons, is chiefly because its status of 'deemed public company' is not statutorily recognised under the Companies Act, 2013.

In a letter to the board of directors of Tata Sons last week, Cyrus Investments Pvt Ltd had described the step as "another act of oppression of the minority shareholders of Tata Sons at the hands of majority shareholders".

"The real motive behind convening the proposed AGM is malafide and for ulterior purposes and the proposed resolutions are not in the interest of Tata Sons as a whole or at all," the letter had alleged.

The mismanagement and oppression petition dealt with corporate governance, transparency issues in the Tata Group. Decisions were being taken by nominee directors of two Tata Trustsrather than the board, Aryama Sundaram, Counsel for Cyrus Investments told CNBC TV18. "NCLT in all probability had misunderstood the case entirely," Sundaram added.

Meanwhile, Cyrus Mistry office has said that NCLAT order is a vindication of what we have stood so far. "We will continue to pursue complete transparency of group for shareholders gain," it added.

NCLAT on Thursday directed the Mumbai bench of the National Company Law Tribunal to issue notice to the respondents and proceed in the matter. A bench headed by Chairperson Justice SJ Mukhopadhaya asked NCLT to dispose off the matter in three months. The tribunal had concluded its hearing on July 24 and reserved its judgement.

NCLAT, however, dismissed Mistry's other petition on maintainability saying the firms do not have more than 10 per cent in Tata Sons. The appellate tribunal has granted waiver in the filing criteria of having 10 per cent shares of the company.

Mistry family firms own around 18.4 per cent of equity shares in Tata Sons, but only 2.17 per cent of the total share capital in the form of equity and preference shares.

The Companies Act mandates that a petitioner should hold at least one-tenth of the issued share capital of a company or represent 10 per cent of the total number of members to file cases alleging mismanagement and oppression of minority shareholders.

Cyrus Mistry family firms - Cyrus Investments Pvt Ltd and Sterling Investments Pvt Ltd - had moved NCLAT after the Mumbai bench of the National Company Law Tribunal (NCLT) had rejected the waiver plea filed by the Cyrus Mistry's investment firms in April.

Mistry was ousted as Tata Sons chairman in October 24, 2016 and was also removed subsequently as director on the board of the holding company in February.

with PTI inputs